In my last post, we reviewed the document that is the cornerstone of every well-run plan the commission spreadsheet. In this post, well discuss the other two pieces of documentation that are critical to plans that truly motivate:
The English-language description is a cogent, clear description of how the plan works and the logic underlying it, in plain English. Together with the spreadsheet, it provides a complete description of the plan. Some of the elements this description should include are:
A properly written description should rarely take more than two or three pages. I might also add that this is a business document, not an employee relations document this document should be drafted by people in finance and sales, and not by HR staff unless they are highly knowledgeable about incentive comp.
The legal document is a good idea considering the large amounts of money changing hands (God willing!). It should be signed by both the sales person and a senior officer of the company the more senior the officer, the stronger the message of respect for the sales person and importance of the comp plan. In most well run companies, sales reps cant receive commission payments until the signed document is on file. Some of the elements in this document should include:
I don’t feel strongly about the length of this document, because ideally it wont see day-to-day use. However, it doesn’t need to be a legal textbook, either. For example, laying out the procedures for every possible permutation of employee termination or territory change and Ive seen contracts that droned on for several pages on this subject doesn’t serve much purpose. In real life the most complex situations of this type are usually resolved by negotiation and not by the exact words of the contract.
Drafting these two documents is the least fascinating part of the process of creating effective compensation plans. But if you do them right, not only will you have a coherent, manageable plan, but you’ll save an enormous amount of time and trouble when things get complicated.