Sales Compensation Focus

5 Steps for Communicating Your New Sales Comp Plan

By Beth Carroll, Prosperio Group  |  January 2015

It's a new year, and with a new year always comes new sales compensation plans. You might have already rolled yours out, but if you are like many organizations, January is the time for the annual sales conference, when sales reps gather to plan for the year and learn about changes to their compensation plan.

For some this is exciting, as it means the opportunity to earn more money. But for most it's an event that is met with skepticism and even dread. In some cases this fear is well-founded. If the reps work or have worked for an organization that has changed compensation negatively in the past, they might have developed a conditioned response to the communication of a new comp plan. If the reps have been treated badly enough in the past, and have gone through several negative changes, then the fear likely has morphed into indifference, disregard, disrespect and disdain. They've seen it all, heard it all and know exactly where the story ends: They make less money and have a higher goal to reach. And to make matters worse, management is going to tell them they should be excited about the change.

Effort Begins with Building Trust

This is where some real skill comes in for the HR manager leading the communication change, but the effort begins long before anything about a new compensation plan is presented. Communicating your new sales compensation plan begins with building trust. If the reps are treated fairly throughout the year, are given accurate information and have their questions addressed promptly and with respect by anyone on the HR staff or in finance or sales operations, you are a long way down the path of having a successful communication event because you will have built up trust credits throughout the year.

This doesn't mean that you always have good news to communicate to the reps. When you have bad news, it's best to be direct and clear about the issues. Don't try to make something wonderful out of something meager and don't mislead them about the potential for gain. They will see through it, and your credibility and their trust will be lost.

Of course, the easiest plans to communicate are those that provide genuine upside for most of the reps. For many, the change will be easy and they will welcome the additional earnings potential, but there will always be a few who resist change because it's change. Developing a good sense of what you can and cannot control is critical to the perceived success of the communication event.  Some of the most common reasons for resisting a positive compensation change are unwillingness to pay more in taxes or the need to pay more in alimony or child support. You can educate reps on the former, particularly when the issue revolves around the timing of payments, but you cannot do anything about the latter. You need to accept that the new plan will not be a welcome change for these reps and move on.

Five Steps to Follow

For any plan, whether a positive or negative change is being presented, you should follow a standard communication process that involves these five steps:

  1. Develop a high-level presentation
    • Business objectives and strategy.
    • Organization structure changes, if any.
    • Process used to develop the plan.
    • Highlights of plan changes, such as what's good and what's different.
    • Next steps, including when the plan will go into effect and when they will get their goals.
    • Plan details by role.
    • Calculation examples.
    • Wrap-up and Q&A.
  2. Develop comparison calculators for the reps that show earnings under the new plan that allows them to do "what if" scenarios to understand how changes in performance can change results. Sitting with one of the resistant reps and walking through his/her earnings calculator can be a powerful way to warm them up to the change.
  3. Test the presentation and the calculators with small groups of reps in a "communications test group." Remember, this is as much about marketing the new plan as it is about the math behind the calculations.
  4. Communicate the plans to the reps' managers first. Be sure they understand the plan and can explain it and answer questions.
  5. Communicate the plan to the reps in the following stages:
    • Group communication. Live is ideal, but town-hall call-in sessions can work well for large, geographically dispersed organizations. The head of sales and the design team members should be involved in this event. Be sure to send the reps a copy of any presentation used or make it available for download on a secure site.
    • Manager communication one-on-one with each rep. This should occur 2 to 7 days after the group communication and should include as much detail as possible, including goals for the following year if they've been set. This gives reps a chance to ask more questions in a private setting. Managers should be instructed to gather questions so they can be posted along with answers on your company's bulletin board or sales communication network.
    • Plan document distribution. A week or two after the group communication and/or concurrent with the manager one-on-one meetings, the reps should be given their full plan document to review and sign.
    • Feedback, feedback, feedback. As the year continues, continual reinforcement of the plan is as critical to success as the entire design process.  Too many managers treat sales compensation communication as a one-time event. This is a huge strategic error.  Sales compensation plans do not manage themselves, nor should they.  Even under the simplest straight commission plan, every incentive payment is a coaching event that can be capitalized on to change or reinforce behavior.

Communicating your new sales compensation plan does not have to be as challenging as you might think. Taking the steps necessary to prepare will give the reps a clear and positive experience for the annual event.

About the Author

Beth Carroll is managing principal at the Prosperio Group, a compensation consulting firm that focuses on aligning pay with performance to help companies drive profitable growth.   

Read the January edition of Sales Compensation Focus.

Contents © 2015 WorldatWork. No part of this article may be reproduced, excerpted or redistributed in any form without express written permission from WorldatWork.

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