Mastering Sales Compensation with Effective SPM Communication

ServiceNow, a cloud computing platform that helps companies manage digital workflows for enterprise operations, cultivated a leading-edge approach to managing sales compensation related communication with their sales organization. This whitepaper provides key components of this program, along with an overview of a self-assessment their team completed with OpenSymmetry, and the improvements they deployed as a result.

Sales compensation is more than just numbers on a spreadsheet; it is a pivotal element that drives motivation, aligns sales behaviors with company goals, and ultimately fuels business growth. In today’s dynamic market landscape, managing and communicating changes to sales compensation plans requires a nuanced approach that balances transparency, engagement, and strategic feedback. This whitepaper delves into proven strategies leveraged by ServiceNow for handling sales compensation changes effectively, fostering trust, and enhancing sales productivity.

THE PILLARS OF EFFECTIVE SALES COMPENSATION MANAGEMENT

Transparency and Open Communication

Facing Challenges Head-On: Sales compensation adjustments often trigger concerns among sales teams, particularly around potential impacts on their earnings. Anticipating these reactions is crucial. Rather than avoiding tough conversations, openly addressing them builds a foundation of trust. During rollout sessions, offering a platform for real-time Q&A—where team members can voice their questions and receive candid answers—demonstrates a commitment to transparency.

Explaining the ‘Why’ Behind Changes: Clarity about the rationale for changes is essential. Explaining why shifts are made, how resources are being reallocated, and how these changes align with broader company objectives helps demystify the process. This transparency reassures sales teams that while the mechanics of their compensation might change, their potential to earn remains intact.

Modeling and Simplifying Compensation Plans

Preemptive Performance Modeling: When introducing a new compensation structure, demonstrating its impact through performance modeling is invaluable. By simulating various scenarios based on past performance, sales reps can see firsthand how they can achieve or even exceed their targets under the new plan. This proactive approach minimizes uncertainty and equips them with a roadmap to success.

Creating Accessible Summaries: Complex compensation plans can be daunting. Simplifying these into a “plan on a page”—a concise, clear document outlining key elements of the plan—makes the information accessible. This one-page summary serves as a quick reference, aiding in immediate comprehension and reducing the learning curve for sales reps and their families.

Learning from Top Performers and Training

Insights from High Achievers: Top performers often find ways to excel regardless of changes. Their success often stems from strong customer relationships and strategic alignment with their compensation plans. By studying these top performers, insights can be gleaned into how compensation plans can be optimized to encourage similar behaviors across the team.

Targeted Manager Training: Sales managers play a crucial role in cascading compensation information to their teams. Providing specialized training for both new and existing managers ensures they understand the plans thoroughly and can effectively communicate and support their teams. This training bridges the gap between individual performance and team-wide success under the new compensation framework.

BOOSTING PRODUCTIVITY THROUGH CLARITY

Linking Understanding to Performance

Clear Understanding Enhances Focus: When salespeople have a clear grasp of their compensation plans, they can focus more on their selling activities rather than worrying about how they will be compensated. This clarity reduces distractions and potentially improves overall productivity, as sales reps know exactly what actions to prioritize to maximize their earnings.

Encouraging Strategic Selling: Transparency in how sales performance translates into compensation empowers salespeople to align their efforts with the most lucrative opportunities. This strategic approach ensures that their actions are not just busy work but are directly contributing to achieving their targets and earning potential.

Balancing Trust and Engagement

Achieving a Trust Balance: Building trust is a continuous process, especially in environments where compensation directly impacts livelihoods. Striving for a balance where a significant portion of the team trusts the process, while others remain constructively skeptical is a realistic goal. This balance ensures that feedback loops remain active and improvements ongoing.

Sustained Communication Efforts: Regular updates and open channels of communication are essential to maintaining trust. Integrating compensation updates into routine newsletters and engaging sales teams through various platforms ensures that they are always in the loop and that any concerns are addressed promptly.

EFFICIENT ROLLOUT OF COMPENSATION PLANS

Timing and Execution

Swift and Coordinated Rollout: Efficient rollout of compensation plans is crucial to maintaining momentum and productivity at the start of a fiscal year. By synchronizing the distribution of quotas and detailed plan information within the first six weeks, sales teams can quickly align their efforts with their goals.

Integrated Kickoff Processes: Aligning the plan rollout with key events, such as the sales kickoff meeting, ensures that sales leaders and individual contributors are well-informed and equipped to start the year strong. This timing facilitates a smooth transition and immediate engagement with the new compensation structure.

Special Incentives to Jumpstart Performance: Introducing initial incentives and “sweeteners” at the beginning of the year can boost early motivation and performance. These incentives help set a positive tone and encourage quick adaptation to the new plans, fostering an immediate focus on achieving targets.

CONTINUOUS IMPROVEMENT THROUGH FEEDBACK

Annual Surveys and Feedback Loops

Feedback-Driven Adjustments: Regular feedback is instrumental in refining sales compensation plans. Conducting annual surveys helps capture the sales team’s perceptions and areas of concern. This feedback allows for pinpointing specific areas for improvement, such as enhancing documentation clarity or ensuring calculation accuracy.

Responding to Changing Needs: Feedback is not static; it evolves as the business environment and sales dynamics change. Addressing dips in areas like manager engagement by introducing targeted initiatives, such as dedicated training and improved communication channels, ensures that plans remain aligned with the team’s needs and the company’s goals.

