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How to Align Compensation with your Sales Planning and Monitoring

The world is complicated. And while we have seemingly endless amounts of content and data at our fingertips, in some ways, it’s actually hard to find. Sure, everyone has a smartphone and can get “anything,” anytime…anywhere, but sometimes, that anything, anytime, anywhere scenario can be straight up overwhelming. It’s kind of like seeing the code behind the Matrix itself and trying to make sense of it all. 

The same is true when it comes to aligning your sales compensation plan with your sales planning and monitoring. Incentivizing on the wrong behaviors, on too many behaviors, on the wrong activities, on too many activities, the list goes on. We’ll give you the simple breakdown to customize your comp plans while aligning them with the right things to drive performance.  

Sales planning allows you to define success for the future and chart a course to get there. And sales monitoring allows you to track your progress and verify that you’re meeting your goals. Together, these essential practices ensure a sales team moves with purpose toward a common aim, rather than haphazardly making sales and hoping for the best.

But in order for sales planning and monitoring to be most effective, you must structure your sales compensation plan to support them. Proper alignment between compensation and sales planning and monitoring means:

  • Your sales reps will be motivated to perform to the best of their abilities.
  • You can identify and reward high performers on your team.
  • You’ll build internal organizational trust at all levels—including sales reps, sales leadership, and the board.
  • Everyone is working together toward the same organizational goals.

By contrast, poor alignment between sales planning and your comp plan means:

  • Good performers may not be properly incentivized.
  • You risk high attrition rates.
  • There may be increased divisions between leadership and individuals.
  • Overall performance will suffer.

But what causes poor alignment, and what can you do about it? Let’s take a look.

Causes of poor alignment between sales planning and compensation

Poor alignment comes from a mismatch between the compensation structure you offer and the sales activities you want your reps to accomplish. We’ll examine a few of the most common ways this can happen.

Crucial sales activities aren’t properly incentivized

Sales planning should identify not only the broad organizational goals everyone is working toward, but also the individual sales activities required to reach those overarching goals. It isn’t enough to simply point to the broader goals and expect your sales reps to fill in the gaps themselves.

In order to properly motivate your team, you need to incentivise the specific sales activities needed to achieve your goals. Otherwise, reps will naturally gravitate toward working on whatever other sales activities have better or more immediate incentivization, and progress toward organizational goals will falter.

Brad Phillips, Sales Manager at Performio, recounts a time from a few years back when we wanted to capture a certain amount of revenue from implementations in service revenue, but we weren’t initially seeing the returns we had expected. On closer inspection, it turned out that the sales comp plan wasn’t offering the right incentivization. Once we identified the problem, we simply added a service revenue component to the plan, and just like that we were back on track to meeting our goal.

Any sales activities that are critical to your sales plan need to be built into your incentive structure.

Too many behaviors are incentivized

The inverse problem to insufficient incentivization is too much incentivization. The reason you offer incentives for specific sales activities is to prioritize those activities and ensure that they’re being completed sufficiently to meet your goals. But if other less-relevant sales activities are equally incentivized, then sales reps will have no driving reason to choose one over the other.

You might as well have not incentivized anything. But it’s even worse than that, as you’ll actually be paying more to incentivize superfluous activities that dilute your sales reps’ attention and divert from making progress toward goals.

Inasmuch as it’s important to incentivize crucial sales activities, it’s equally important that you not over-incentivize less-important goals. And for some non-revenue-driving activities that you need to incentivize but don’t want to overshadow more-critical work, consider using non-cash incentives instead.

Quotas aren’t set at appropriate levels

Sales quotas are the most direct link between compensation and sales planning and monitoring. They help to motivate reps by providing them with clearly defined performance expectations they need to meet during a given sales period. However, if quotas aren’t set correctly, they could actually be harming performance and keeping reps from completing your sales plan.

If quotas are set too high, then most sales reps won’t be able to reach them. They’ll become discouraged at their inability to make their target incentive pay, and they’ll lose the motivation to continue trying.

