trategy: Although this seems very elementary, it is not unusual for a company to attempt to design a new sales compensation plan without having a consensus among Senior Management as to where their sales focus should be, which products or services to emphasize, and in some cases, what the role of the sales person should be. We recognize that some of these factors will change during the course of a yFall brings with it certain happenings: leaves changing colors, kids dressing up for Halloween, cool evenings, the change back from Daylight Saving Time, and, in the business world, the beginning of the annual budgeting process, as well as the time to revisit sales compensation programs. It is the last of these annual events that presents a significant challenge to many businesses.

Sales compensation plans are important to the success of a company, yet many organizations fail to get it right the first time. So when fall rolls around and the sales numbers are as cool as the weather, companies begin to review their sales compensation program, intending to make changes. Changing the plan on an annual basis is time consuming, and has a detrimental effect on the sales forces’ perception of why the company keeps making these changes; credibility generally suffers as a result. Assuming that an organization has done its homework and recognizes that its program is not achieving the intended results, a plan redesign can be accomplished in time to permit a new plan to be developed, tested, and readied for roll-out well before its effective date, usually the beginning of the next fiscal or calendar year. In order to achieve the desired results, it is best not to be rushed, but rather to have sufficient time in which to review and redesign the plan without the extra pressure of an unrealistic, last minute deadline.

In order to accomplish this in a systematic and effective manner, we suggest that the following six (6) step approach be taken:

Step 1 - Clarify the Sales and Marketing Strategy: Although this seems very elementary, it is not unusual for a company to attempt to design a new sales compensation plan without having a consensus among Senior Management as to where their sales focus should be, which products or services to emphasize, and in some cases, what the role of the sales person should be. We recognize that some of these factors will change during the course of a ye

sation plans are important to the success of a company, yet many organizations fail to get it right the first time. So when fall rolls around and the sales numbers are as cool as the weather, companies begin to review their sales compensation program, intending to make changes. Changing the plan on an annual basis is time consuming, and has a detrimental effect on the sales forces’ perception of why the company keeps making these changes; credibility generally suffers as a result. Assuming that an organization has done its homework and recognizes that its program is not achieving the intended results, a plan redesign can be accomplished in time to permit a new plan to be developed, tested, and readied for roll-out well before its effective date, usually the beginning of the next fiscal or calendar year. In order to achieve the desired results, it is best not to be rushed, but rather to have sufficient time in which to review and redesign the plan without the extra pressure of an unrealistic, last minute deadline.

In order to accomplish this in a systematic and effective manner, we suggest that the following six (6) step approach be taken:

Step 1 - Clarify the Sales and Marketing Strategy: Although this seems very elementary, it is not unusual for a company to attempt to design a new sales compensation plan without having a consensus among Senior Management as to where their sales focus should be, which products or services to emphasize, and in some cases, what the role of the sales person should be. We recognize that some of these factors will change during the course of a y

the company keeps making these changes; credibility generally suffers as a result. Assuming that an organization has done its homework and recognizes that its program is not achieving the intended results, a plan redesign can be accomplished in time to permit a new plan to be developed, tested, and readied for roll-out well before its effective date, usually the beginning of the next fiscal or calendar year. In order to achieve the desired results, it is best not to be rushed, but rather to have sufficient time in which to review and redesign the plan without the extra pressure of an unrealistic, last minute deadline.

In order to accomplish this in a systematic and effective manner, we suggest that the following six (6) step approach be taken:

Step 1 - Clarify the Sales and Marketing Strategy: Although this seems very elementary, it is not unusual for a company to attempt to design a new sales compensation plan without having a consensus among Senior Management as to where their sales focus should be, which products or services to emphasize, and in some cases, what the role of the sales person should be. We recognize that some of these factors will change during the course of a y

r year. In order to achieve the desired results, it is best not to be rushed, but rather to have sufficient time in which to review and redesign the plan without the extra pressure of an unrealistic, last minute deadline.

In order to accomplish this in a systematic and effective manner, we suggest that the following six (6) step approach be taken:

Step 1 - Clarify the Sales and Marketing Strategy: Although this seems very elementary, it is not unusual for a company to attempt to design a new sales compensation plan without having a consensus among Senior Management as to where their sales focus should be, which products or services to emphasize, and in some cases, what the role of the sales person should be. We recognize that some of these factors will change during the course of a y

trategy: Although this seems very elementary, it is not unusual for a company to attempt to design a new sales compensation plan without having a consensus among Senior Management as to where their sales focus should be, which products or services to emphasize, and in some cases, what the role of the sales person should be. We recognize that some of these factors will change during the course of a year, and the plan should allow for the focus to be modified without radically altering the plan or having “to throw the baby out with the bath water”. Once the focus items have been identified, they need to be prioritized from most important to least important.

Step 2 - Determine the Desired Mix and Amount of Sales Compensation: There is a considerable amount of reliable comparative market data on companies and industry segment, how much variability should there be in pay, and what should the sales personnel be paid for (units, revenue, price or margin). Using this as a baseline, the company should decide on its intended Sales Compensation Philosophy. Specifically, it will define the mix between fixed pay (salary) and incentives, bonuses, and/or commissions. These typically range from 50/50 to 70/30, but each company will have to determine what is really best for its own sales force. This will serve as the “stake in the ground” for evaluating the current pay program and for any redesign.

Step 3 - Develop a Draft Sales Compensation Plan: The plan is actually the sum of the parts needed to achieve the identified sales and marketing strategy in the most effective manner. The parts should consider participants, setting and measuring of performance targets and thresholds, award determination and funding, and the rules for administering the program, including splits and sharing of awards, payout mechanics, and a host of other issues that prove the point, “the devil is in the details”.

Step 4 - Modeling the New Plan: Many companies fail to test the new plan design under hist