A regional sales conference is winding down. The day's workshops and lectures are finished and a group of sales managers and marketing professionals are gathered in their hospitality suite of choice.

Various conversations start up and, along with good-natured lies about golf handicaps and plans for dinner later, among the next likely topics of conversation is bound to be something about a company's compensation plan—how it is being received, how successful it has been and how it has impacted the bottom line.

'It's always a popular discussion topic,' says Michael Marks, principal partner of Indian River Consulting Group in Melbourne, Fla.

Compensation plans. Pay plans. Or 'comp plans,' as they are often referred. Whatever they are called, there is no shortage of opinions, theories and feedback when salespeople gather.

The old axiom, 'If you've seen one...you've seen one' may apply to compensation plans. At least, 'If you've seen one effective compensation plan, you've seen one.' Because what works for Company A may not work well for Company B.

Unfortunately, some struggling companies will tend to take a one-size-fits-all approach to their comp plans. And trying to copy a seemingly successful plan from elsewhere can prove problematic. Don't fall in love too easily with what has worked for someone else, experts advise.

But all too often, the guy back at that hospitality suite may scribble down on a napkin a few ideas he just heard and bring it back to the home office. There, he'll issue an irate, one-page memo and change the comp plan. But what sounded like a good idea in the hospitality suite of a regional convention may not play as well if hastily implemented elsewhere.

'That's an absolute prescription for failure,' Marks says. 'But it's amazing how often you'll hear about that going on.... Some companies can do most everything else well, but err in this area.'

Patience is a rare virtue these days. Here's the new plan. When will we see the results? Instant gratification rules the day—especially with a new comp plan in place and a sales manager wanting to see gains right away.

'There was a patience, a willingness to say that it's a long-term process, years ago,' says Al Bates, chairman of the Profit Planning Group in Boulder, Colo. 'I don't think we have that patience any more. Or maybe we can't afford that patience anymore.'

Marks and his colleague at Indian River, Mike Emerson (practice manager), have seen this tendency all too often as well. In other cases, though, just the opposite approach can be harmful. Few distributors have much experience in drawing up a sales compensation plan, Emerson and Marks point out. In addition, few distributorships are start-ups these days. So a newly purchased company will bring in new owners who cling for too long to the pay plan already in place.

'People do tend to live with the plans for a long while, in many cases,' Marks explains.

Through the years, many companies had operated on the notion that there was a direct connection between their compensation plans and their resulting market share. In essence, pay good commissions and get good results. Case closed.

Good commissions are fine, of course. But in 2003, Marks and Emerson wrote a book refuting this very point. In What's Your Plan?, they make the case that there is no consistent connection between a company's comp plan and the way their market share will turn out.

'The key message is that the pay plan structure doesn't have anything to do with gain or loss of market share,' Marks explains.

The confusion over what makes a good compensation plan is another indication that the role of the sales force is changing and that comp plans must keep up.

Along these lines, Emerson will hear from companies lamenting that 'we're not getting the results we want. And we're paying the sales guys too much,' he says. 'OK, they might not be getting the results they want, but that might not be a result of how they pay the salespeople.'

What's Your Plan? is based on broad-based industry research. The two authors chuckle a bit about the early presentations they did based on the book's information. Marks says that some people 'wanted to kill the messenger. A lot of people were in denial on this. People didn't want to hear that there was no comp plan/market share connection.'

Most who were in denial, Marks explains, were companies who would try to manage their sales force strictly via their comp plan. For example, if the salespeople weren't succeeding, some companies would simply change their comp plan—their view being that 'they can control what the salespeople do by how they pay them,' Marks says, 'which is a horrible substitute for basic sales management.'

Emerson adds that they are seeing improvement in this area as some, but not all, companies are viewing their comp plans in connection with the overall picture.

'A lot of wholesale distributors are looking a bit harder at their pay practices based on the changes they've seen in the economy and the marketplaces over the past few years,' Emerson says. 'But it's not a flurry of activity. What you'll see are more add-ons or modifications to existing plans, instead of taking a step back and looking at what would make the most [overall] sense and adjust.'

Marks goes back to the changing role of many sales forces in industry. Most traditional sales staffs would deal with local buyers and manufacturing plants. In recent years, though, many companies have centralized their purchasing.

'So now that 'local' guy is no longer somebody you can sell to,' Marks explains. 'In addition, some people are placing more of their orders online so you don't always need a sales guy to go write up that order.'

Marks also cites the migration of the manufacturing base to overseas locations. Bates agrees, and emphasizes that it is vital for companies' sales departments to become more productive over time.

'What I need are guys who are doing relationship building and making sure we get the maximum out of those accounts,' Bates says. 'I also need someone to open up new accounts and make people aware of the entire product line...[but] not to only write an order. And that can lead you toward a very different compensation plan.'

Bates restates his plea for patience here, realizing that these new relationships don't get built by simply meeting for lunch.

'It could take me three years to get that relationship built up,' Bates cautions. 'Now, I don't know of any comp plans that will pay you for three years for selling nothing. Can I show or document that I'm building that relationship? Those are things that are part of the long-term process, but I don't know how you compensate [salespeople] for that.'

Compounding the challenge, of course, is that sales figures need to be sustained, and ideally improved, while still kindling these potential relationships for down the road.

'If I'm a salesperson, and you're going to compensate me by percentage of sales, I'm going to spend all the time I can with the low-hanging fruit,' Bates says. 'I'm going to sell to people I already sell to. Am I doing you a [long-term] favor there? I don't know if I am or not.'

What kinds of companies are handling this comp plan dilemma well? Marks appreciates and praises small to mid-size distributors that 'are very small but effective, make a good financial return, but they aren't hostage to their history—be it inventory control or sales management or computers. There are thought leaders out there who are well managed.'

Among the suggestions that Marks and Emerson recommend is having your company's payment plan aligned with its corporate objectives, in addition to being sure the company has solid sales management.

For example, when Indian River surveyed more than 500 wholesalers, they found that the companies that were well managed were clear on what their specific corporate objectives were. And it wasn't only an obvious sentiment like wanting happy customers. They knew the difference between objectives and goals, Marks says.

'Their objectives are actionable,' Marks explains. 'They might want to reduce their dependencies on their top 10 customers by developing customers 20–500, or increase the percentage of warehouse sales.'

In addition to this, he added, the better companies 'had objectives, but were also able to talk to their salespeople about what their roles should be to help achieve the objectives. Then, their pay plan helped reward people for helping the company achieve those objectives.'

Communicating just what the company expects and needs from its sales department is vital, Emerson and Marks emphasize. Set clear corporate objectives, talking about the role of the sales force in terms of how they were going to help achieve them, and then design the comp plan to reward them for their success.

'The communication of how a [new] plan works and why it's being changed is a huge determinant in how successful it will be in getting the results you're gunning for,' says Emerson. 'It's absolutely crucial.'

'Lots of times people think it's a formula. But it's not a formula, but the clarity of understanding,' Marks says.

'Salespeople are human beings and are entitled to clear explanations and a chance to talk it through. It's crucial that the people involved in the process understand how they can make a difference. You make them a part of the process, rather than just 'victims.''

Comments? E-mail Joe Nowlan at jnowlan@reedbusiness.com