Who Should Be In A Compensation Plan

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Compensation Plan

When designing or redesigning a compensation plan, one of the decisions you will need to make is who should be present during the design process. An equally important decision is who should definitely not be present!

Let’s tackle the first decision first. We recommend that a small group be gathered that includes the following types of people:

The leader of the group. This should be a direct selling and compensation plan expert with years of experience designing and improving multilevel compensation plans for hundreds of different kinds of direct selling companies who together sell a wide range of products and services in many countries. Yes, while they are few in number, these people do exist. I am proud to say I am one of them. The leader’s role will be to make it his business to understand your business and then to present choices composed of thoughtful high-quality recommendations to design or improve your compensation plan.
The decision makers. These are the people who have the responsibility and the authority to make the design decisions. While the leader will likely contribute a large percentage of ideas to the group, the leader is not a decision maker. How many decision makers should there be in your group? My answer is at least one and no more than five. If you have too many decision makers, it will take too long to make decisions, or worse yet, you may get stuck in gridlock.

The final decision maker(s). If your group includes more than one decision maker, your decision makers may not always agree with each other. To deal with this reality, you will need to appoint what I call the “final” decision maker who has the ultimate authority or decide to let every decision maker cast a vote and let the majority each time make the decision.

The historian. If your company is not a brand new one, you may have employees on staff who worked for your company for many years. Their perspective is valuable because they have seen what the company tried before that worked and that didn’t work. If you choose to add an historian to your compensation plan design group, be sure to pick one with a good attitude who is also open to change. Don’t select someone who fights changes or argues incessantly with everyone, even if they have been with your company for 200 years. Attitude and openness to change is more important than longevity.

The field cheerleader. Be sure to include at least one group member who is an employee of your company who has regular contact with your field force. While you won’t have any independent representatives present during the design process (see below for the reason why), you definitely want the field represented by at least one corporate soul in your meetings.

The business analyst. Business analysts identify department needs for information, communicate these needs to IT people who implement software changes, and confirm the delivered results meet the needs. Business analysts are always thinking about details. If you have someone in your company who is a business analyst or performs the role of a business analyst but doesn’t have that job title, add that person to your group. The addition of this key role to your group, if you have can fill it, will allow your group to do a better job of identifying what else needs to change to support the new or improved compensation plan.

The IT professional. Eventually, you will need to communicate the details of the new or improved compensation plan to your software developers or software providers. If you have an IT director or supervisor on staff whose time you can spare to devote to the design project, choosing to include that person during the design process will not only save you time later, but it will also give you early feedback on what will need to be done to implement the changes to your plan.

Let’s conclude by addressing the second decision. Who should definitely be excluded from your design group?

Anyone who is paid through your compensation plan. While you will definitely want to show your new plan to your top field representatives before you show it to others, no one who will be paid through your plan should be present when you are brainstorming and designing changes, even your top representatives or your master distributor, if you have one. You know about the fox in the hen house? Well, there’s that.

Disrupters and arguers. In order for a group to complete a project like the design or improvement of a compensation plan, there needs to be little or no acrimony. Choose each of your group members with personality in mind. You should select respectful, kind, thoughtful and analytical people who work well with others.

Unqualified people. If you cannot come up with a reason as to why person X should be in your group, take them out! Only include people whose presence is clearly needed. Clearly needed means you expect that person to not only participate but to give good suggestions and feedback, solicited or not.

Now you know who should be present when your compensation plan is designed or improved and who should stay home. Let’s get to work.

By Jay Leisner, President of Sylvina Consulting