Managing Change when Launching a New Sales Compensation Plan

Managing Change when Launching a New Sales Compensation Plan

For our second post in our in-depth look at change management, we’re going to look at the challenges that come into play with adjusting your sales compensation plan. With the switch to virtual selling in our present pandemic environment, no doubt many organizations are taking a look at their sales compensation plans and considering this to be a good time to make changes to how sales reps get paid for successfully winning deals.

We’ll take a look at why you should consider change management best practices in planning for adjustments to the sales compensation structure and, as part of that management, how you can effectively adjust your compensation so that the change management process of shifting from the old plan to the new goes as seamlessly as possible.

Why You Need Change Management for Sales Compensation Plans

It’s one of life’s realities that people are creatures of habit. Even the most ardent adrenaline seekers who thrive on variety and things constantly shifting crave stability in things like a sales compensation plan. Therefore when changes come into play, there’s a high likelihood of a confused and skeptical sales force as everyone scrambles to calculate how they’re going to personally do under this new structure.

With a change management plan in place, you can ensure as smooth a process as possible when introducing a new sales compensation plan – it will be an adjustment that everyone understands and can see the logic of, and they’ll be well prepared to adapt to the new reality.

Or, to put it another way, without a change management process carefully plotted out ahead of time, a new compensation plan can be a very dangerous time for a company. Even those sales reps who stand to benefit significantly from the change can become unnerved and confused by the shift and those who see the change negatively might end up leaving the organization for an employer who offers an easier-to-understand (or similar to the old way) compensation plan. And we all know how expensive sales rep turnover can be.

So having a change management strategy before the switch occurs can keep everyone clear and focused, reduce disruption, and drastically reduce the probability of turnover occurring.

How to Design the Change Management Process for Sales Compensation Plans

That’s great, you say. Clearly we need a change management strategy. We understand the basics of change management generally speaking, but what does it look like when specifically applied to sales compensation plans?

Excellent question. The answer, as is the case with so many sales-related processes, is that it involves a series of steps that form a clear, logical, end-to-end process when put all together.

  1. Examine your pre-existing sales compensation plan.

    Look at all aspects of your present compensation plan. Ask yourself a series of questions, including but not limited to: What elements of it are working and need no or perhaps minimal tweaking? Are there any parts that your sales reps frequently comment are unclear or complex to calculate? What does the turnaround time from process of sale close to depositing commission look like? Which specific behaviors and activities does your plan currently encourage – both positive and negative – and what objectives will you want to encourage moving forward?

    Once you perform this deep-level analysis, you have a basis for understanding what your current plan’s strengths and weaknesses are, laid out in a clear, well-organized form – whether in a Word document, in a spreadsheet, etc.

  2. Determine what you want your new sales compensation plan to achieve.

    At an absolute minimum, you will want a sales compensation plan that is easy for all of your sales reps to understand and simple to calculate for themselves. The plan should also have systems and processes attached to it that allow your reps to receive their compensation as realistically and seamlessly as possible.

    But sales compensation plans are about more than simplicity, user-friendliness, and timelines, of course. As we noted in the first step, compensation structures will encourage or reward certain sales behaviors and activities – whether by design or – in many cases – unintentionally.

    So part of your process will involve calculating how you can foster those behaviors and activities that have most clearly been tied to sales success – in other words, what are the leading KPIs that directly translate into increased productivity and higher sales – the most important lagging KPI? Thinking of your compensation plan in these terms can have potentially electrifying effects on your revenue.

    Conversely, not paying attention to those factors can result what you might well have noticed in your initial review of your present compensation plan – the wrong behaviors are being encouraged – which in turn has a potential dampening effect on both employee morale and total revenue.

  3. Seek input from the current stakeholders – sales reps, managers, and leaders.

    You might think that after the first two steps, you’re ready to move on to the design stage. Nope. There’s one more critical phase to include (though there’s no reason it couldn’t run simultaneously with one of the other two steps). Namely, you need to solicit feedback from all levels of your current sales organization.

    Find out what they think is working well with the current plan, and what they’d like to see changed. While you might think – particularly from the sales rep and leadership levels – that the feedback will amount to more money and lower costs respectively, it’s probable you’ll get much more thoughtful, constructive suggestions and opinions beyond that surface-level reaction.

