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May 23, 2008
The Keys to Implementing Sales Compensation Programs
By Bob Brady, BLR Founder and CEO

There are several steps to successful implementation of a sales compensation program, says to Robert Conti, Callidus Software, San Jose, CA.

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Conti was speaking at WorldatWork's Total Rewards Conference in Philadelphia this week.

The presentation, "Reinventing Sales Rewards," detailed how the electronics giant, Motorola, went about redoing its worldwide sales comp program. His co-presenter was Erin Smith, director of Global Rewards for Motorola.

While the demands of overseeing thousands of sales people in dozens of countries is beyond the scope of most readers, the principles of what Motorola did are illuminating.

Begin Infrastructure Work Early

Most sales compensation plans are complicated and need data from many sources. If the infrastructure work begins too late in the process, even the best plans can end up being trashed. "You end up with either: 'We'd really like to do that, but we can't', or a million spreadsheets," said Conti.

Reduce Complexity

Motorola's sales compensation systems had grown haphazardly over the years, and they had ended up with over 300 different job titles. In many cases, these didn't really relate realistically to nominal job grades. As a result of the work that Smith and Conti have done, these have been reduced to 28 titles, across six grades.

Asked how they could possibly have just 28 titles for all of the businesses they have in so many markets, Smith replied, "Their business cards may be more creative," but for HR and comp purposes, the limited number of grades work effectively.

Pay Attention to Geography

Though job titles and grade structures are the same worldwide, rate ranges and salary structures are not. Every country has its own salary structure, based on local markets.

Engineer for Flexibility

Different cultures and different businesses require different approaches. If you don't allow for flexibility, people will either "go offline" to get it, or the businesses will suffer.

Smith outlined how one system allows for different mixes of variable pay, ranging from zero percent to 76 percent of base salary. "By providing the right guidelines, we actually provided a lot more flexibility" she said.

Develop and Configure

If you wait until you've completed the above steps before involving IT and systems, you are setting yourself up for big time trouble.

Involve Everyone Early

To be effective motivators, commissions have to be paid promptly and accurately. To make that happen, you need cooperation and buy in from all the interested parties. These include, sales, HR, sales operations, finance, and IT. "If you miss someone in the process, it will come up and bite you, Conti cautioned.

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