When your job is to design sales compensation plans, it’s easy to feel like you’re stuck in a maze of uncertainties. You can analyze the data, collaborate with key stakeholders, and create plans that align with business goals and still be left questioning what outcomes your plans will produce. Will you motivate sales reps to go the extra mile? Will your comp plans earn your business more revenue? Or, will your new plans fall drastically short of expectations?
Unfortunately, sales comp managers aren’t the only ones facing uncertainty. We often hear from commissioned employees how difficult it can be to understand the impact their efforts have on their paycheck.
But, what if there was a way to double down on the variables within your control? What if you could build comp plans to mitigate uncertainty and refocus reps?
In today’s article, we’ll introduce you to a framework that will help you do exactly that. Read on to learn how to gain control over your domain of expertise, using a concept known as the Circle of Influence.
What is the Circle of Influence?
The Circle of Influence is a concept coined by Stephen Covey, author of the bestselling book, The 7 Habits of Highly Effective People. Covey uses this principle to emphasize one of his key themes– become a proactive person by focusing on aspects of your life within your control.
Every single human being has a wide range of concerns, from the personal (our health, families, financial wellbeing, challenges at work, etc.) to the environmental (politics, the stock market, weather conditions, you name it.) All of these various worries and interests make up our Circle of Concern.
The Circle of Concern includes a smaller circle known as the Circle of Influence– sometimes called the Circle of Control. These are the things we care about and actually have some degree of control over, through our actions, behaviors, and attitudes. Everything outside of the Circle of Influence makes up the outer ring of the Circle of Concern— things we worry about but have no control over.
For example, we assume your salary is important to you. You care about getting a raise this year, and you also worry about your company’s overall performance, as the business’s success may play a factor in how every employee is compensated.
There are proactive steps you can take to better your chances of earning a raise: delivering on specific KPIs, exhibiting strong leadership skills, being a positive and helpful team player. These are things you can control, which puts them inside your Circle of Influence.
But, there are other factors that also might affect your chance at a raise: your company’s overall earnings, the state of your industry, the economy at large, etc. These concerns aren’t within your control, so they exist inside your Circle of Concern but outside your Circle of Influence.
When you focus on the outer ring of the Circle of Concern, you exert unnecessary time and energy and cause yourself undue stress. Proactive people zero in on their Circle of Influence, this allows them to stop worrying about uncontrollable variables and instead focus on the things they can directly impact.
Why the Circle of Influence Matters in Commission Planning
The typical sales organization is composed of several different teams and roles, each with their own specific function. As a department, these teams share a number of big-picture goals related to driving revenue for the business.
As a result, each sales employee is often juggling a range of competing concerns and priorities. If your commission plans don’t encourage the behaviors and outcomes each rep should focus on, they’ll struggle to achieve quota attainment.
Instead of being focused, your team might stress over market conditions, internal politics, or other detrimental behaviors. Or, they might focus on what other teams are doing that might have a positive or negative impact on their earnings.
Stephen Covey’s Circle of Influence and general ideology around influence and control are great tools to help you avoid those pitfalls and reap the following benefits:
1. Improved focus and efficiency
An effective compensation plan should not only reward desired sales outcomes but also serve as a roadmap, highlighting the individual objectives and actions someone should adhere to in order to achieve those larger outcomes. By emphasizing commission plan elements that are in each employee’s Circle of Influence, you’ll incentivize them to ignore superfluous activities and keep their focus trained on what matters most to their role.
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2. Increased motivation
Understanding how to motivate sales employees is critical to commission planning. Motivation isn’t just about how badly someone wants to achieve a goal or earn a reward. After all, most salespeople will tell you they want to earn as much money as possible. Good sales comp plans don’t just set ambitious goals, they also set clear and achievable goals.
When salespeople feel they have control and influence over their objectives, they’re far more motivated to achieve them. On the other hand, if they only vaguely understand what actions will get them closer to their goals, they’ll be more prone to uncertainty, indecision, and ultimately lack the motivation needed to hit their targets.
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3. Higher morale and job satisfaction.
Salespeople are more likely to be satisfied in their job if they feel like they have significant control over their domain of expertise. Commission plans that align with the Circle of Influence will send a clear message to every sales employee: Your success is in your hands.
If they exceed expectations, they’ll understand why and can therefore replicate those methods in the future. And, if they fall short, they’ll know where they went wrong and understand what they can do to improve next quarter.
Recommended reading: The Impact of Compensation Psychology on Sales Strategy
Example: Circle of Influence-Driven Commission Planning
Let’s say your company is struggling to hit new business targets due to economic conditions, so leadership wants to heavily prioritize customer retention. So, as a leadership team, you agree to make slight adjustments to AE comp plans.
But, retention hinges on many different factors, some of which don’t directly fall on an AE. So, in this example, if you adjust your comp plans to reward reps only after an account has remained a customer for a set period of time, they might start worrying too much about onboarding, ongoing product support, NPS scores, and other variables that are more in the CSM’s wheelhouse than their own.