But if quotas are set too low, sales reps will meet their quotas too quickly. And when that happens, they tend to slow down a bit in their sales activities until the next quota starts up, leaving you with a period of decreased productivity.

Additionally, when it comes to sales planning, you need to make sure you build in a buffer for sales quotas to compensate for sales reps who don’t meet their quotas, as well as for things like turnover. If your sales plan relies on making 100% of quota, then all it takes is for one rep to fall short or one rep to leave, and suddenly your whole plan is thrown off.

As a baseline, you can aim for your quotas to have a buffer of around 25% over the plan. However, the more precise you can get it, the better positioned you’ll be to avoid either pitfall of too-high or too-low quotas. This means looking to your own historicals to create a model based on past performance. Consider such factors as ramp time, attrition, macro market expectations, volume and velocity of business, and product launches.

For example, if you’ve consistently experienced high sales-rep turnover, then you’re going to need a larger quota buffer to stick to your sales plan than a sales org with low turnover.

Principles for improved alignment

Beyond simply avoiding the problems we discussed above, there are a few other principles you can follow to support proper alignment between compensation and sales planning and monitoring.

Look at historical data

If you’ve been monitoring and tracking your sales performance, you should have a wealth of historical sales data to use when planning and making decisions. When you can see how your team has performed in the past, you’ll have a much better idea of what you can expect from them in the future.

Of course there’s no guarantee that past performance will always be a reliable indicator of future performance. But if you’re also actively monitoring current performance, you’ll be able to see when things begin to diverge from historical precedents, and then you can adjust accordingly to get back on track.

But to do this well, you’ll need a dedicated solution—like Performio’s ICM software—to give you real-time access to current performance, and to analyze past sales data for invaluable insights.

Communicate so that everyone can buy in

Clear and open communication is a must in order to get buy-in from all stakeholders. You’ll not only need to gain approval from the board, but you’ll also need to convince your team that you’re presenting them with a viable plan. If sales reps are dubious from the start, you’ll have a much harder time motivating them to meet their goals.

This means you’ll need to provide justification for each decision you make—especially if it deviates from expected norms. If you’re making decisions based on historical data (as you should be), then you also should use that data to explain why you made the decisions you did. Point to what past performance has been, show what it will look like should those trends continue, and describe how your plan intends to address it. You need everyone from the top down to understand your plan and consider it feasible. 

Be decisive and comfortable in the uncomfortable

When it comes right down to it, you’re going to have to make a decision and move forward. While you should always factor in the most reliable data you have access to, you’re going to have more accurate and consistent data during some periods than others.

This is especially true throughout times of volatility in the macro economy. When we don’t know whether things are getting worse or getting better, it leaves a lot of unknowns for our sales planning. All you can do is look at the data in as many ways as possible, make an educated decision, and move on.

No matter how thoroughly you plan, you’re going to have moments where things are off. But if you communicate well, if you’re open and trustworthy about the data you’re using to make decisions, and if you adjust appropriately as needed, then you’ll be well positioned to get back on track and end up where you need to be. It’s okay if not everything is perfect all the time. Just continue to monitor and make changes as needed.

Streamline sales compensation with Performio

With Performio, building or changing a comp plan is easy. No need to sort through rows of data in spreadsheets, modify individual copies, and hope there are no errors. Just make the necessary changes once, and the new plan will be automatically distributed to your sales team to accept and sign electronically.

Performio then automatically calculates sales compensation reports for sales reps, managers, and finance staff. It’ll take into account both the old plan and the new one, and it’ll do it all in one place. This ensures that even when business priorities shift, your incentive structure can keep in step.

Additionally, our software gives you a start-to-finish look at your sales data, producing valuable insights at every step of the way. You’ll see which leads have the best conversion rates, which sales reps are securing the most customers, which methods are the most effective, and how all of it comes together to support organizational objectives.

Ready to see what Performio can do for your business? Request a demo today.

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