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March 2011
By Ram Moorthy and Alison Davis
Sales leaders often launch compensation plans with great fanfare, and then they are disappointed when employees don’t understand the plan or believe it’s fair.
What’s the problem? It’s true that compensation plans are often complicated, but complexity could just be a smokescreen for the two true root causes:
- Communication that isn’t clear
enough, doesn’t allow reps to ask
questions and is over before reps
understand the plan.
- Disenfranchised managers who
don’t really understand the plans,
so they aren’t equipped to
explain them.
To engage employees in your compensation program,
you need an approach based on proven change
communication. In this article, get six key
strategies, along with a case study example
that demonstrates how to use these strategies
to gain buy-in.
Case study
Three months into the new incentive program,
product sales have barely moved at Widget Co.
Paul, the new COO, meets with his VPs of Sales,
Sales Operations and HR. “Why
aren’t we seeing better results?”
Here’s what his VPs tell him:
“Restructuring has affected the
morale of old-timers; new folks are still
figuring out their roles.”
“The flex-selling model — with
specialists and account reps sharing
territories — is confusing.”
“I’m not sure our managers
understand the implications of the changes
we’ve made.”
Strategies to Build Buy-In
- Assess the current state
To avoid making unfounded assumptions
about compensation programs, it’s
critical to conduct a thorough assessment
of the current state, including an objective
evaluation of the compensation program
itself, as well as feedback from sales
reps on their perceptions and preferences.
Paul forms a cross-functional team that
partners with a consulting firm to conduct
a “health check” of the
compensation program.
The assessment indicates that the program
design is sound but understanding is low.
- Ensure accountability
In many organizations communication
responsibilities are unclear or split
among multiple groups. What’s
needed is a dedicated cross-functional
team that focuses on helping sales
reps understand how the compensation
plan has changed and how to succeed.
Once the assessment is completed, Paul
establishes a Compensation Communications
Task Force. This team includes HR and
Operations managers plus representatives
from a new group called the Compensation
Governance Council. The council consists
of selected reps and managers to provide
input into program design, become
experts on the program and serve as
field ambassadors.
- Communicate with plain language and visuals
When designing a new compensation program,
it’s typical to create a statistics-
and detail-heavy PowerPoint deck for
senior management (typically evaluating
multiple options). The problem occurs when
the same document is used as the foundation
for communication to the field. Not
surprisingly, it usually falls flat.
Busy reps need relevant messages in a
simple form they can digest immediately,
using tables, graphs and other visuals.
Feedback indicated that there was one question
that the field cared most about: “How
can I maximize my bonus earnings on this plan?”
Widget Co.’s team creates a simple
message platform to communicate the
compensation program:
- A theme and logo of “Scaling
the Peak” to denote peak earnings
in the compensation plan
- A scaled-down presentation with a
more visual approach and focus on key
field questions
- Set expectations for leaders
The typical annual sales meeting agenda is
packed with presentations about an array of
topics. A senior leader presents the
compensation plan and strongly endorses it.
But sales reps won’t fully understand
and buy into the plan unless trusted leaders
communicate repeatedly and consistently.
At the National Sales Meeting, Paul speaks to the
compensation plan as part of his keynote, and there
are district-level breakout sessions where
representatives learn details of the incentive
plan from their managers.
He continues the communication theme in:
- His weekly “all-hands-on-board”
teleconferences, Paul acknowledges individuals
who are excelling on key aspects of the
compensation plan.
- As he travels to regional meetings and on
field ride-alongs, Paul reiterates to his
managers that they need to own the
incentive plan.
- Provide managers needed support
In survey after survey, employees pick
“my manager” as their most
trusted source of information. Yet, in
many organizations, managers aren’t
effective interpreters.
The best approach to achieve this is having
focused training for managers in which they
can explore the incentive plan, answer
questions and prepare to communicate.
Two weeks prior to the NSM, WidgetCo. hosts
a series of Web-based “train-the-trainer”
sessions for field managers.
In the week before the NSM, managers are
encouraged to take an online self-assessment
on the compensation plan.
- Use the right mix of channels
It’s necessary to use the channel
that is most appropriate for the message
and audience, and to be more inventive
about how you use communication channels.
The key is to repeat messages in many
forums, making sure you incorporate
compensation messages into existing
channels like weekly e-newsletters or
monthly calls. Don’t forget to
seek opportunities to tap into new media
your salesforce is using, including
microblogs and social networking.
WidgetCo. identifies various ways to keep the
compensation program top of mind, such as:
- A wallet card that provides highlights of the program
- A “Sales Pulse” newsletter
with a “sales compensation question
of the month” section
Ram Moorthy is a Principal with ZS Associates and plays a key role in ZS’s sales compensation, salesforce effectiveness and sales performance reporting practice areas. E-mail: ram.moorthy@zsassociates.com.
Alison Davis is CEO of Davis & Company (www.davisandco.com), an employee communication firm that helps companies reach, engage and motivate employees. E-mail: alison.davis@davisandco.com.
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