Managing the Effects of Your Sales Compensation Plan

Matthew Flotard is a Sales Incentives Expert and Strategic Leader with over ten years of experience in sales compensation.

He is currently the Global Finance Head of Strategic Sales at Celonis, a data processing company. Previously, Matthew was the Global Go-To-Market Strategy Leader at Medidata Solutions and a Sales Compensation Analyst at Stryker, a multinational medical technologies corporation and one of the world’s leading medical technology companies.

In a conversation with Justin Lane, Matthew discusses the effects of your sales compensation design and execution processes, how to communicate the plan, and lessons learned throughout his career his career.

Listen to this episode of The Sales Compensation Show to learn:

  • Why sales compensation is not a one-size-fits-all solution
  • The best way to issue clawbacks in your sales organization
  • How to effectively communicate your sales compensation plan

Three key takeaways:

#1: Sales compensation is not a one-size-fits-all solution

A sales team’s most effective compensation structure will depend on various factors, including the company’s sales goals, industry, products or services being sold, and the sales team’s experience level.

However, all great sales compensation plans have commonalities:

  • They align corporate & individual goals
  • They’re motivational
  • They’re competitive
  • They’re equitable
  • They’re automatable

If you can’t tick these boxes, your plan is half-baked, at best. But that’s where the similarities end.

For best results, your comp plan must be highly customized to your organization’s needs, goals, and resources. While certain general principles can guide sales comp plan design, the plan components should be tailored to the organization’s unique circumstances.

What may be considered great in one organization will be vanilla in another — boring and unlikely to produce the best outcomes.

"Sales compensation is an art and science. Often times, the answer for how to do it best is: it depends." - Matthew Flotard, Celonis

Corporate context matters in sales compensation. Your business is unique, and while some general principles and guidelines around planning and design can be helpful, it’s important to experiment to see what works for you.

Mix it up. Analyze the data continually, and develop a plan that best reflects your assets and strategy — not someone else’s. Anything less will only produce half-baked plans with stale outcomes.

#2: Provide options to reclaim compensation after a clawback

Clawbacks are never easy conversations in a sales organization, but they are critical to recognize.

Matthew told us that the best way to handle a clawback is to be overly transparent and offer the salesperson options to reclaim the compensation:

“Show your salespeople a new path to success after a clawback and provide them with options to make the money back. There’s a better way to approach it. You need to consider the human component to sales compensation in these situations.- Matthew Flotard, Celonis

Clawbacks can be challenging for salespeople because they may feel that their hard work and effort are being unfairly punished. However, there are steps that an organization can take to make the clawback process fair for the salesperson:

  1. Clearly define the terms of the clawback: The clawback provisions should be clearly defined in the employment agreement and the sales compensation plan, outlining the specific circumstances under which a clawback may be invoked. This will help ensure that salespeople understand what behavior can trigger a clawback.
  2. Conduct a thorough investigation: Before invoking a clawback provision, conduct a thorough investigation to gather evidence and establish clear grounds for the clawback. The investigation should be objective, fair, and transparent.
  3. Inform the salesperson: Once the investigation is complete, inform the salesperson of the findings and the reasons for the clawback. Provide the salesperson with an opportunity to respond and present any evidence or mitigating factors that may be relevant.
  4. Determine the amount of clawback: Determine the amount of compensation to be clawed back based on the evidence and the terms of the employment agreement and the sales compensation plan. Ensure that the amount is fair and reasonable and takes into account any mitigating factors.
  5. Offer repayment options: If the clawback is upheld, offer repayment options that are fair and reasonable, taking into account the salesperson’s financial circumstances. This could include a repayment plan over a period of time or other options that minimize the financial impact on the salesperson.
  6. Be transparent and consistent: Ensure that the clawback process is transparent and consistent for all salespeople. This will help build trust and ensure that the clawback process is perceived as fair.

By following these steps, and providing options to reclaim the compensation, an organization can make a clawback fair for the salesperson while still protecting the interests of the organization.

#3: Transparency is the key to successful communication

Introducing a new compensation plan to your sales team is the most significant enablement period you can have. It’s critical to communicate the plan with full transparency during this time.

Matthew said to start at the highest level, the stakeholders, and make sure they understand the plan first, then roll it down to the sales managers.

“Your sales managers are your partners. They will help your reps understand what the plan is and how they can leverage it to be successful. You need to make sure that’s very clear.” - Matthew Flotard, Celonis

When the sales managers communicate the plan clearly and openly, salespeople understand how their performance is measured, how their compensation is calculated, and how they can improve their earnings. This level of transparency helps to create a positive culture of trust within the organization.

When salespeople trust that they are treated fairly, they are more likely to be motivated, engaged, and committed to their work. They are also more likely to stay with the organization and contribute to its long-term success. On the other hand, when there is a lack of transparency in sales compensation, employees may feel that they are being treated unfairly or that their contributions are not being recognized. This can lead to lower motivation, disengagement, and higher turnover.

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