    Even if you don’t receive anything meaningful and it’s as rudimentary as you thought, this is still an important step to engage in. It makes the members of your organization feel heard and gives them an ownership stake in the process – quite the opposite from a top-down ultimatum. And that sense of being heard is essential in making team members feel valued and like their voice actually matters, which in turn improves retention rates and reduces turnover.

    Obviously, you won’t be able to incorporate all the feedback and suggestions you receive. Some of it might be mutually exclusive. Other ideas simply might not be feasible for your particular industry and markets. But do strongly consider using the suggestions that are feasible and align with the goals you’ve identified in Step 2.

  4. Design your new compensation plan.

    After all the previous steps are completed, you’re at last ready to begin the formal design stage. Gather together the information you’ve compiled from the previous steps – namely:

    1. The answers to your analysis questions of your existing plan
    2. The goals that you want your new plan to achieve
    3. The feedback from your stakeholders

    Then design your new plan, making sure that it will accomplish the goals you’re wanting to achieve with it, resolving any issues or problems that you’ve identified in the diagnostic on your current compensation structure, and incorporating as much of the feedback from your stakeholders as possible (this will give them a sense of pride and stake of ownership in the new plan – they’ve directly contributed to it – and make them more amenable and accepting of the changes).

    One other important note: You want to make sure your plan not only benefits your sales staff, but makes fiscal sense for your organization – specifically, that you don’t unintentionally draft a compensation structure that negatively impacts your margins. So it’s crucial to also design the plan with the company’s overall sales goals in mind.

  5. Engage in internal marketing to get your organization excited about the new plan.

    Just as you would with a sales training initiative before the event, put together a promotional campaign that will get the organization interested in and excited about the new plan. Focus on the positives of the changes and how they will benefit your stakeholder groups – after all, humans are self-interested, and when they can see how changes that are coming are going to improve conditions for them, they’re that much more invested in seeing those changes come into existence.

  6. Have the marketing and/or sales enablement department create supporting collateral.

    A new sales compensation plan involves learning new information and knowledge. And just like a sales training event needs reinforcement to ensure that the new knowledge and skills translate into permanent sales behavior changes, so too will a new compensation plan need reinforcement.

    Why? Because it’s not only new information that can lead to numerous follow-up questions as your sales reps forget information, you’ve also designed your plan to encourage specific sales behaviors and activities. While those things you want to highlight aren’t new, your plan’s spotlight on them is.

    So you’ll want to have marketing develop collateral that explains what the plan is, clearly outlines the specifics of the plan, and perhaps includes things like a calculator and FAQ, where anticipated common questions are succinctly answered. Make sure to distribute these materials to your organization in advance of the next step, so that your members have time to review it beforehand.

  7. Hold meetings and information sessions just before the rollout.

    Even when you’ve taken all the above steps, that doesn’t mean you can simply roll out the plan and everything will proceed smoothly. No matter how carefully you’ve analyzed your existing plan, defined your goals, incorporated feedback, drummed up enthusiasm, and drafted collateral, your organization will still need to have a meeting and/or information sessions before the new plan drops.

    In this meeting, go over the changes to the plan, explain how you arrived at them and why they’re being made, share the ‘WIIFM’ for the rep and open up the floor to questions that your sales representatives have. After all, there’s a strong possibility that there will be members of your organization who haven’t read the plan, read it but not carefully enough to understand what’s going on, or who thoroughly read it and the supporting documents (such as the FAQ), and still have more questions.

    Take the time to answer all questions fully, honestly, and completely. Not only will this prevent misinformation that might damage your rollout, it’ll make your sales professionals feel heard – their concerns and confusions are being listened to and addressed transparently.

  8. Roll out the plan on the announced date, and have resources in place for post-implementation support.

    Sometimes organizations follow all seven of the above steps and believe they simply need to then change to the new plan on the designated date. This is a tactical mistake. Instead, you should have post-implementation support resources, such as a designated contact for specific questions and easy accessibility to documents that can answer queries and clarify any issues that may happen to come up. In an ideal world, these things wouldn’t be needed, but as 2020 has so amply demonstrated, we do not live in a perfect world. And so we need to prepare for as many possible outcomes and snags as possible.

As you see, the change management process for switching your sales compensation plan is a complex, involved process that will take time and require the input of your entire organization in order to be successful. But proceeding diligently and with great care to make sure all these phases and steps are completed will transition you and your organization from the old to the new as seamlessly as possible – thereby launching your business to even higher revenue by reaching your goals and fostering the most profitable sales behaviors and activities.