Sales comp is a huge challenge for a lot of companies. Recently, someone asked me for advice on a comp plan design that takes the “new hire” factor into account and I sent them the following:
Give the new hires a full-year compensation plan like anyone else would get, and then,
Based on start date we (a) prorate their quota and goals and, (b) prorate their variable comp.
As an example, someone starting June 1 has 214 days remaining in the year (assuming we align fiscal year to calendar year). Let’s say their annual plan has a $75k variable on an $800k quota. Since they won’t be here a full year, we prorate everything, which loosely works out to the following:
Their quota for this fiscal year is $470k. That’s $800000 x (214/365), or 58.63% of $800k.
Next, their variable for this fiscal year is $44k. That’s the same 58.63% weight against their $75k variable.
You can implement this in your monthly goals if you aren’t already. The M1 goal would be prorated as (days remaining in the month) divided by (total days in the month) then multiplied by (the standard monthly goal).
A standard monthly goal of 20 assumes 28, 29, 30, or 31 days (depending on month/year), right? Thus, assuming a 30-day month, someone who starts on day 15 gets a goal of 10, since ((15/30) x 20) = 10.
Starting day 21 of a 30-day month gets you a goal of 6, since ((9/30) x 20) = 6.
You could then provide a draw to acknowledge the fact that they’re ramping. Note adding a draw would change some numbers around a bit, namely the multiplier and any accelerator.
Sean M Masters 