Sales Comp Guy
Assessing the Fairness of Your Sales Compensation Plan
A fairness checklist for sales team managers.
Defining fairness is a challenge because it means different things depending on where you are sitting.
For this post, fairness is defined as consistent application under the compensation plan. That includes the clarity and transparency of how the targets are set, if there is equitable opportunity to perform, if the target pay levels are competitive, and that the governance and administration of the plan have clear policies and procedures.
Below is essentially a checklist of elements of your compensation plan that need to be reviewed regularly and on an ongoing basis to maintain fairness to your sales team. Needless to say, if any category listed here is missing from your comp plan, it’s a good idea to correct that issue as soon as possible.
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All’s Fair in Sales and Compensation
As long as you follow this compensation fairness checklist
Target Setting
- Clarity: Is it clear to your salesperson how their job aligns with their objective?
- Transparency: Have you explained to your salesperson how you arrived at the objective?
Opportunity to participate at all levels of pay
- Performance: Does your salesperson have the opportunity and ability to either underperform or overperform?
- Capability: Can your salesperson influence the outcome of performance?
- Autonomy: Is there some level of personal autonomy in the process of selling?
Competitive Pay Levels
- Compensation Philosophy: Check your compensation plan against your organizational compensation philosophy. If you don’t have one, take the time to create one.
- Internal & External Assessments: Have you checked your pay levels against the market value and reviewed them for internal equity?
- Justification: If you can’t pay at market competitive levels, have you taken the time to explain the reason behind those lower pay levels by offering a genuine understanding of the organization’s financial limitations?
Governance
- Exception Process: Does it exist and is it clear?
- Documentation: Is your sales incentive plan fully and formally documented and available to your sales team?
- Plan Process: Is the process for how your incentive plan works accessible and clear?
Administration
- Crediting: Have you documented the process of how transactions are procured and assigned to each individual role and how that translates to performance under the compensation plan?
- Payment Timing: Are you applying a consistent methodology to payout timing? When there are deviations from that regular process, is the variance understood?
Sales roles are competitive by nature, and when you offer variable pay in the form of incentives for performance, the reality is that everyone is going to get a different paycheck at the end of the performance period.
They key to cultivating an atmosphere of healthy competition, positive morale, and good teamwork is consistency and communication. Make sure you and your team understand the difference between fairness and equality. When it comes to pay for performance, equality of pay may not be achievable 100% of the time, but fairness certainly is.New Paragraph
