6 Things to Consider When Designing Your 2021 Comp Plans

6 Things to Consider When Designing Your 2021 Comp Plans

6 Things to Consider When Designing Your 2021 Comp Plans

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Author: Matt Hausbeck

Lessons Learned from 2020

2020 was a bumpy year for obvious reasons. Yet the impacts of major events from the year will inevitably trickle into the early part of 2021. Many companies started paying draws, reducing quotas, increasing target incentives, or re-aligning territories to combat the economic impact from COVID-19. If you’re a company that made modifications to comp plans in 2020, it’s crucial to evaluate what worked and what did not. We tend to learn more from our failures than our successes, so make sure to set aside some time to re-think comp plan designs that struggled to produce results with the salesforce and apply changes to the early part of 2021.

Pay Generous Achievement Bonuses Early

Paying bonuses early may seem counter-intuitive because, due to the economic environment, most companies are looking into cost-cutting mechanisms to maintain financial stability and profitability. However, because of the economic slow-down, many reps are unlikely to sandbag going into the early part of 2021. They are more likely to close their deals now to avoid layoffs and to maintain healthy paychecks. Paying generous bonuses to over-achievers early in 2021 may be a great way to motivate reps and prevent sales pipelines from drying up. Then, deeper into 2021, closely monitor commission expenses and work towards normalizing bonus payouts as the economy recovers.


Make Room for Mid-Year Comp Plan Changes

With the economy re-opening, aggressive fiscal stimulus measures in place, and several COVID-19 vaccines in Phase 3 of trial, the economy is poised for a rebound. Set expectations with your salesforce that compensation payouts are closely monitored and expect changes throughout the year. Be sure to pro-actively communicate these changes to reduce stress on your sales team and to give them time to adapt. If you use an SPM solution to calculate your commissions, Managed Services might be a great opportunity from an implementation partner like Canidium. Having a bucket of hours to use for ad-hoc and on-going changes provide flexibility and can improve the time-to-market on calculation changes.

Evaluate KPIs

Figure out what performance indicators are important to the business, and tailor your comp plans accordingly. KPIs can help you prioritize pay components and optimize your design. For example, if KPIs indicate your company values customer satisfaction, it might make sense to emphasize customer retention measures rather than revenue. Always make sure that your sales reps' incentives align with corporate's goals! 

Keep Your Design Simple

Putting boxes around pay calculations often does more harm than good. Companies who keep their compensation plan design simple reap several benefits:

  1. Trust from Sales Team - Sales Reps dispute commission less frequently because they understand what they’re getting paid and why.
  2. Higher Productivity - Sales Reps spend more time selling and less time with their managers asking questions about their pay.
  3. Lower implementation costs – Limiting or removing unnecessary “exception rules” can reduce the cost of implementation due to complexity.

Talk to your Compensation Team

Your compensation team will have critical insights into where calculation errors are occurring most. Costs due to calculation errors don’t stop at the incorrect payout amounts. It also breeds mistrust for your sales reps. Often, fixing these calculation-related issues can mean investing in an SPM tool where all calculations are automatically validated and consolidated into a single-cloud based location.

Survey your Salesforce 

Figuring out how to best motivate your sales team could be a simple matter of having “an ear to hear." Send a survey out to your sales team to get an idea of what’s working and what's not. This will help you figure out what’s worth changing and what’s worth keeping.

To learn more about how a commissions solution can benefit your business, reach out to us at Canidium.com/contact.

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