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The 5 Cs of People and Performance in Sales Compensation: Part 1

RS
Tuesday, May 24, 2016
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Sales compensation dashboards are common, but they usually only tell half the story. There are actually two sides to your dashboard that lead to growth: performance metrics and people metrics.

Performance metrics are already on the dashboards. But too few organizations skip gathering real data on how the compensation plan is working for the sales teams. Other times, the compensation plan uses ad hoc information and spot analytics. Meanwhile, the people metrics of your dashboard tell you how the people in your organization are motivated by the plan, and how it affects their behavior, and possible organization risks with the plan. It’s the only way to complete the picture.

Combining both the people and the performance side of the dashboard can tell you whether your team is performing as expected, whether their behaviors are driving the strategy of the organization, and whether or not they are motivated to act in those strategic directions.

Keep the following perspectives in mind when considering which analytics are most important. 

Connection – Strategic Alignment 

Ask your sales organization (through a brief survey) whether the sales compensation plan aligns with their strategic objectives. Questions to dig a little deeper include:

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  • How does sales define the strategy? 
  • What parts of the plan align and don’t align? 
  • Do participants understand the strategy?

You’re looking for the perception of alignment and the mood of the organization. On average, 50 percent of sales reps feel their comp plan aligns to their strategy. If your number is low, you may need to review the plan to see if it’s out of alignment, or re-communicate the plan and the objectives. Survey questions like this also can tell you if the plan is motivational. If the sales reps feel there’s no alignment, they may be confused and irritated.

Some other Connection questions to ask the organization are: What are the sales team’s priorities? and What is most important to accomplish in each role? In these answers you’re looking for alignment with the strategy and clear emphasis on certain products or markets (rather than ambiguity). Finally, be sure to address whether new customers are really the priority, and who grows current customers? 

Causation – What Motivates? 

Ask your sales organization how motivated they are by the compensation plan. You’re looking to understand what specific components of the plan motivate your team. Is it base pay? Upside potential? SPIFs? On average, 59 percent of companies state their plan is “very motivational” or “motivational.”

If your organization falls below this number, dig deeper. Be sure to ask:

  • If the plan isn’t motivational, what is? 
  • Is our team motivated by pay? 
  • Is it plan measures, mechanics, or even quotas? 
  • Can or should these drivers be incorporated in the incentive plan?

One of the ironies of sales compensation is that while it’s a tactical program, it can churn up issues that are actually bigger sales effectiveness misalignments. Keep in close communication with the sales organization to understand how they’re interpreting the comp plan, and be prepared to tweak mid-year if necessary to keep the plan on track.

In my next post, we will examine Contrast, Contribution, and Change.

RS
About the Author
Rebecca Sandberg is executive director of consulting services at SalesGlobe and co-author of a chapter on sales compensation ROI in The Compensation Handbook.
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