A recent production from World@Work that touches on several very interesting concepts related to using the sales compensation plan to improve sales performance.
In the following interview, Anna Krasniewska Shahid of CEB touches on several compelling topics; plan perception vs. pay, payout curve optimization & guidance on team based incentives and sales compensation.
The perception of the sales comp plan by the sales force is a bigger driver of performance than the actual payouts and can be linked more closely to performance. Perception in this case is defined by three dimensions; Fairness, Risk (Base/Variable mix) & complexity.
Other tidbits worth highlighting;
Payout curves; The steepest part of your plans pay curve should occur in the 95-105% achievement range, Many plans reserve this bump for the higher performance levels, but Anna argues that for the best performers, other factors will have more performance leverage than pay.
Team based incentive comp; If using a team based measure, being able to tie an individual's contribution to the team's performance can be a much more powerful performance motivator than a broader shared measure.
When it comes to minimizing complexity and building trust in the fairness of the plan, nothing beats clear communication !