Enhancing Manager Engagement

Elevating Managerial Involvement: Manager engagement is critical in the successful implementation of compensation plans. If managers become less involved because they rely too heavily on centralized communications, their direct support to their teams diminishes. Fostering higher manager involvement through specific training and responsibilities ensures they remain integral to the communication and execution of the plans.

Ongoing Support Mechanisms: To maintain engagement and address evolving queries, establishing continuous support systems such as office hours and targeted newsletters helps keep communication lines open. These channels provide sales teams with ongoing opportunities to clarify doubts and align their efforts with the compensation structure.

BRINGING IT ALL TOGETHER WITH SELF-ASSESSMENT

In an effort to continually look for ways to improve, ServiceNow partnered with OpenSymmetry and launched their SPM  Communication Survey to assess the effectiveness of how they communicated sales compensation related data.

Helping to  ensure a comprehensive assessment, ServiceNow deployed the SPM Communication Survey to the payees to gain insights into how the sales population (reps and managers) felt about the communication they received and if they understood what was being conveyed.

Although the SPM Communication Survey was primarily focused on helping identify opportunities to improve communication between a company and its sales organization the survey helped ServiceNow:
1. Evaluate Sales Interaction with Technology and Processes: Assessed how sales teams interact with these tools and processes, providing insights into how these elements can be optimized to support better communication and understanding of compensation plans.
2. Measure the Impact of SPM Automation on Communication: Explored how the adoption of SPM automation tools affects the effectiveness of communication with field teams, shedding light on whether technology is enhancing or hindering the clarity of compensation messages.
3. Correlate Plan Communication with Sales Performance: Understand correlation between ICM/SPM communication and  performance.

Assessment/Survey Findings and Improvements

The SPM Communication Survey revealed several key insights that underscore the importance of robust communication strategies in SPM. These insights have been distilled into the following best practices subsequently deployed by the ServiceNow team and are shared to help organizations bridge communication gaps and optimize their sales compensation strategies for maximum effectiveness.

1. Clear and Concise Messaging: Organizations must prioritize the clarity of their compensation plans: Simplifying complex information and delivering it through multiple channels can ensure that all sales team members have a thorough understanding of their compensation structure.

2. Regular Training and Updates: Continuous education and regular updates about compensation plans are essential. This keeps the sales force informed about any changes and reinforces their understanding, leading to better alignment with organizational goals.

3. Leveraging Technology for Enhanced Communication: The integration of advanced SPM tools can streamline communication and provide real-time insights into compensation metrics. These tools can support personalized communication and allow for instant feedback loops.

4. Aligning Communication with Sales Processes: Effective communication strategies should be deeply embedded within the sales processes. This alignment ensures that compensation plans are not just understood but are also seen as integral to the day-to-day activities of the sales team.

5. Continuous Feedback Mechanisms: Establishing robust feedback systems enables organizations to continuously gauge the effectiveness of their communication strategies. Regular feedback from the field can help in promptly addressing any misunderstandings or issues.

CONCLUSION

Mastering sales compensation management requires a delicate balance of transparency, strategic communication, and continuous improvement. By fostering open dialogues, simplifying complex information, and leveraging feedback for ongoing adjustments, companies can create a compensation environment that not only motivates their sales teams but also drives sustainable business growth. In doing so, they build a foundation of trust and engagement that empowers their salespeople to focus on what they do best—selling and achieving outstanding results.

KEY POINTS

• Transparency and Open Communication:
– Address concerns upfront during rollout sessions with opportunities for Q&A.
– Clearly explain the reasons behind compensation changes and their alignment with company goals.

• Simplifying and Modeling Compensation Plans:
– Use performance modeling to show potential impacts of new plans on sales reps’ earnings.
– Provide concise, clear summaries of compensation plans for easy reference, such as a “plan on a page.”

• Leveraging Insights and Training:
– Study top performers to understand how they maximize their compensation and encourage similar behaviors.
– Train sales managers thoroughly to ensure they can effectively communicate and support their teams regarding new compensation plans.

• Boosting Productivity Through Clarity:
– Ensure salespeople clearly understand their compensation plans to reduce distractions and enhance productivity.
– Encourage strategic selling by linking compensation transparency to performance, guiding sales efforts towards lucrative opportunities.

• Efficient Rollout of Compensation Plans:
– Roll out compensation plans and quotas quickly and in a coordinated manner, ideally within the first six weeks of the fiscal year.
– Integrate plan rollouts with key events like sales kickoff meetings for immediate engagement and alignment.
– Introduce initial incentives at the start of the year to boost early motivation and performance.

• Continuous Feedback and Improvement:
– Conduct annual surveys to gather feedback and make targeted improvements to compensation plans.
– Ensure managers remain engaged and integral to the communication and execution of compensation plans.
– Establish ongoing support mechanisms like office hours and newsletters for continuous engagement and clarification.

• Conclusion:
– Successful sales compensation management balances transparency, strategic communication, and continuous improvement.
– By fostering trust, simplifying complex information, and leveraging feedback, companies can create a motivating compensation environment that drives business growth.
– Effective sales compensation management empowers sales teams to excel and achieve outstanding results.