I’ve been reading about comp plans for sellers. They are a huge challenge. A recent report cited: 97%* of leaders think there are challenges with their comp plans. 91% of organizations failed to hit goal, yet only 31% of them felt the quotas were unrealistic. 78% find their comp plans difficult to understand. And only 1% of RevOps and 12% of Finance leaders believe comp plans are aligned with overall company goals.
Yet despite all of this, the primary lever managers use to drive performance is comp–and I suspect that’s why we see the data above.
I have to confess, I made that mistake at one point in my career. We had the idea that we would develop a comp plan that would both motivate sellers to do more; focus them on our strategic initiatives; drive new customer acquisition; assure their efforts were balanced across the entire product portfolio; drove key account growth; and a few other things.
In hindsight, to understand the plan, you had to have PhDs in statistics and behavioral analysis. And, as you would expect, sellers were confused. Instead of being focused on the plan, they gave up, focusing on hitting their numbers, whatever way they could, ignoring the “guidance” we were providing through the comp plan design.
It was a massive failure. And while I have always kept comp plans constant through a fiscal year, this time we had to abandon it in the second quarter, dramatically simplifying the plan. In the end it focused on hitting revenue goals, and balanced performance.
But we didn’t abandon our other initiatives. We just realized it was inappropriate to put all of these into the comp plan. We recognized, it was more appropriate to put the other performance focus areas into something else—the performance plan. We included goals–some quantifiable and some directional, into the performance plans. And as managers coached their people, they reviewed performance against these criteria, making sure people were doing their best on all elements, and coaching them in areas where they weren’t meeting performance objectives.
We forget, we have multiple tools to drive performance. The comp plan is only one of those. Performance plans, development plans and other areas provide us the capability to drive performance in ways that are much simpler for both managers and sellers to understand. And much simpler to implement.
For example, if we have a new customer acquisition goal, let’s put that goal as a performance objective. When we do pipeline reviews, we look at the number of net new customers that are added to the pipeline, coaching people on how to hit their goals. If we have account growth goals, we put an objective in the performance plan. We look at the account plans to see of they are focused on how we achieve those goals, we look at pipelines to make sure we are pursuing opportunities that support the account growth goals.
The good news about this, is that it both simplifies comp plans, but it is much more proactive. Comp attainment is a historical view, we don’t know whether we are achieving our goals until long after everything has happened. As a result, we don’t have the ability to take proactive action that enables the seller to more appropriately achieve their goals.
As leaders and coaches, we are most effective in helping our people achieve the highest levels of performance, when we leverage all the tools at our disposal, using the most impactful tool to achieve our goals.