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Have you ever thought about what truly motivates your sales reps to produce? Is it their sense of personal accomplishment? Receiving company recognition? Or is it really all about the money? While factors vary by industry and company culture, there is one tried-and-true system to designing an effective incentive compensation package tailor-made for your business: Design for Six Sigma (DFSS).
A regional multi-line insurance company recently engaged SSA & Company to redesign its field incentive compensation process. Through extensive “voice of the customer,” industry benchmarking, and value stream analysis, SSA discovered that the compensation process itself was not broken, but rather the factors used to calculate incentive pay were poorly understood. So what were all of these factors? And how did they drive sales reps’ performance?
Typically, incentive compensation plans are passed on from one year to the next with a few minor tweaks to re-energize sales reps and motivate them to improve their individual performance and overall business performance. Rarely is a structured methodology used to decide what those tweaks should be; instead the decisions rely on a company’s incremental learning cycles or are purely driven by revenue growth. While historical perspective and future outlook are valid points of view, this “guess and check” method is inefficient and fails to capture all variables.
In following the DFSS methodology, SSA & Company held a series of focus groups to uncover key design elements and functional requirements for an optimized compensation plan. With participation from across the organization, SSA consultants analyzed these elements using a Quality Function Deployment (QFD) to prioritize opportunities and create innovative compensation plan solutions. Finally, all potential solutions were evaluated against management-defined success criteria using a Pugh Matrix. The result was a compensation plan that properly aligned individual and team objectives to those of the company as a whole.
The key factors of the redesigned incentive compensation plan included:
Although the new compensation plan was surprising to some, most believed it to be just the catapult the company needed in order to motivate desired behaviors and boost product sales. Applying the same DFSS tools and techniques in another company or industry could produce a completely different outcome, but the end result would be the same; a robust incentive compensation plan tied to improved business performance.
Written by Blair Robinson, Director, SSA & Company