Tweaking Compensation Plans – Is it Good or Bad?

At the start of the sales compensation planning period, you will undoubtedly here the concept of “tweaking plans”.  Instead of doing a complete overhaul on the sales compensation plans, many leaders will suggest to only “tweak” or slightly change the plans.  This sounds like a great idea, because you don’t want to make too much change, since without good change management confusion comes.  However, tweaking plans is not necessarily always a good thing.

In fact, most sales compensation practitioners know that tweaking plans is frowned upon.  The main reason why is because sales compensation plan development doesn’t start with the actual plan, the incentive plan is the end result of a process.  You don’t start with the current plan you have and make changes.  The starting point in sales comp plan creation is the corporate objectives.  From that point, you make sure the whole sales strategy, organization, process and roles etc. are aligned to those objectives (what we call “design factors”).  If any of these are not clearly defined it will hinder plan performance.  Then, the last step is the sales compensation plans, or sales incentive plans. 

Now let’s assume all is the same, corporate objectives, GTM strategy, sales process, etc.  The company should still do analysis on plan performance to make sure plans are working as intended.  Are the plans in place driving the right behaviors?  What percentage of plan participants are achieving quota?  Is the company hitting revenue goals?  What about sales compensation expense, are you over/under spending?  Now, if all these are in line with the company's desired objectives then there is no need to change plans.  However, if something is off, the company should dig in a bit further to find out the reason and maybe it is just a tweak – or maybe it’s something more.  The point is to ensure you have your design factors in order, do the proper sales comp analysis and then decide if you need to leave sales comp plans the same, tweak or completely overhaul the plans.  The key with plan design is alignment with corporate objectives and roles, when you tweak without looking at the bigger picture you may over complicate the plans or cause misalignment.  Many times, due to lack of structure or time, businesses may tweak plans every year instead of going through the process.  This process of tweaking year over year, without proper analysis and strategy review, will not only lead to over complication & misalignment but also overspending.

If you would like to know more about how to create a sales incentive program with downloadable comp planning tools, we have a course here that you can explore.  Perhaps, you’d rather discuss sales compensation questions in community.  If so, join the conversation with our professional network here.