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In the latest episode of the CPSA Sales Compensation show, we focus on preparing sales comp plans ahead of the new year.
Our guest is David Johnston. David is the founder and CEO of Sales Resource Group Inc., a leading consulting company with extensive experience in the design and development of sales compensation programs for organizations across North America and around the world.
Listen to this episode of the CPSA Sales Compensation Podcast and discover:
* Who is responsible for initiating and managing the process?
* How do you ensure that the compensation program aligns to the business goals and sales strategies of the business?
* Should salespeople be involved in the development of the 2018 plan?
* Does finance get involved in the process? If so, how?
Want to hear more? Check out these bonus insights:
* When is the right time to start preparing for the coming year? How long will it take?
* How important is target setting in planning for 2018?
* What role does the Leadership Team play in the compensation planning for next year?
Read the edited transcription:
Intro: Welcome to the Sales Compensation Podcast brought to you by the Canadian Professional Sales Association.
Neil Kumar: Our guest today is sales compensation expert, Dave Johnson from the Sales Resource Group. Dave, welcome to the Sales Compensation Podcast show.
Dave Johnson: Thanks very much, Neil Kumar.
Neil Kumar: We'll start off by asking, is there a process or steps that would be recommended for addressing this planning requirement?
Dave Johnson: Sales compensation is part of an organization's business planning for the coming year. Typically, organizations start this process in early September to give themselves enough time to plan adequately and make sure they have everything ready for January 1st. Sales compensation is no different. The process typically starts with research into what's been happening with the sales force, how they've been performing under the current plan, and that's followed up by looking at what the direction of the organization is for the coming year. Getting alignment between where you are now and where you need to go over the next 14-16 months is a critical element in the process.
Neil Kumar: Who is responsible for initiating and managing the process?
Dave Johnson: Well, it's not one group or one individual. Typically, world class sales compensation plans are managed by a team. HR is typically responsible for the design and the market competitiveness of the plans, but sales obviously has a vested interest. Operations who track and monitor sales performance and collect sales information are critical, along with finance, IT, a number of other organizations, including maybe even marketing. It should be a team effort.
Neil Kumar: How do you ensure that the compensation program aligns to the business goals and sales strategies of business?
Dave Johnson: Well, that's where the sales leadership group comes in because they're the ones that are identifying where the organization is going and what compensation needs to do to support it. Very often, we'll get comments from people that say, "If I could only get the right comp plan, we would get right results," but sales compensation is an output. It's not an input, and it's the output between alignment of the company's business goals and objectives, the sales marketing and service strategies to achieve those goals, the tactical activities, behaviors that you need for executing those strategies and then finally the structure and how you go to market in terms of your sales methodology and the way in which you want salespeople to perform.
It's ensuring that you understand the direction and the vision, also, having the sales leadership on board to ensure that they are driving the process, you have the right direction.
Neil Kumar: Should salespeople be involved in the development of the 2018 plan?
Dave Johnson: A lot depends on where the organization is at. If people are disgruntled in the field, if there are issues with the compensation plan, then I think you need to give them the opportunity to express those, any frustrations, and to provide you with input into the process. Very often, however, management is driving the bus and wants a plan that has their objectives in mind. A lot depends on the culture of the organization, whether occlusive culture or one that's more management-driven.
Neil Kumar: Is sales management compensation part of the process, or should that be left up to the leadership team?
Dave Johnson: Well, up to the executive level, I think it's absolutely essential that you have alignment between the plans of the salespeople in the field and the people that are managing them. If you don't get that alignment, you can have conflict where the objectives for managers are different than those of the salespeople and you don't get the coordinated effort. It is essential that sales management comp is looked at, as well, and it's often overlooked until the very end of the year, and then you're rushing to get something into place.
Neil Kumar: Does finance get involved in the process? If so, how?
Dave Johnson: Finance has a critical role to play, in particular, around target setting. If you don't have good targets, the sales compensation plan doesn't work very well, and that target setting has to meet the needs of the organization, it has to support goals that are being given to the sales leadership, but at the same time, it has to be realistic. Targets that are set that aren't realistic and that salespeople can't achieve results in sales force being demotivated from the get-go. It's very important finance participates in this and that there's a vetting process back and forth between what the organization has been able to deliver and what finance and leadership needs it to deliver.
Neil Kumar: If you could give one piece of advice to organizations planning for the 2018 sales compensation program, what would it be?
Dave Johnson: Well, start early. Don't wait until the business plan has already been developed because it's too late [inaudible] and you'll be scrambling.
Neil Kumar: Our guest today has been Dave Johnson from the Sales Resource Group. Dave, thank you for your time and joining us on the show.
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