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Tip: When Changing Compensation Plans, Consider the Risks

May 10, 2012

It’s no secret that when you change up someone’s pay plan, it’s going to cause some turmoil. The question is: How much? Change is never easy, especially when money is involved. But you can mitigate the discontent.

“Any time you change compensation programs it consumes management time,” says Mike Marks of Indian River Consulting Group in the article No Perfect Sales Compensation Plan. “It takes salespeople’s eye off the ball because they get very concerned. This is about money.”

He recommends you consider the risks being taken by the salesperson and the company, and then strike a balance. Model the changes before making them so that you can be sure the “wheels aren’t going to come off the wagon.”

The most successful changes in an organization share five characteristics, according to Marks:

  • They align with your strategy.
  • They include performance accountability.
  • They create conditions for learning and ownership.
  • They give and take - "The most fundamental problem is people throw more stuff on the sales force, but they don't give more than they take and it ends up being a disaster," says Marks’ partner, Steve Deist.
  • They involve proactive management – in other words, focus on managing activity. You can’t manage results.

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