When (and how) to roll out a new sales compensation plan
Changing a sales compensation plan can be a stressful and traumatic event for a sales team. With a new incentive plan comes the risk that you’ll be making less money for doing the same work. This is an understandable concern considering it’s rare that a new comp plan pays you a higher commission rate or your quota goes down. However, with this guide, you can minimize the disruption to the organization and keep your sales reps happy.
When to roll out a new sales compensation plan
In an ideal world, you will want to roll out a new incentive plan during a natural break in business at the end of an earnings period. The best time to roll out a new plan is at the beginning of the calendar year — if your fiscal year doesn’t line up with the calendar year, then use the fiscal calendar.
In some emergency situations, you can roll out a new plan mid-year or even in the middle of a month. However, you should ONLY do this if it’s to improve the plan for your sales reps. Maybe your compensation plan isn’t allowing people to earn what they deserve or an industry disruption makes it impossible to hit quota. In that situation, it’s entirely reasonable to increase commission rates or lower quotas in the middle of the month/quarter.
How to roll out the new comp plan:
Carefully! You should have a deliberate plan for rolling out a new compensation plan otherwise you run the risk of losing control of the messaging.
- Understand the plan yourself: Ensure that you understand all the moving pieces of the plan and how it impacts your sales reps. If you don’t grasp it, you can’t be expected to explain it to anyone else.
- Do it all at once: Unless the change in the plan only affects 1 person, discuss the new plan with everyone it affects at once. Otherwise, you risk gossip, conjecture, and misunderstandings.
- Explain the why: If the quota is going up, explain the business reason for it. If the commission rate on a certain product line is decreasing explain that it’s less profitable. If it’s left up to reps to guess why their plan is changing, they will often have false assumptions.
- Practice explaining it: My dogs must have a great understanding of lots of different compensation plans given the number of times I’ve used them to practice the intricacies of an incentive plan.
- Prepare for questions: You don’t want to be caught off guard by any questions you’re asked. It makes the plan look more complex than it is.
- Give your reps a way to track their attainment and commission: QuotaPath offers an incredibly easy, beautiful and free way to calculate commission and quota attainment. You can create the plan for your team and share it out with them so there are no misunderstandings. It’s simple and easy to create an account and start tracking.