Keep the compensation management decision makers close to the participants

by on June 17, 2009 · 0 Comment POSTED IN: HR Info Center

Let the people closest to the action make the decisions with compensation management

You need to keep the compensation management decision-making as close to the people as you possibly can. The people affected and the one who knows the most about the situation I think should make the compensation management call and invariably that’s, generally, in the sales area.

You need to, also, describe when are we going to pay. Are we going to pay every quarter, every month, every year, what the pay out schedule? And how soon after the pay – the performance period ends, whether it’s a quarter or a month or whatever can we expect payments?

You – and I’ve seen lots of incentive programs fail, because of not able to, essentially, calculate what the incentives are off of the plan that they wrote. Or they take such a long time in order to calculate the incentive and that sometimes people have to wait months in order to get their payment from an incentive plan.

Balance this with – try not to be so accurate and still make it as easy as possible and get the payment out there as soon as possible. It’s like Pavlov’s dog, when the bill rings, the dog slide, you see feed them. That’s the way you should treat salespeople or anybody under an incentive program. Reward as close to the behavior as you possibly can.

So, we talked about who should manage sales compensation. I said: Human Resources, finance and sales including deciding the plan. So, we talked about that. You should really think also about changing a plan or reviewing sales comp plan, especially, and any incentive plan, probably, on a – at least an annual basis.

Keep track of all the exceptions. I’ll put that in quote that you make. Certain decisions will be made, as you go through this process of paying people, calculating rewards and paying people. And, you should keep track of the issues or questions that come up and try to work those into the document, if, you possibly can for the coming year.

So, if you have – everything works correctly. This document should clearly communicate all the provisions of how people are going to get paid. The rewards are easy to calculate. Employees believe they’re being treated fairly. They can trust the company.

I would, probably, set up tough rules and administer flexibly. Meaning that everybody knows the tough rules at the beginning and sometimes you surprise them by deciding in their favor, assuming there’s doubt.

And, in my opinion, it creates this trusting relationship between the employee and the managers. And, there has to be that sort of relationship. And, again, reward as soon as possible after the close, the performance period.

Edited Remarks from “Incentive Talk: How to Design an Incentive Plan that Works for – Not Against – Your Company’s Goal” by Rick Olivieri

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