Consider this: Your incentive compensation design team has spent months designing the perfect sales compensation plan best suited for your company’s overall growth and your sales team. Everything is picture perfect, and you roll out the incentive plan document to your salesforce, but they fail to execute it efficiently. Is this plan still perfect?

Let’s take a deeper dive into this. 

Why is communication important for the success of a sales compensation plan? 

Organizations often go through a lot of processes and back and forth to design an effective incentive plan to align with their current strategic needs keeping the bigger picture in mind. But in a rush to roll out the sales compensation plans, they often forget that communication of the plan is the key.

Communication of your sales compensation plan to your salesforce is the last but the most crucial step in the sales compensation plan design process. This step is often overlooked, failing a perfectly well-designed incentive plan. For your sales compensation programs to succeed; clear communication of the plan and presentation to different stakeholders in a structured manner is very important. 

A research report from Sales Management Association (SMA) says that only 54 % of companies effectively communicate their sales compensation plans to their salesforce. 

This is a common mistake that many make, assuming that everyone understands how the plan works. Despite designing a great incentive plan, it doesn’t meet the desired end objectives due to lack of effective communication. The salesforce does not understand the plan clearly, and misalignment disengages the salesforce.

Hence, to avoid sales rep setbacks, let’s take a look at how sales leadership can effectively communicate sales compensation plans:

1. Three-step Communication Approach 

A consistent message should be communicated to the sales representatives at least three times. Using this three-step approach, the sales compensation plan should be communicated by different people at different stages to the reps. The conveying of the messages should start broadly and narrow down eventually to the individual level. 

The three steps of communication are as follows:

– Sales kickoff meeting for plan introduction & overview

– Sales head/ manager meeting for impact on the team

– One-on-one meeting for impact on individuals

The new incentive plan should be first communicated to the sales reps in the annual sales kickoff meeting by the highest level hierarchy of sales management, such as the VP of sales, director of sales or CSO. This needs to be a high-level explanation of how this plan will affect the salesforce and how they will benefit from it.

The second message in this communication chain should come from the sales manager or sales head. This message is communicated to the sales manager to their specific sales team. In this, the focus should be on how the incentive plan will affect the sales team as a whole, the perks of the plan, and some tips on how to achieve these goals. This meeting will also provide an opportunity for the sales reps to ask any questions they might have concerning the sales incentive plan.

The last but most important step is one-on-one communication. The sales manager should discuss the incentive plan with each member of his sales team individually. The agenda of this meeting should specifically emphasize how the plan will affect each rep individually. It is also important to focus on the differences between the new incentive plan and the old one and how the new plan will help them maximize their earning potential.

2. Transparency 

The most ideal way to communicate your incentive compensation plan starts with transparency. Your employees need transparent, clear, and honest communication about their compensation plans. Leaving them with questions and doubts isn’t something any sales leadership should do. Clarity in your messaging can make a huge difference in their mindset and motivate them to do better.

3. Communication Channels

The communication of the sales compensation plan can be done through different channels of communication to different stakeholders. This mode of communication can be online or offline. These channels may be web pages within the organization’s intranet or emails, through group meetings, company newsletters, weekly meetings with sales leadership, etc. All of these are great avenues for passing out additional information regarding your sales compensation plan. 

The reason to use multiple channels is to set the correct context of the sales compensation plan for the reps and they are clear as to what is expected of them. During these communications, major emphasis should be placed on the why’s and how’s of the new incentive plan.

Communication Channel

4. Be Clear on the “What”, “How” and “Why”

There are three questions that every sales rep needs to answer to. 

What is expected of them, and what do they need to achieve to be successful?

How is the sales compensation plan created, and what is the ideation process?

Why has the plan changed, and what are the insights into the thinking process of the new plan? 

The sales leadership needs to understand and effectively communicate the answer to the above questions. By educating your sales reps on these questions, you help them understand the bigger picture, which in turn helps them move forward without losing sight of their goals. 

4. Ensure Two-way Communication & Feedback

Communication never works well if it’s a one-way street. To ensure that your salespeople have understood their sales compensation plan perfectly well, gather feedback and questions from them. Make it a point to gather feedback early and constantly. All the feedback gathered must be taken into consideration, and measures should be taken accordingly. 

Train your frontline sales managers to answer queries with legitimacy. They should also provide the reps a path to escalate their unresolved questions and problems. 

This communication and feedback loop will help organizations understand where they lag in communicating the sales compensation plan. By knowing this, they can make the appropriate adjustments needed. 

5. Better Sales Compensation Dashboards (Reporting) and What-If Calculator

Sales compensation dashboards are one of the most important factors in effectively communicating your sales compensation plan. Configurable and customizable dashboards are one of the best ways to illustrate the incentive plan to the sales reps. Clear reporting is provided to the sales reps in the form of dashboards by showing them their personalized performance stats; rewards received, targets to achieve, comparative reporting, team performance, etc. 

Sales incentives & commission management platforms like Incentivate are an excellent medium to provide your salesforce with engaging and intuitive reporting. This builds an environment of trust and consistent engagement, thereby increasing the productivity of the salesforce. 

One other feature that should be considered is What-if calculators. What-if calculators allow sales reps to play around with the numbers and predict their future earnings against the targets. Showing them these calculations live with examples is going to be a more effective communication tool than explaining the plan’s mechanics verbally or using spreadsheets. 

7. Streamline and Automate Sales Compensation Process  

A significant hurdle in effectively communicating sales compensation plans is the time taken to collect the incoming data, the manual process to make the payout and then create performance reports. 

It is advisable to invest in a platform that provides end-to-end automation of the entire sales compensation process. By automating this process reps get real-time reports, consistent updates on their performance & pay, and highly automated ad-hoc reporting. 

One crucial feature is that reps have a uniform platform to eliminate all their queries with dispute management. In a Sales Incentives & Commissions Management Platform you can customize your query management workflow. If your reps have any queries regarding the incentive plan or their payout, they can raise a query within the platform itself. This not only reduces the hour of back and forth but also increases efficiency amongst your sales reps.

8. Few other things to keep in mind

– The sales compensation plan should ideally be communicated to the salesforce at least a couple of weeks to a month before the commencement of the performance period.

– Incentive plan education is not a one-time process. It has to be an ongoing process.

– Training your sales reps on the compensation plan is one crucial part of the sales training program; hence, it should be included in your ongoing sales training programs.

– Create a list of some Frequently Asked Questions (FAQs). This will help the sales leadership ensure that a consistent message is conveyed to their sales team.

– Drill-down capabilities to help salespeople better understand the incentive compensation plan and avoid commission conflicts by allowing them to see how their pay was distributed.

Takeaway

A good sales compensation plan should provide reps and managers specific targets to strive for, be simple to comprehend and explain, and be connected with the company’s goals and objectives.

You now have an eight-point strategy. The more effectively you present your sales compensation plan to your employees, the more likely the entire company will approve of it and adapt it easily.