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Does Your Company Suffer From Compensation Complacency?
As a sales team leader, you wear a lot of different hats. If one of those hats is labeled “Compensation Management,” ...
As a sales team leader, you wear a lot of different hats. If one of those hats is labeled “Compensation Management,” you might be susceptible to comp plan complacency. Overhauling any longstanding company policy is going to invite a host of ideas and opinions, and some stakeholders will be invested in how things have always been done.
Complacency is a profound comfort with the status quo, and it can undermine the forward thinking necessary to adjust to new or challenging circumstances. At its most extreme, complacency can cause a crisis — but it’s not just a problem for trauma surgeons and fighter pilots. In business, complacency limits agility and hinders the ability to adapt to rapidly changing conditions.
How can you overcome obstacles, including company tradition, and revamp commission plans to attract and retain the sales talent your business needs?
Overcoming compensation complacency
Compensation complacency can, over time, disrupt sales operations, cause discord among sales teams, and lead to a decrease in both employee and customer satisfaction. So, while it seems easy to roll with the status quo, complacency and “legacy thinking” will have your sales team — and your company — losing steam in the long run. Meanwhile, your competition is making more dynamic compensation moves.
An effective compensation plan keeps your business competitive in more ways than one. It energizes and motivates your existing employees, improves performance and retention, and attracts new talent to the employee experience you offer.
Signs of compensation complacency
Sales compensation plans are affected by a variety of constantly evolving circumstances, including team and individual performance, company goals, and volatile market conditions. With constant change comes the need for compensation vigilance.
To recognize when it’s time to reexamine your sales compensation approach, watch for signs of sales team dissatisfaction, such as:
- A growing gap between sales and compensation. Your top sales performers aren’t receiving top commissions. Sales reps regularly question their commissions, and targets are increasingly out of step with performance. More than half your team members regularly miss sales targets, and your company is paying out the same compensation with diminishing returns.
- High turnover among top sales performers. Compensation and commission plans are designed to motivate, recognize, and reward success, but if your team members don’t feel the rewards are sufficient, they will move on, compromising your revenue stream and adding cost and time pressures to recruit and onboard replacement talent — if you can find it.
- Sales goals are not aligned with business goals. Commission structure should fit with growth targets, and tie motivation and reward to the overall strategy and commercial goals of your business. If your company has seen changes in productivity, or added products and services, review your compensation strategy to ensure it remains effective and relevant.
- Resistance to new comp plan solutions. As new products and services are added to your sales offerings, your company will confront differing margins and evolving marketplaces. The agility of your comp plan reflects an ability to encourage sales team engagement. Without an easily adjustable plan, sales reps may settle into performance paralysis. What “always worked” before is not guaranteed to work today, and comp plan complacency undermines growth and scalability.
Analyze and improve
Complacency is the enemy of excellence, but it can be overcome. Improve your compensation plan by making it more transparent, fair, flexible, and secure for your team. Whether you decide to start from scratch or simply tweak your current compensation recipe, consider these strategies for implementing comp plan changes:
- Keep the good. Keep the elements of your existing plan that work well. Evaluate the whole, and break it down to discover old weaknesses and new opportunities. Focus on incentives. Which were most successful? Why? Use what you find to drive improvement in a new, more successful plan.
- Focus on clarity and simplicity. Complex plans create confusion, and they can be challenging to calculate and pay out accurately. Simplify your compensation plan to make it easier for sales reps to visualize and prioritize their sales activity. Create clear incentives to motivate and reward sales performance.
- Make it data driven. Use data to benchmark sales incentives. Compare sales compensation data with industry benchmarks to ensure your plan is both fair and competitive. With millions of job openings and a shallow talent pool, data-driven comp plans are essential to recruiting and retaining top performers.
- Analyze and adjust as needed. Compensation planning used to occur quarterly or annually, if at all, but the past few years of disruption make the need for consistent agility clear. For current success and future growth, regularly review, analyze, and revise plans to identify potential problems and make changes with ease.
Don’t succumb to comp plan complacency. Create and manage more agile, efficient, and effective sales compensation plans with a comprehensive commission management platform.