No one liked the compensation plan design you had prior to this one.  You spent long hours putting it together, and yet performance levels are about the same as before if not worse, and the underlying behavior hasn’t changed much either.  In fact, it seems like there are more undercurrents and complaints now than there were with your old plan.  What went wrong?

While no two plans are alike, there are many reasons why your plan may not be working as well as you expected.   Most of those reasons could be labeled incoherent messages.  Incoherent messages can take a variety of forms.

Unreachable Goals

Plans which rely on goals or performance levels seen as unreachable quickly discourage incumbents.  While a few may stretch to the performance level needed to earn incentives, an incentive or commission tied to performance well above current levels discourages a majority of employees.  The end result is that they will ignore that element and focus on the remaining incentives.  Even worse, some may just bide their time until they can find a position elsewhere that they feel more pays them more fairly.

Inadequate Transition

Invariably you are hoping to clone the results achieved by your superior performers when you revise your sales plan.  If your plan implementation strategy did not allow for the time, energy and training needed to lift incumbents to your new definition of target performance; your plan will not work well.  When your sales reps feel that there is little chance for them to earn what they were earning before, the typical incumbent will be de-motivated.

Failure to Communicate the Opportunity

Failure to deliver a competitive economic opportunity is another common reason for plan failure.    Paying under the market median is seldom the whole story.  Companies also offer other “total pay” elements such as benefits, company reputation, working conditions and training.  Unfortunately these are difficult to convert to a dollar value and higher cash pay made by other companies looks all too attractive when your company is changing around you.

A related and equally challenging situation is when your product line, your brand or your customer relationships enable consistently greater sales volume.  You may pay 10% while your “peers” pay 15% but your reps still earn higher incomes.  Unfortunately, that kind of information seldom gets communicated when sales personnel compare notes about how they get paid, or what kind of deal “so and so” got when he changed companies.

Introducing Your Plan

When plan introduction becomes “this is how we are doing it” rather than “why and how”, there is little but inertia or trust to hold the plan together.  Soon after implementation, someone comes along with a “better idea” (or a louder voice), and the plan gets questioned and often changed.  Over time, the plan design slowly morphs into just another grouping of plan elements which get tweaked from time to time.  Eventually, it fails as it is neither understood nor appreciated.

Lack of Clarity

A lack of clarity dilutes a plan’s effectiveness.   Plans that are very clear on their own can contradict with the messages inherent in your objectives, training, recognition plans and strategy.  When that happens, it will almost always be compensation that wins out.  Unfortunately, when you divide your messages into several streams, their force is not as great and employees respond accordingly.  When incumbents are not clear about what is expected of them, they typically do what they have always done or perhaps what their best buddy is doing.  Unfortunately those messages seldom match up with what you need as an organization.

Managing the Managers

Changing how people get paid does not change how managers manage.  Managers must be trained in not only how they introduce and illustrate the plan, but what they need to do differently to align with their job expectations.  Too many companies rely on compensation to manage their sales force for them.  Managers must be trained to manage performance.  Ideally they too are paid, recognized and managed in a manner that aligns their performance expectations with those of the group they manage.  Your best bet for assuring the alignment of managers and your sales force is to revise the managers’ plans when you revise the compensation plan of your sales reps.

Now What?

Does any of this sound familiar?  What to do now?  You don’t want to go through another plan design process . . . you don’t even want to look at your plan again!  Yet you know that you need to address your plan design issues if you are to get your sales team refocused on making more sales.  A four step process is in order:

1.    Find an outside expert to help you and ask him or her to meet with some key members of your sales force to get their input.  Involving an expert third party creates some neutral ground and helps reestablish trust.  It is important that he or she get only feedback from the group, avoid designing “on the fly”, and not make promises about the design or the income levels likely in any revised plan.

2.    Direct the consultant to prepare a revised plan design that addresses most of their key concerns.  Ask him or her to look at your other management messages to make sure that they are also in alignment.  Be prepared to include a generous transition plan and make sure that the consultant models your plan rigorously to avoid creating any new issues for either party.  If possible, he should avoid changing any more of your original plan than necessary to preserve the credibility of its original sponsors.

3.    Bring your advisory group back in again and get their feedback on the revised plan.  Show them how the revised plan would benefit them individually and speak to the “whys” as well as the “hows” of the new plan.  Your consultant should also discuss the relevant benchmarking and show the alignment between your objectives and your plan design.

4.    Implement the revised plan as carefully as you did the original plan (or more so).  Monitor its performance carefully and be prepared to make adjustments as needed.

With an aligned and coherent set of messages in place, your sales force can refocus on their job – making more sales.  That is not to imply that your plan will not need review and revision from time to time, but it will mean that you can get back to setting and managing to your company’s strategic goals . . . until you change them again!

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