Published: Monday, April 26, 2010
If you're in sales management, you may have determined that you have a problem with your sales compensation and are assessing options to fix it. You've decided to take the plunge and make changes to your plans. Managing the disruption of a compensation project is critical to success.
Here are five (5) risks to take into consideration before embarking on a compensation project:
1. Timing - Mid-year corrections can be extremely difficult. You risk losing momentum of the team and losing trust by changing their plans and goals at the mid-point. Focus on implementing at the start of your fiscal year. If that isn't an option, make sure you are VERY confident a mid-year correction won't cause massive disruption that impacts the revenue goals.
2. Speed - Deciding to make changes and then dragging out the process will cause a dip in morale. Once people get wind you are reviewing their compensation plans, they will immediately want to know how it impacts them. Whether doing this yourself or using an outside firm, make sure a definitive project plan with milestones, dates and owners is established.
3. Proof - Many companies know they need to make changes and do so without any empirical data to suggest those changes will work. Before heading down the road of incentive changes, be sure the project team and the methods have been successful elsewhere.
4. Cost - This is the most significant risk when changing incentive plans. There are material resource costs in conducting analysis - be it internal or external - as well as major implications if the new plans miss the mark. If the cost to revise your compensation plans is $100,000 and the results adversely affect revenues, it's a double whammy. Running financial models that clearly defines best and worst case scenarios is highly recommended before implementation.
5. Personal Risk -Ineffective incentive plans tie directly into hitting (or missing) the revenue number. The risk of creating an even bigger mess than you had before is palpable. Ensuring you have people you can trust to get the job done is paramount. Pull your best people in for this and make it a priority. If they are otherwise engaged or you can't find an outside resource who you know can get you the results, wait.
There is a saying that you can't put the toothpaste back in the tube once it's already out. A compensation project is directly analogous to this. If you've decided it's time for a change to your sales compensation plans, make sure you take these five risks into account to help manage the disruption and ensure your project is a success.
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