Suddenly, your commission plan is having the opposite of its intended effect. AEs are paying attention to what CSMs are doing to drive retention, drawing their own focus away from new deals.
Instead, using Covey’s idea of Circle of Influence, the changes you make to comp plans should be clear and directly tied to behaviors within a rep’s control. In this example, that may mean you make adjustments intended to encourage reps to secure better fit accounts that are more likely to have success using your company’s products.
This could be an additional cash bonus paid out for every closed/won deal where the account meets very specific ICP criteria– like company size, industry, multi-department buy-in, compatible tech, etc. This level of specificity is essential to driving more of the right behaviors.
Now, with this plan adjustment, reps will focus solely on working and prioritizing accounts that are more likely to have long term success with your company’s products– thus improving retention rates.
Best Practices for Leveraging the Idea of Circle of Influence in your Commission Plans
Now that you’ve got a good grasp on the Circle of Influence, we’ll leave you with a few tips for effectively implementing this concept as you create and adjust your commission plans.
1. Map sales objectives to specific roles.
Specificity is critical to commission planning. If a plan is too general, emphasizing only the shared business goals that all employees are working towards, sales reps will lose sight of the individual roles they play in achieving those goals. So, you’ll want to avoid “loose” commission components— goals and metrics that aren’t tightly aligned with a salesperson’s day-to-day responsibilities.
Start by breaking your larger business goals into smaller objectives by job function. What activities must an AE prioritize on a daily basis in order for the overall organization to hit its goals? What about an inbound SDR? Outbound SDR?
By cascading large goals down the ranks and breaking them into smaller sub-objectives, it’s easier to remove external concerns and really hone in on what’s important. The idea is that everyone will understand what shared goals they’re working towards but remain focused on the individual goals they should focus their own energy on.
Recommended reading: Building Your First SDR Commission Plan
2. Incentivize a combination of behaviors and outcomes.
It’s an age-old question— what’s more important to incentivize: the results that a salesperson produces, or the activities required to produce those results? The concept of Circle of Influence presents a compelling argument for incentivizing both behaviors and outcomes.
Here’s why: a salesperson has direct control over their behaviors. An inbound SDR has control how fast they respond to a qualified lead but less control over what happens after that lead is passed off to be worked by an AE. Yet, encouraging only an activity (lead follow up time) or only an outcome (closed won opportunities and revenue) will likely cause reps to over-rotate.
Using the same example to illustrate our point– too large a focus on speed-to-lead may cause a high volume of low-quality, ineffective follow up. And, on the other hand, too large a focus on closed/won opportunities and revenue will lead to a disconnect and lack of perceived control.
That’s why it’s important to balance both behaviors and outcomes in commission plans. You can’t only reward an inbound SDR for qualifying and swiftly responding to leads, of course. But if you assign earnings to actions like lead response time— in addition to outcomes like closed won revenue— your team members will be motivated and laser focused on the activities and behaviors required to meet their goals
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3. Be specific, but not complicated.
As we’ve already covered, there are a lot of variables in a salesperson’s Circle of Concern that they can’t control or influence. But, that doesn’t mean their Circle of Influence can’t become overcrowded as well. A sales rep might understand the behaviors and outcomes they have influence over, but the list can get long and difficult to prioritize.
Although we’ve stressed the importance of specificity when it comes to creating effective comp plans, it’s important to clarify that ‘specific’ doesn’t and shouldn’t mean ‘complicated’. The goal of The Circle of Influence conversation is to eliminate distractions and isolate clear and specific factors. Remember to keep that idea at the forefront of your mind when implementing any changes to your comp plans.
Our friend, Chris Semain, Principal and Tech Practice Leader at the Alexander Group, explained this well in an interview with Spiff, “Too simple of a plan and you’re not going to drive all the behaviors you want. At the same time, if you have ten priorities and they’re all number one, you’re going to wind up with a plan that your Ops team won’t be able to administer, and reps won’t be able to understand. You need to be mindful of what you can operationalize in your environment,” says Semain.
Recommended reading: 4 Reasons to Automate Your Sales Commission Process
It’s important to remember that control is not an either/or concept. There are variables that a salesperson can completely control, some they only have indirect control over, others they can strongly influence, and some they can’t impact at all— and the same goes for the employees designing comp plans.
Use the Circle of Influence concept to keep those variables where they belong. When your commission plans emphasize worthwhile actions and mitigate futile concerns, you’ll help sales reps focus on their own personal Circle of Influence.
Spiff is a new class of commission software that combines the familiarity and ease-of-use of a spreadsheet with the power of automation at scale- enabling finance and sales operations teams to self-manage complex incentive compensation plans with ease. Spiff is designed to facilitate trust across organizations, motivate sales teams, increase visibility into performance and earnings, and ultimately, drive top line growth. The platform’s intuitive UI, in-depth reporting capabilities, and seamless integrations make it the first choice among high-growth and enterprise organizations.