2020 has been a busy and unpredictable year for sales compensation professionals. There have been guarantees, plan design revisions and quota adjustments – and the year’s only half done. Most companies have only recently decided how to handle Q3 2020, but companies are already forced to start thinking about their sales compensation plan design for 2021.
2021 already has some known complexities. A vaccine will likely be available early in the year, but the timing of mass vaccinations is not clear. The timing of the resulting herd immunity will drive the timing of the resumption of normal activities, with the rebound of the economy (hopefully) not far behind.
But 2021 also has a lot of unknowns. Exactly what will the shape of the recovery look like – V, U or L? Will your sales force move – in whole or in part – to the inside sales model many were forced to adopt in 2020? Will some of your customers go out of business, and will certain industries and geographies be impacted differently than others? Will the economic malaise impact the number of salespeople we need to optimize sales and profitability?
It’s impossible to predict 2021 and most companies are struggling to predict the rest of 2020. With an unprecedented number of unknowns, the theme for 2021 sales compensation is simply agility:
- Agility in the performance period: One of the most common changes companies made in reaction to COVID-19 in 2020 was to shorten the performance period. Meaning, rather than trying to plan and pay for a year’s worth of performance, they shortened it to a quarter. Or even a month. This allowed them to rapidly adapt instead of being tied to a year-long incentive program that may no longer be appropriate. Companies will have to be equally agile in 2021.
- Agility in the plan design: One company had 90% of their salespeople out of the money in Q2 of this year. They could have let the plan ride, but they felt they needed some middle ground between “making them whole” and paying them nothing. So they changed their sales compensation plan to find that middle ground. Another company initiated a plan design change in Q2 because they were asking their salespeople to perform different tasks. For the entirety of Q2, the directive to the field was not to sell but rather to service their customers and be there to support them in whatever way they needed. The traditional sales metric became irrelevant in Q2, as did the plan design. As a result they shifted to MBOs for the quarter, resuming the original plan in Q3.
- Agility in quotas: Around 90% of salespeople have quotas, and those quotas are typically tied to a forecast. As forecasts rapidly adjust to the conditions on the ground, so do sales expectations. Setting 2021 quotas later this year, with an unwillingness to review them in real time during the year, will result in widely inaccurate quotas, errant payout forecasting, and ultimately, reduced field motivation.
- Agility in administration: Being agile in all of the elements above requires you to be agile in the way the plan is administered. Any change in the way the plan is calculated, of course, requires the administration system to quickly support the change.
- Agility in governance: Sales compensation professionals will get more requests for relief and adjustment in 2021 than any other year in recent memory (with the possible exception of 2020). Governance guiding principles need to be established early. The principles need to be broad but still offer guidance to handle every situation. Without clear governance principles, situations can be treated differently with no real reason.
As you kick off your 2021 plan design season, include agility in every aspect of the plan. Make sure every part of your program is agile and readily adaptable to a rapidly changing environment.