The thought of change in any aspect of sales compensation is daunting to most salespeople. A change management model to guide plan implementation can be a helpful tool. One we find relatively easy to use with sales organizations involves executing four steps. This Short describes each step and explains how it contributes to a successful plan change.
Step 1: State the change message. A change from a current sales compensation plan to a new sales compensation plan requires a clear leadership message to guide that change. While this sounds obvious, over half the companies we come in contact with do not articulate a clear rationale for the change. For example, sales leaders ought to state clearly:
- What will change
- Why change is important now
- When change will occur
- How change will benefit the customers, the salespeople, and the company.
Step 2: Provide complete implementation support. To effectively introduce a new sales compensation plan, it is essential that front line managers have all support materials they require for the change. This includes a leadership message about the rationale for the change, training about how the new plan works and how to work with it, and the communications materials for how to announce the plan to the employees covered. The material should address not only the new plan, but also new roles or jobs that may be associated with the change.
Step 3: Monitor change results. Too many companies do a poor job of monitoring the results of change initiatives and a change to a new sales compensation plan is no exception. To realize the benefits of a plan change in your company consider two initiatives. First, establish clear measures of success and communicate them to the individuals responsible for managing the transition. To begin with, one purpose of a new sales compensation plan is to direct, motivate and reward the results
management expects from the change. We often ask top managers: What behavior and results are you not now obtaining that you expect to realize from the new compensation plan? The answer to that question is a good place to start when thinking about success measures for your company's new plan.
Second, once you are clear about the new compensation plan's success measures, you should set a specific time period over which results will be tracked. Generally speaking, we observe that companies wait too long to validate results of a plan change.
For example, a consumer products company told us that eight months after they had changed their compensation, management discovered the sales staff did not understand the new plan. Because it was an annual plan, with a mid-year payout, and the first payment did not take place until two months after the mid-year close, salespeople did not appreciate how much they were earning until the company distributed the first payment checks.
Once they had their checks in hand, the salespeople were able to see exactly how the company calculated their incentive pay. Up to that point, many of them had adopted a wait-and-see attitude about how the plan was going to pay out, which is what sales people told us when we interviewed them about the situation. That point alone startled us. A major reason to change a compensation plan is to redirect behavior based on management expectations for business results. If salespeople adopt a wait-and-see attitude about a new plan, clearly the company has missed an opportunity for performance improvement.
Step 4: Recalibrate. In the rush to implement change, companies often underestimate the number of details that require attention. This is particularly true when it comes to paying salespeople or paying others who for the first time are being paid under a sales compensation plan. Because this is inevitable, it is essential that you quickly modify or correct any shortcomings or omissions Step 3 identifies.
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