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

As Synygy enters its third decade, I am pleased to report positive results for our fourth quarter and fiscal year ending December 31, 2009. We closed out the year strongly with a spate of new clients, multi-year renewals, and business expansions across a diverse group of industries including pharmaceutical, distribution, broadband, business services, medical technology, and more.

In addition to securing our revenue streams, Synygy prepared for further growth by releasing several new workflow applications and software features, expanding the sales force that is reaching out to small to mid-sized companies in need of on-demand software and plan managed solutions, and signing co-marketing and solutions development agreements with important new partners. More detail is available in our official press release.

Mark Stiffler, President & CEO

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

The New Year is synonymous with setting new goals for the sales organization, a process which frequently involves revisiting existing quota methodologies.  This is especially true in today’s uncertain economic climate where companies must address the unpredictable factors that come with an expected economic recovery.

A few trends have emerged among our clients that have been grappling with this problem.  Clinton Gott, Principal, Better Sales Comp Consultants elaborates in our “Ask The Expert” column:

• “Companies realize that it is of utmost importance to set appropriate quotas. In many cases, this includes looking beyond last year’s results and attempting to use more typical growth rates or even ones with recovery expectations factored in.

• Furthermore, companies are sometimes pairing these informed quotas with relief on the lower end of the pay line, particularly in the form of reduced thresholds. A salesperson’s perception of the challenge to meet an assigned goal can be somewhat relieved by the opportunity to earn a portion of variable pay at lower achievement levels.

• Third, as companies are increasingly hesitant to assign larger or aggressive quotas at the potential risk of poor seller morale, some sales organizations are lowering accelerators above plan which effectively pushes out the expected excellence point, i.e., the achievement percentage where they expect top performers to reach.

• Fourth and of key importance, many companies are reexamining or at least ensuring that a large deal clause is in place. While the definition of a large deal can vary based on the selling environment, plan policies often include a clause where a deal of a particularly significant size or type can be pulled out of the core compensation plan and reviewed for appropriate payment.”

Write in if you face similar problems or if you have any additional inputs you would like to share.

Last year’s Synygy Executive Education Series of webinars were a resounding success and we’re gearing up for another great series in 2010. To ensure that the sessions continue to address your sales compensation and other sales performance management challenges, we invite you to help shape this year’s webinars. Simply click here to submit your suggestions for topics you’d like to see covered and we’ll do our best to include them.

P.S. As a thank-you, we’ll send along a presentation kit with all of the 2009 webcasts, just in case you missed any!

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.