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“It’s Complicated”: How to Save Time and Mitigate Disputes with Your Sales Comp Plan

No matter how simple something seems, there’s always something complicated beneath the surface that enables said simplicity. Take your iPhone for instance. You swipe up and magically the camera recognizes your face and boom…You’re in the user interface doing the things you do on your device. But under the hood of this magic lies all kinds of complex hardware and software. 

Just like building a sales comp plan. I want to incentivize my sales people on x, y, and z. Simple enough right? Well, sometimes, but sometimes when we strategize a plan to achieve peak performance from salespeople, let’s be honest, it gets complicated. But having the right software to enable simplicity is the key to sales comp success.  

There’s no getting around it: the best sales compensation plans are often complicated. And that isn’t necessarily a bad thing. Complexity allows you to fine-tune the payouts you offer based on factors like the product being sold, the size of the sale, the sales a rep has already made, and more. And this fine-tuning ensures that every dollar of your compensation spend is targeted where it will be most effective—saving money while optimizing the sales process.

But that complexity comes at a cost. If you don’t have a plan for how to deal with complex comp plans, they can create no end of headaches.

In this article, we’ll take a look at the problems complex sales comp plans can introduce, the trap of “simple” solutions, and how Performio empowers you to utilize unlimited complexity in your sales comp plans without any of the downsides.

The difficulty of complex sales comp plans

The more rules and components you introduce into your sales comp plan, the harder it becomes to track and calculate them. This in turn increases your chances for introducing errors—especially if you’re still using spreadsheets to calculate your commissions.

If you’re working in Excel, you have to translate your sales comp rules into formulas, and then copy those formulas across hundreds or even thousands of rows of data. Need to make a change? You then have to update the formula everywhere it appears.

As your sales comp plans grow more complicated, your formulas will need to reference each other, creating an intertwined web of calculations. And if you introduce even a single error anywhere in your spreadsheet, the whole thing can come crashing down.

Best-case scenario—the mistake is obvious enough for you to spot it right away. Then you’ll spend hours or days trying to find the error and fix it. But worse (and more likely)—the error goes unnoticed, and you go for weeks, months, or even years issuing incorrect payouts due to one tiny error. And whether they’re underpayments or overpayments, they’re a big problem.

Overpayments cost organizations an average 3% to 5% of their commissions, according to Gartner. And it’s unlikely your sales reps are going to volunteer the information if their paychecks end up being higher than they expected. Once discovered, you’ll either need to eat the cost of the overpayments that went out, or you’ll have to make the deeply unpopular and morale-harming decision to issue clawbacks.

Underpayments are far more likely to be noticed and called out by sales reps, leading to drawn-out disputes that erode trust no matter how they’re resolved. Once a rep opens a dispute, you’ll have to re-examine the sales data to determine whether an error is present, locate and correct the error if so, and then recalculate and reissue any payouts that had been affected. It’s a huge waste of time, and the more it happens, the less confidence your reps will have in their earnings.

Lacking confidence in your ability to calculate their commissions (and lacking any real-time transparency into their current earnings), sales reps will resort to “shadow accounting”—their attempt to calculate their payouts themselves in order to double check your work. That’s not only a waste of their time that could be better spent making sales, but it’s also unlikely to be any more accurate, further increasing the number of disputes they open, many of which will have no basis in reality. And telling them that their calculations were wrong won’t do you any favors for improving trust or morale.

The trap of “simple” solutions

Faced with such problems of complexity, you may be thinking it’s time to move away from spreadsheets and toward a dedicated Incentive Compensation Management (ICM) solution. And this is absolutely the right impulse! But it matters which ICM solution you choose.

Far too many vendors focus on “simplicity” and “ease of use” over everything else. And true to their word, they often are simple to use. But simplicity isn’t necessarily what you want. A simple solution is no good if it can’t handle the complexity of your sales comp plans. At Performio, we’ve had no end of clients come to us after trying a “simpler” ICM solution, only to become frustrated at its inability to handle their needs.

For example, consider the case study of Dräger, a producer of medical and safety products. They first adopted Xactly for their sales comp management, but they eventually found the platform unable to handle the complexity they needed in certain key areas.

“The majority of our sales comp plans are pretty standard,” said Anh Ung, Finance Controller at Dräger. “But there are other outliers, for example, government sales vs. corporate sales, types of products sold, and services provided. We needed a system that could handle all of this.” Ung added, “We were always boxed in and could not grow. Our plans were in the same layout for ten years.”

The problem with many “simple” solutions like many of Performio’s competitors is that they’re still based on spreadsheets. They provide users with a slicker interface that saves a little time compared to manual data entry, but the deeper problems with spreadsheets remain. And they’re ultimately unable to facilitate more complex sales compensation plans.

Why a modular approach is essential for complex plans

When it comes to selecting an ICM solution, “simplicity” is not what you’re after. You need a robust solution that can handle any sales comp plan, no matter how complex. That’s why Performio uses a modular design for creating and managing plans.

Here’s how it works. Instead of creating individual formulas that get copied wherever you need them, you create each calculation rule once as its own module.

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Within each module, you define everything you need to know about that calculation rule.

From there, every time you need to use a given rule, you simply plug in the component you already created. No duplication. No working with error-prone formulas. No digging through row after row of spreadsheet data. And best of all, it’s infinitely scalable and able to manage any level of complexity you may need.

“Because Performio can be customized, the solution has allowed us to build anything we have wanted. Performio has been very accommodating and has allowed us to set up our commissions the way we want. Now the process is much easier and we can work smarter, not harder.” —Anh Ung, Finance Controller, Dräger

Additionally, Performio provides your sales reps with real-time access to their completed sales activities, earned commissions, and progress toward meeting their quotas and goals. This helps to keep them motivated, head off shadow accounting, and prevent unnecessary disputes. And when disputes still arise, you can use the built-in dispute resolution system to work through the issue and come to an agreeable solution.

Make the most of your sales comp plan with Performio

Performio’s ICM solution gives you powerful tools for creating new sales comp plans, tracking performance of individuals and the team as a whole, calculating commissions, generating reports, and seamlessly communicating within the team.

Our software tracks everything for you, providing sales-comp admins with all the data they need to keep teams on course toward meeting their goals, and giving sales reps a real-time window into how they’re doing and what they can expect to earn.

 

Ready to see what Performio can do for your organization? Request a demo today!

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