As part of our series on Compensation Plan Modeling we bring you insights from our expert, Dan Ganse on best practices to ensure that your compensation plans achieve the results you expect. What to expect and plan for and how to ensure that you won’t end up overpaying or underpaying your people:

“When plans are not properly modeled before they are rolled out to the sales force, companies must deal with the consequences of unknown budget risk, unanticipated compensation costs, and unexpected mid-cycle modifications to plans. Many companies lack the time and resources to model new compensation plans, but not doing so can lead to some nasty surprises. So, the first step to modeling is to simply allocate time and resources to people with the right experience.

Once you’ve established modeling as part of your compensation planning process, the next step is creating a plan model. Building plan models requires a specialized set of skills so that the resulting plan model can be tested easily in a range of likely scenarios. You have to know where you’re headed with your testing to know what kind of model you need to build.

Once the plan model is created, the next step is using it to test different scenarios. The first run of the model should be “at plan,” or assuming achievement of the sales target. That is, if your company performs as you expect it to for the plan year (or whatever appropriate timeframe you’re modeling), what will the commission/bonus payments be?

If your results are not what you expect, the problem could be related to the structure of the plan or to the plan parameters. If adjustments to the commission rates, products weights, or other parameters do not produce the expected results, the problem is likely structural, which means rethinking and redesigning the plan itself.

Assuming your results are in line with your expectations, the next step is testing the plan’s budget sensitivity. What happens to payments and the cost of sales if goal attainment is 50 percent, 90 percent, 110 percent, or even 200 percent of target? Note the expected payout of each of those scenarios and match that against what is acceptable.

When running the various scenarios, be sure your modeling data sets are representative of typical performance distributions rather than assuming that everyone overachieves at exactly the same levels.

If you are satisfied with the model results under a wide range of scenarios, you are ready to launch your sales compensation plan, but modeling does not end there. After plan launch, track actual performance against predicted performance on an ongoing basis. Investigate any deviations that you may find and consider making mid-course adjustments to your compensation plan if the consequences of not making adjustments are severe enough.”

Write in if you face issues or have anything to share about your compensation plan modeling.

A well-designed compensation plan is one of the most effective ways organizations can drive their sales forces towards their sales and revenue targets. However, many organizations cannot predict how their new plans will perform or assess the impact of changes to existing plans because most software systems lack easy-to-use modeling tools. A lack of robust reporting and analytics tools similarly hinders the quality interpretation of modeled results.

Sales organizations without the ability to effectively build plan models and interpret results are unable to:

• test changes to compensation plans, data inputs, organizational hierarchies, team definitions, territory alignments, and many other important factors

• compare results from multiple plan models before making changes to compensation plans

• track, monitor, and audit changes to compensation plans over time

• understand how proposed changes to compensation plans will impact pay across the sales force

• predict compensation expenses both in absolute amounts and in percentage of sales

Failure to model, validate, and analyze the impact of new plans or plan changes before they are rolled out to the sales force exposes companies to unknown budget risks, unanticipated commission costs, and excessive mid-cycle plan modifications.

With these challenges in mind, Synygy recently enhanced the already-proven plan modeling capabilities of its sales performance management software. Now, it’s even easier for sales organizations to model the impact of proposed plan changes in response to changing market conditions, corporate strategies, data inputs, and sales force structures. Click here to learn more  about how modeling can eliminate the unexpected.

This year, the April 20-21 Synygy Sales Performance Conference is being held at the CHF Conference Center in Philadelphia’s most historic neighborhood, just minutes from Independence Hall and the National Constitution Center and one block from the Omni Hotel.

Now in its 14^th year, the conference once again boasts a robust educational program focused on the latest tools, techniques, and insights for driving sales force effectiveness. Helping lay the foundation for the event will be an opening keynote by Jim Dickie of CSO Insights, presenting the findings of the latest research into the challenges impacting sales performance and revealing how organizations are leveraging people, processes, and technology to overcome today’s sales obstacles.

Following that will be a full program of expert-led hands on workshops, informative breakouts, and interactive roundtables. Covering a broad range of topics from sales compensation, quota setting, and resource deployment, to dashboards, workflow, report design, and more, you’ll discover proven solutions, learn best practices, and uncover the latest trends for increasing efficiency and productivity in your sales operations.

If your position is involved with increasing the effectiveness of your sales organization, consider taking a break from your usual responsibilities to join us this spring at the Synygy Sales Performance Conference in common pursuit of the means to operational excellence.  I look forward to welcoming you to Philadelphia!

Mark Stiffler, CEO

Synygy does not believe in outsourcing its very livelihood to third parties.  This is why Synygy directly employs software developers located on three continents.  And it’s why, with the largest software development staff in our market, we are able to deliver a broader and deeper set of sales performance management applications.
In our most recent release, Synygy continues to increase ease-of-use without sacrificing any of the flexibility and power that our solutions are known for:

• Sales portals can be personalized for even more expediency

• Salespeople and sales managers can go from dashboard to detail in fewer clicks

• Business users have more intuitive control over their processing schedules than ever before

Each aspect of a new Synygy release reflects our worldwide developmental strength and commitment to software excellence. For details on the latest, see our official press release.

Synygy announced today that it will be providing sales compensation management software and implementation services to RCN Corporation as part of a five-year deal that closed in December.

In addition to a number of services directed towards business customers, RCN provides a triple play of residential broadband services—digital television, high-speed internet, and digital voice services. With a heavy presence in major population centers stretching from Washington, DC to Boston and in Chicago, RCN is set to enjoy many years of growth.

We are excited to help RCN grow by providing them with new sales compensation management tools and we look forward to expanding our already impressive expertise in the telecommunications market. Welcome RCN!

To read the press release, click here.

Mike Ousey, Synygy Client Relations Manager

As we begin 2010, we look forward to helping contribute to a reviving world economy and therefore are excited to announce the launch of the Synygy blog.  Our goal is to create a platform where we can interact and exchange to build a knowledge community within the domain of Sales Performance Management.

As leaders in performance management and incentive compensation, we bring over 20 years of experience and have worked with giants across industries as diverse as pharmaceuticals, healthcare, telecommunications & manufacturing. We have been recognized as thought leaders in the field over the past 2 decades and feel it is time to build a community of like-minded people who face similar problems with regard to misaligned sales comp plans, inability to adapt quickly to changing situations, inability to communicate their plans to their sales force and lack of process consistency in their incentive management processes.

We look forward to interacting with all of you and look forward to an exchange of ideas and solutions to problems you are facing, related to sales performance and incentive compensation. Be on the look out for sample compensation plans, videos on sales comp planning, articles by experts, and general industry news on this domain that has been our mainstay for the past 20 years.