Getting Sales Compensation Right
A Conversation with Synygy's Founder and CEO

Mark Stiffler is the founder, president and CEO of Synygy, Inc. – the world's largest provider of solutions for managing sales compensation. Mark has won numerous awards for his success in growing Synygy from a concept in 1991 to a global organization with 450+ employees.

The Sales Performance Journal sat down with Mark for a talk about the challenges of designing, launching and managing effective sales compensation plans.

Sales Performance Journal (SPJ): When it comes to sales compensation design and implementation, what's keeping sales leaders up at night – and what are innovative solutions providers offering to help them sleep?

Mark Stiffler (MS): First, it's not only sales leaders who lose sleep – not to mention money – over sales compensation plans. Sales managers who don't comprehend their companies' comp plans can't effectively use those plans to reinforce behaviors that drive the organization's strategies. And sales reps need to think about their compensation plans when they prioritize and plan. So when a sales comp plan isn't designed, implemented or managed properly, it undermines profitable sales. It affects everyone.

SPJ: What are the biggest sales compensation problems you encounter on a regular basis?

MS: There are three big problems we often see. One is errors in results. By that I mean the failure of an organization to identify and fix upstream data problems, measure the performance of each salesperson, and to accurately process sales commissions. There are organizations out there with sales compensation plans that may be sound, but people don't trust the results because of errors. Consequently, salespeople are not effectively motivated. The problem is large. I read that Gartner estimates that 8 percent of sales commission payments are inaccurate on average.

SPJ: The second frequent problem?

MS: We've found that a surprising number of sales leaders, sales managers and salespeople simply don't understand how their sales compensation plans work. It's not enough just to send salespeople an email that describes their sales compensation plan. You've got to make sense of it and communicate its meaning—and the desired behaviors—across the organization. Then, you've got to reinforce how the plan works through the effective communication of plan results and why people earned what they did.

SPJ: What's the third big problem you see the most?

MS: That would have to be strategic misalignment, or a disconnect between strategic objectives and salespeople's behavior.

SPJ: How does strategic misalignment happen?

MS: It can result for any number of reasons. A lot of organizations use an Excel spreadsheet to track sales and calculate commissions. Depending on the organization's size, that may work just fine. But as a business grows, the quality of a spreadsheet-based program may drop. So, depending on a company's size, and the complexity of its sales and other factors, aligning what salespeople do with an overall strategy may be a lot harder than people think.

SPJ: What would you say is a classic example of a strategic misalignment?

MS: Take a large organization, for example. Say a plan has always paid on revenues, but all of a sudden senior leadership decides it wants to pay on gross margin. What many sales executives may not realize is that it can take IT six months to a year or more to reconfigure its systems to the new comp plan. It's trickier than a lot of people think. During that months-long delay, there's strategic misalignment because salespeople's behavior will not be aligned with management's strategy. This can cost an organization lost profits that may be many times the cost of sales commissions.


SPJ: How can an organization that's up against one of these three challenges rise above it and grow profitable sales?

MS: Well, keep in mind, there are other challenges as well – problems like a limited ability to model plans, or an inability to adapt to a new plan or plan changes, or a process that inconsistently produces accurate and timely results. And in most cases we find that there's overlap among these problems.

SPJ: Sounds pretty complex.

MS: We've seen internal plan implementation efforts take up to three years – and still not get it right! So, obviously, one way to keep sales profitable is to find an outside organization that lives it and breathes it, whose sole job is to design, launch and manage sales compensation plans. It takes more than just implementation; someone has to monitor the plan, manage it and – most importantly – know how to talk with the sales force about it. Communication is a big part of the picture. It often comes as a surprise to executives when salespeople don't clearly understand why they got paid what they got paid. Salespeople want to know that their commission statements are timely and accurate. Big organizations need to create automated processes that are aligned with strategy – and have the expertise, experience, and time to do day-in-day-out management – to make that happen.

SPJ: What's the first thing an organization should do to address these problems with its sales compensation, get it on track and drive profitable sales?

MS: First, try to understand the cost of not solving the problem. I mean, look, it may not be a big enough problem to address. So an organization needs to figure that out for itself.

SPJ: How?

MS: Conduct an analysis. We've identified six categories of cost associated with these problems. One of the largest is overpayments and errors. This could include overpayments of commissions or the cost of non-compliance with government regulations. It could even include the cost of a publicly-traded company's stock dropping as a result of a sales compensation plan that isn't working.

Another large cost is the cost of a poorly motivated sales force. Are salespeople targeting the right customers? Are they discounting haphazardly and unnecessarily? Are they selling the right products and services? And if not, when you calculate the missed opportunities, your head will spin! Beyond that is the cost of lost selling time: How much time does a sales manager spend resolving disputes instead of growing sales?

The fourth category of cost is associated with high sales turnover. Let's face it: You can't count on retaining good salespeople who aren't getting adequate compensation. Then of course there are administrative costs such as the cost of maintaining the current system: What does it cost you to handle disputes, keep records and respond to inquiries?

Finally, there's the cost of keeping the current system going from an IT perspective: How much do your inaccuracies cost you? What do you pay your IT people who manage the current system?


SPJ: When Synygy works with an organization that has identified one or more of the problems and decided that the cost of not fixing them is too high, what comes next?

MS: Next is what we call Discovery. This involves a number of visits to the client, and many questions about how their current processes for plan management work, and what they want to see change. We look at everything. We break it all down and identify what needs to change. Once an organization knows what needs to change, it can make those changes itself – or, like many organizations, choose an outside vendor to put requirements together, and design and automate new plan management processes that address the seven problems and cut the six categories of costs.

SPJ: It all sounds pretty straightforward. But things are often more complicated than they seem on the surface. With that in mind, what kinds of hurdles does a company run up against when it tries to make such a change?

MS: Well, let's face it – people and companies only change when they have to; so you can expect to see some resistance from people who are simply accustomed to doing things one way – and are now being asked to take another approach. Not to mention that some people may lose their jobs in a process such as this where previously manual functions will be automated. This may introduce fear into the situation. And as we all know, when people are acting emotionally – out of fear – their judgment may be impaired.

SPJ: Once an effective sales compensation plan and plan management processes are implemented, what happens?

MS: Well, first and foremost, when salespeople, sales managers and leaders really understand the comp plan, salespeople's behavior will align with strategy. We've found that when a salesperson can go to a Web portal where he or she can see payout information, commission reports and special announcements, and where they can wrap their heads around their objectives, these are the salespeople who get engaged and take aim at the right sales targets.

What does it look like day to day? First off, fewer promotions, contests and spiffs – because they're no longer needed. There'll be fewer exceptions, fewer disputes and a lot fewer disconnects such as commissions rising faster than revenues. Organizations that implement and manage really good sales compensation plans see rising revenues, more time to sell and better retention.

And why wouldn't they? These are the organizations where sales leaders can line up strategic objectives with compensation, and where sales managers know how to reinforce behaviors that help grow profits.

SPJ: Thanks, Mark!

MS: You're welcome.
Mark Stiffler is the author of PERFORMANCE: Creating the Performance-Driven Organization (Wiley Press) and is a frequent speaker on the topic of sales performance management.


Mark attended the Massachusetts Institute of Technology (MIT) where he earned an MBA from the Sloan School of Business. He holds two bachelor degrees – one in Civil Engineering (Project Management) and one in Management Information Systems, also from MIT.

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