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2009 Sales Compensation Checklist

2009 Sales Compensation Checklist
By David Cichelli, The Alexander Group, Inc.

January is the sales compensation roll-out month for many sales departments. More than 65% of all companies have fiscal years beginning January 1, and most wait until the start of the new year to announce their new or revised sales compensation plans. More than 85% of all companies will make changes to their plans for 2009. 

Here is a checklist of action items to ensure the success of your 2009 program. 

Strategy Alignment. An effective sales compensation re-design effort ensures alignment between company goals and sales objectives. The 2009 plans should reflect your company’s 2009 ambitions. The 2009 design team should have challenged and eliminated the now irrelevant traditional and historic practices during the design process. Each plan should have three or fewer measures that contribute to reaching the company’s sales goals for 2009.
   
Cost Modeling. Sales operations and finance should have done an extensive cost modeling to test the payout scenarios for all of the plans. You should look to your “numbers people” to help avoid nasty payout surprises — either too high or too low as compared to target. This effort requires aggressive testing of bold and sometimes unthinkable scenarios. Use historical data, Monte Carlo modeling and what-if testing to evaluate all possible conditions. And use a task force to examine and challenge modeling methods and results.
   
Field Training and Communication.  There is a natural tendency for corporate staff members to do a “road show” to roll out the new sales compensation plan. Unfortunately, this is an incorrect approach. Yes, corporate staff personnel who helped build the new incentive plans know the new plans best. However, front line sellers will believe in the plan if they know their supervisors and managers are behind it. This requires that field sales management do the hands-on communication of the new incentive plans. This means special training programs for field managers.  Be prepared to invest in this effort. And don’t be seduced into pre-recorded Webinars. While such web-based modules have an important educational role, the inspiration provided by a supervisor is the key to activating the measurement commitment component of the incentive plan.
   
Administration. Make sure the IT folks can support the new sales incentive plans. Whether you plan to administer the incentive plans with dedicated commercial software, a homegrown custom application or desktop solutions, make sure you can calculate payments, manage exceptions and provide Web-accessed reporting to all levels. Test and re-test before the launch of the new incentive plan.

David J. Cichelli is senior vice president of The Alexander Group Inc. He has been a WorldatWork member since 1980 and is a member of the WorldatWork faculty. He can be reached at dcichelli@alexandergroupinc.com or 949-255-5650.

Contents © 2009 WorldatWork. No part of this article may be reproduced, excerpted or redistributed in any form without express written permission from WorldatWork.

Reader Comments
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Thu April 23, 2009 7:12 AMReport Abuse
Barbara G Archer, CCP
Compensation Manager
Member Since: 5/1/1998
Comments: 1		 
great reminders of the fundamentals we tend to forget. Thank you!
 
Fri January 23, 2009 11:04 AMReport Abuse
Donald R Marich, CCP
Principal/ Sr Compensation Consultant
Member Since: 11/19/1992
Comments: 1		 
Very good points to remember when preparing for the new year's commission plans and gaining the sales team's buy in of these new plans.