Your Compensation Plan Was Successful. So Why Didnt Sellers Change Their Behaviour? 

You made changes to your compensation plan. Created new KPI’s. Implemented accelerators. Tied the plan to your business goals. Six months later and seller behavior has remained pretty much the same. 

How come? 

Changing your compensation plan isn’t going to guarantee seller behavior will change.

As Sales Compensation professionals we tend to think if we can change what the seller gets paid for they will start selling more of that thing. This isn’t always the case. 

When you change a seller’s incentive you are changing the economic lever you have over them.

They will only act upon something if they believe they have control over it and the number is large enough to move the needle.

Maybe the number was too small. Or maybe there is another payout that is more lucrative than the KPI you’re trying to drive.

Either way we need to be looking at did our seller change behavior and did that behavior help us achieve our economic goals.

 1. Just Because You Changed Your Comp Plan Doesn’t Mean You’ll Change Behavior

Let’s say you work for a Telecommunication Company and want your seller to start selling more premium products.

You add a new KPI to the plan that will make up 10% of their variable pay.

Plan goes out the door. Everyone gets paid properly and you’ve done everything you can think of to get this to happen.

Six months later you see a slight uptick in premium product penetration.

What didn’t we do right? 

Maybe 10% wasn’t enough to change the sellers behavior since they had 60% of their comp tied to overall revenue.

Could be that the sellers know it’s hard to sell these products. Or that inventory may not be available at the time of sale.

There are many things that can prevent a behavior from taking place even after a compensation plan change.

We changed our compensation plan but not our sellers behavior.

Many factors come into play when determining what will motivate a seller to take certain actions. Your opportunity in market, your products ability to compete, sales cycles and even what your seller thinks they can achieve.

You will need to create a more compelling reason for them to sell that product/service.

2. Here’s What Lack of Seller Behavior Looks Like in Other Industries.

 Telecom Industry 

Many Telecom Companies in the US/Canada would like to see their sellers increase sales towards premium 5G products, bundle products together etc.

Let’s say you offered a 10% incentive on the adoption of these premium products but left your seller earning 60% off of overall revenue.

While they may recognize this as a priority they will continue to focus on what will help them achieve their revenue number the quickest.

We offered them an incentive to sell more of these products but may not have given them enough leverage to do so.

We want to ask ourselves did our sellers increase their offers of these products?

Did they convert more? Bundle more products together? Continue to discount at a lower rate than average?

These questions will tell you if the incentive actually changed the sellers behavior.

Insurance Industry 

You may want your producers to grow your book of business in a more profitable way.

After making changes to your plan and adding a profitability component to your sellers income they may continue to chase dollars and grow their book of business.

If 70% of their incentive opportunity is coming from writing premium then that’s what they will focus on.

Grow our book of business profitably” is the behavior we want to see from our sellers.

However they may be focused on growing premium dollars because that’s what we’re telling them to do financially.

We want to see if our producers are starting to write better quality of business. Maybe they’re discounting less and growing their retention/persistency numbers.

If none of this has changed then we haven’t done anything to motivate them to sell better quality business.

 SaaS 

You may want to see an increase in your New ARR. After implementing an accelerator to drive your sellers to sell to strategic accounts they may continue to sell to everyone else.

While we did implement an incentive for them to sell to strategic accounts we failed to see a behavior change.

Ask yourself did our seller spend more time on these accounts? Did we see an increase in deal size?

Did our seller discount less/more on these opportunities? Were they selling more products to these customers?

These questions can tell you if the behavior you want is occurring or not.

Just because you changed an outcome doesn’t mean you changed a behavior. And just because you changed a behavior doesn’t mean you created value for your company.

Make sure to look at both. 

 3. Here are Some Reasons Why Your Seller Isn’t Changing Their Behavior.

a. Not enough leverage. 

You may say you want your seller to focus on a behavior that will benefit your company but only offer them a small portion of incentive opportunity to do so.

If that behavior is difficult to accomplish and you don’t offer enough incentive to make them want to do it they will focus on what they can achieve quicker.

Always make sure you are offering your sellers enough incentive opportunity to change their behavior.

b. Not enough control. 

The seller needs to feel like they can affect the outcome. If your trying to motivate a seller to sell more of a product they may not always have available. Increasing that % will not allow them to sell more of that product.

c.Too complex. 

Your seller should be able to understand how they are getting paid. If they have to sit down with a calculator to figure out what they are owed then your plan is probably too complex.

Don’t make it hard for them to understand their payout.

d. Feedback is too slow. ** 

When you create an incentive that will take longer for your seller to understand what they’re doing to achieve that number the likelihood of them acting on it will decrease.

4. How Can We Determine if Our Compensation Plan Changed Behavior?

This is where Sales Comp and RevOps should be looking at the effectiveness of their incentive plans.

Instead of asking ourselves did we pay our plan correctly we should be asking did our seller change their behavior.

Here is a quick way to look at your plan.

1. Identify what behavior you want to see from your seller.

Be specific with what you want your seller to do. “Sell more of our premium products” vs “Increase our penetration of premium products by 10%”.

2. Establish a baseline. 

Look at what your seller is currently doing before you made any changes to your compensation plan.

3. Measure the behavior. 

Are they selling more of the product? Discounting less? Spending more time on specific customers? 

4. How did that behavior affect your economics. 

Did you see an increase in revenue from the product you want your seller to focus on. Did you make more money by having them sell this product?

5. Continue to test what will get your sellers to act.

If your seller isn’t changing their behavior there is a possibility they aren’t motivated enough to do so. Maybe you need to increase that % on that KPI or find another way to incentivize them.

Conclusion 

As Sales Compensation professionals we will continue to see plans that don’t affect seller behavior. We need to find ways to test our plans and determine if they are actually changing behavior.

We want to see an increase in our revenue that we can attribute to a change in our sellers behavior.

By utilizing new technology we can begin to predict how our plan will perform and monitor if our sellers are actually changing their behavior.

Change the way we look at compensation plans and we can start driving better behavior from our sellers.

When we hear “we changed our plan but nothing happened”. Ask yourself if we gave our sellers enough incentive to change their behavior.

We can’t expect our sellers to change their behavior if we don’t give them the proper motivation to do so.