{"id":161,"date":"2011-07-03T09:18:20","date_gmt":"2011-07-03T16:18:20","guid":{"rendered":"http:\/\/bobbacon.net\/blog\/?p=161"},"modified":"2014-02-22T21:58:11","modified_gmt":"2014-02-23T04:58:11","slug":"elements-of-a-commission-plan","status":"publish","type":"post","link":"https:\/\/bobbacon.net\/blog\/archives\/161","title":{"rendered":"Elements of a Commission Plan &#8211; Plan Components"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright size-full wp-image-164\" title=\"Comp Plan Puzzle\" alt=\"\" src=\"http:\/\/bobbacon.net\/blog\/wp-content\/uploads\/2011\/07\/Comp-Plan-Puzzle2.jpg\" width=\"249\" height=\"200\" \/><span style=\"color: #000000;\">This is my second post on the topic of sales incentive compensation.\u00a0 I need to outline these basic elements of a commission plan to set the ground work for future discussions so please bear with me.<\/span><\/p>\n<p><span style=\"color: #000000;\">Like a three legged stool that can\u2019t stand up on two legs, every comp plan needs five elements to be stable.\u00a0 These elements are territory, quota, plan components,\u00a0terms and conditions\u00a0and finally monetary reward or OTE.\u00a0 Each of the five is a necessary part of the puzzle and they are interdependent.\u00a0 For example, if a territory with limited opportunity is cut in half the quota\u00a0might be similarly reduced.\u00a0 If a new component is introduced then a new quota must be created.<\/span><\/p>\n<p><span style=\"color: #000000;\">Most of these five elements need no explanation to experienced sales managers but the <strong><em>component<\/em><\/strong> element, performance against a specific goal, is most often misused.\u00a0 In an effort to tie some portion of a plan participant\u2019s variable compensation to a multiplicity of corporate goals, plan effectiveness is\u00a0sometimes diluted by too many components.\u00a0 Are there a \u201cright\u201d number of components for any one plan participant?\u00a0 I don\u2019t think so but, purely from a mathematical standpoint, the lower the number of components the more focused and potentially effective the overall plan.\u00a0<\/span><\/p>\n<p><span style=\"color: #000000;\">Clearly, senior sales managers can understand a plan with as many as three or sometimes four components but their attainment against those components is based on the performance of their team, not as much on their individual performance.\u00a0 If the front line sales resources can\u2019t quickly calculate in their head their potential commission for a given transaction then the value of the comp plan to incentivize behaviors is diluted.\u00a0 Ask yourself, if a front line plan participant carries a component that accounts for 10% of their variable compensation, is that sufficient incentive to drive behavior or is that more of a distraction from the behaviors driven by the larger, theoretically more important, components?<\/span><\/p>\n<p><span style=\"color: #000000;\">I am interested to know your experience with multiple component plans.\u00a0 What is the largest number of components you\u2019ve assigned to an individual on\u00a0your team of front line sales resources?\u00a0 What is the lowest percentage of variable compensation you\u2019ve ever tied to a specific component and what performance did it measure?<\/span><\/p>\n<p><span style=\"color: #000000;\">Cheers!<\/span><\/p>\n<p><span style=\"color: #000000;\">Bob Bacon<\/span><!-- Counter\/Statistics --><br \/>\n<script type=\"text\/javascript\">\/\/ < ![CDATA[\n\/\/ < ![CDATA[\n\/\/ < ![CDATA[\n\/\/ < ![CDATA[\n\/\/ < ![CDATA[\n\/\/ < ![CDATA[\n\/\/ < ![CDATA[\n\/\/ < ![CDATA[\ngeovisit();\n\/\/ ]]><\/script><\/p>\n<p><noscript>&amp;amp;amp;lt;img src=&#8221;http:\/\/visit.webhosting.yahoo.com\/visit.gif?time&#8221;&amp;amp;amp;lt;br \/&amp;amp;amp;gt;&amp;amp;lt;br \/&amp;amp;gt;&amp;lt;br \/&amp;gt;&lt;br \/&gt;<br \/>\nalt=&#8221;setstats&#8221; border=&#8221;0&#8243; width=&#8221;1&#8243; height=&#8221;1&#8243;\/&amp;amp;amp;gt;<\/noscript><\/p>\n","protected":false},"excerpt":{"rendered":"<p>This is my second post on the topic of sales incentive compensation.\u00a0 I need to outline these basic elements of a commission plan to set the ground work for future discussions so please bear with me. Like a three legged &hellip; <a href=\"https:\/\/bobbacon.net\/blog\/archives\/161\">Continue reading <span class=\"meta-nav\">&rarr;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_s2mail":"yes","footnotes":""},"categories":[23,4],"tags":[26,36,11,88,13,27,28,29,89,12],"class_list":["post-161","post","type-post","status-publish","format-standard","hentry","category-sales_compensation","category-sales_ops","tag-bob-bacon","tag-commission-components","tag-commissions","tag-icm","tag-incentive-comp","tag-plan-components","tag-plan-elements","tag-sales-compensation","tag-spm","tag-variable-comp"],"_links":{"self":[{"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/posts\/161","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/comments?post=161"}],"version-history":[{"count":18,"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/posts\/161\/revisions"}],"predecessor-version":[{"id":807,"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/posts\/161\/revisions\/807"}],"wp:attachment":[{"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/media?parent=161"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/categories?post=161"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bobbacon.net\/blog\/wp-json\/wp\/v2\/tags?post=161"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}