Summer doll-drums, when vacations call with their siren songs, and sales managers/VP's nightmares of commission plan negotiations begin to manifest.  For many it is during the summer that strategic plans begin to form.  Commission plans are a key part of achieving revenue targets. Yet the development and execution on sales compensation plans remains a mysterious art. This post is going to be one of a few discussing compensation.

So as a karmic manager we believe in foreseeable consequence. In the case of comp plans this is best characterized as, " If you pay for it...then it will get done".  I have spoken in previous posts about Key performance indicators, quota achievement is likely one of these. Unfortunately the commission plan is often built as though it were the only indicator. There are many factors you need to consider when building a compensation plan:

1. What is the break down of how you compensate your reps? Is it 50/50 salary/commission, 100% salary, 100% commission, etc. How you break down the total compensation of your reps will greatly determine what kind of commission plan you build.

2. What is the nature of your business. Are you a software company that commissions on the basis of shipped units, or a value added reseller whose business is highly dependent on margin? This factor is yet another to consider before you build your plan.

3. What are the input variables that you know impact your sales process? How are you going to compensate reps for doing the things that you know will make them successful, and discourage territory skimming.

4. What is your acceptable cost of sales. Do you have enough dollars in the pool? What happens at 80% achievement or 160% achievement?

5. How much complexity will your reps accept. Obviously if you are trying to move a bunch of levers at once, your plan is going to be more complex than the simple marching order " Go sell!". Complexity is not a bad thing unless in its execution your reps lose transparency. If your reps cant figure out what they are making in a few quick calculations on their handy dandy calculator your commission plan is probably failing in some capacity. Lack of transparency will result in a distrust of the numbers and ultimately turn over.

6. What is the ROI that you expect for a sales person. This is closely tied to quota calculation and needless to say determination of quota is inseparable from commission plans.

In understanding these factors you will be able to build a couple of commission plan alternatives for refinement. Ideally jointly with the development of the comp plan is the quota negotiation. Next week- Understanding the breakdown of your sales compensation and what it will mean for your commission plan.

Moment of zen
"We are what our thoughts have made us;so take care about what you think. Words are secondary, Thoughts live;they travel far"-Swami Vivekananda

P.S. If you are interested in leveraging the karmic philosophy to accelerate your career or business please check out my website http://www.karmiccoach.com , and get Karma working for you!