Hubspot: The Right and Wrong Ways to Handle Midyear Sales Compensation Plan Changes

July 28, 2017

by Mark Donnolo, Managing Partner, SalesGlobe

It’s rare that sales compensation plans are presented to cheering crowds of salespeople, vibrating with excitement about their new incentives and performance measures. That’s probably never happened. It may be more truthful to say a successful rollout involves the sales team confirming they understand the new plan, offering lukewarm acceptance, and reluctantly changing their behavior.

But what if, by mid-year, it’s clear your sales compensation plan isn’t working? What if you have to tweak the plan?

First, Get a Reality Check

Usually, companies make a plan adjustment if there is a change in sales strategy, go-to-market strategy or sales process, or if the plan simply isn’t doing what was intended. But before picking up your calculators and scaring your team with unnecessary changes, give your current plans a serious evaluation. Assessment of your sales compensation plans should already be an ongoing process, but too often these evaluations are an informal check to see if the sales team is comfortable — or they’re skipped altogether.

To determine if your plans really require mid-year changes, ask the following:

According to your dashboards, what’s the relationship between pay and performance? Are high performers the top earners? Are underperformers hitting incentive pay too early? Is there significant differentiation between high and low performers? What percentage of reps attains their goal?
How is the program operating? What’s the reaction from the sales organization? Do you have a process in place for collecting this information or is it ad hoc?
Are C-suite’s goals being achieved? How do you know?

Change the Right Way

If your answers reveal that a change is necessary, plan to act swiftly but carefully. Follow the six steps below when developing your change management strategy.

Start strong. Conduct your due diligence to make sure the changes are bulletproof and ready to go.
Craft the change story. Be honest about the reasons for the change, and develop a clear message around the C-Level Goals℠.
See the organization’s view. Expect some resistance, and identify who those detractors might be so you can get them on board.
Assess the change forecast. Know your organization’s readiness for change and your team’s resolve to see it through.
Leverage sales reps’ learning modes. Harvard psychologist and education professor Howard Gardner proposed there are at least seven modes, in his Theory of Multiple Intelligences. Leverage as many as possible to communicate with the organization and increase the impact of your message.
Follow the process. Begin communication early and follow your approach until well after introduction.

3 Pitfalls to Avoid

Assume that most people will see any change as negative. This is particularly true when it comes to compensation. From a sales organization view, unless the current compensation plan is a complete disaster, they’ll assume the only reason to change the plan is to manage pay or improve the company’s financial position.

Avoid the following common – and destructive – change management pitfalls.

1) Withholding information.

Unless very clear communication is coming from the top – and coming as soon as you suspect the compensation plans might change – the organization will jump to worst-case scenarios. Gossip and water cooler conspiracy theories will abound. You may not actually be withholding any information, but perception is reality when it comes to the way people are paid.

As soon as possible, use a regular flow of inbound and outbound communication between the leadership team and the sales organization, including presentations, key message scripts, and frequently asked questions to keep the team consistent and on-message.

2) Not considering your organization’s tolerance for change.

If you’re implementing a change to one part of the sales comp plan — say, changing one performance measure — that’s probably a minor change. If you’re implementing a new go-to-market strategy, that’s a more transformational dramatic change for the organization to absorb. Consider the size of the change and the frequency with which your company makes changes of that size. Ramp the communications up or down, depending on whether this is a major or minor change.

3) Thinking you won’t encounter active resistance.

It’s typical to see as much as 30% of the sales organization resist the new plan. The resistors will range from passive to active. Passive resistance behaviors can include apparent confusion, hesitancy to act, and a lack of urgency. On the active side, behaviors include outright opposition and involvement in trying to halt the new plan by demonstrating why the changes will not work.

The key to working with passive resistors is to connect, sense, and communicate at the field level to understand their resistance points before the implementation. If ignored, their resistance can become contagious. As for active resistors, they’ll test leadership’s resolve for change and possibly try to derail the initiative. However, if the management team is determined to make the change and the company has an executive in place who has created a clear mandate for change, using a gentle yet firm approach can smooth the process.

Midyear tweaks happen. Conduct regular plan evaluations to assess the performance and impact of the plan at pre-determined points, so you can avoid major changes based on nothing more than gut-feels and poor reactions by the sales team. Be honest and forthright with your sales team and help them adjust to the changes, because the entire sales comp cycle will begin again soon enough.