Make your employee incentive plan work in a down economy

by on June 15, 2009 · 0 Comment POSTED IN: HR Info Center

Revise your employee incentive plan to adapt to the new economic environment

With where we’re at right now in the economy, sales people are having a hard time meeting their goals. So here are some of the things that we actually can do to help our sales people get the most out of the employee incentive plan.

Review and reassess sales strategies and goals. That may have changed now that the economy has tanked a bit and companies have rethought their whole sales strategy and goals. And that need to be filtered down to the sales people.

Make sure quotas are set properly. Instead of reducing quotas, we probably need to keep quotas where they’re at. And you know, people may earn less than they did a year before but that’s the way the employee incentive plan is supposed to work. When the performance goes down, the incentive goes down.

Focus sales energies on selling more actively to successful industry territories and customers because there are certain parts of the economy that are not as affected as badly as others. Find out what those are and try to focus some energy there.

Realign the responsibility for your sales force so that sales people are concentrating on selling and not administrative work as much as possible. Look into packaging a solution as opposed to a particular product. And realign everything with what your customers are really looking for. And generally they’re looking for, “If I buy this, what’s my rate of return?” or, “How can I reduce expenses?” et cetera.

And then also revise upside or downside the employee incentive plan for sales people. And that means probably playing with that formula we just talked about. The threshold for example, you may actually want to keep quotas the same. Yeah, we know it’s going to be tough but we’re also lowering threshold, meaning that you can make more money than you did in the past assuming you achieve at least a minimum level of performance.

So my final step in designing an employee incentive plan is to write the plan up in a document. And to write a good plan however is a bit of an art form. You need to state things clearly, concisely and in sequential order. Every word is chosen carefully. And it should all pertain to sales compensation, no extra words. Try to avoid a lot of legal jargon which makes sales people want to go contact their lawyer before they either sign to come to your company or if you’re asking them to acknowledge a receipt that they may have some problems with unless they talk to a lawyer. The document should clearly state what is expected of each plan participant at the beginning of the performance period and what the reward possibilities are and exactly how incentive awards will be calculated. So without those components, you really have lost the link.

Every participant should get a copy of the written employee incentive plan. And it should include things like what’s the company compensation philosophy? Essentially, we want to sell the employee incentive plan to people. What’s the effective date? Who exactly is eligible? What are the performance measures? How awards are going to be calculated, even showing them example. If there are definitions that are – need to be included so everybody is on the same page, that should be included. Administration including the right to terminate the plan and generally, what the payout schedule is going to be, that should all be written down.

Edited Remarks from “The Seven Deadly Sins of Employee Compensation Plans (and How to Fix Them)” by Rick Olivieri

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