4 Best Practices When Rolling Comp Plans Over Into a New Year

As the end of the year approaches, organizations face the critical task of rolling over compensation plans to align with new objectives and performance expectations. This process is an opportunity to enhance plan effectiveness, streamline workflows, and address accumulated tech and operational debt. To make the transition smooth and set your team up for success in the new year, proactive planning and strategic adjustments are essential. In this article, we explore four best practices for rolling comp plans over, helping you prepare year-round, refine your workflows, verify plan accuracy, and document changes to improve performance and reduce stress on your teams.

Make Mini Preparations Throughout the Year

In our predominantly digital age, tech debt is to be expected – the problem, however, lies in allowing tech debt to accumulate without a management plan in place to address it. We understand the need for a quick fix – such as building a work-around solution for a crediting override to get payouts out in time – but unless the quick fixes are revisited, they only add to the pile of tech debt. According to a 2023 survey of over 1,000 technology leaders, nearly 70% of organizations view technical debt as having a high level of impact on their ability to innovate.

How can you combat this? One solution is to earmark the tech debt you accumulate and quick fixes you build throughout the year. Something as easy as labeling a column with “[Temp]” to easily identify your quick-fix placeholders or documenting and storing a running list can make it simple to identify areas to be re-addressed, sustainably.

In addition to tech debt, operational debt often accumulates throughout the year, slowing you down even further as you get deeper and deeper . Are your processes inefficient for your team’s bandwidth? Is your comp admin’s day-to-day focus more tactical than strategic? Year over year refreshes are also a great opportunity to look at how to better align your workflows with your incentive compensation management solution. Some ideas for this are:

• Evaluate to your time-to-payroll process and notate the aspects that take more time or energy than you’d like.
• Look out for new or updated ICM features released throughout the year and note which ones you want to implement with the new year.
• Discuss overarching incentive program goals with your team and align on how you might be able to use an ICM solution to solve barriers to achieving them.

Prep by Asking Important Questions From the Top Down

Before focusing on the details, it’s important to understand the strategy of your plan refresh. Start from the high-level picture of what the commission plans should accomplish, and continue to ask more targeted questions as you go. Utilizing your reporting system will help you identify if the commission plans are operating how you expect them to, as well as where you might need to pivot to drive the right behaviors. 

Here’s a few questions to get you started:

• What types of reports am I frequently asked for? Am I currently able to build all the reports I need? Are my commission plans built in such a way to make that data easy to extract and transform into a report?
• Were our commission plans effective in helping us meet company targets? For example, if bonuses or spiffs were in place to reward certain behavior like closing multi-year deals, does it look like reps prioritized the bonus behavior over the desired behavior, such as low attainment for base quota but high achievement of bonuses?
• How frequently did I make manual adjustments or overrides? Is there enough consistency in the adjustment reasons that it can be built-in to the commission plan?

For example, the CaptivateIQ team worked with a customer that needed to build in override logic for hold and release commissions. Their current process was to hold 100% of commissions until the invoice was paid. However, anytime a large deal was closed, they released 40% commissions upfront and held the remaining 60% until the first payment was received. The process worked, but required a manual override each time a large deal was closed. Even though the large deals weren’t a monthly occurrence, the process was consistent, so the CIQ team implemented an automated fix - a hold and release threshold - to automatically identify large deals, switch the hold percentage, and pay correctly without any manual intervention. Win-win.

QA Plans by Testing From the Bottom Up

You might be able to put together a decent enough packing list if put on the spot, but it’s usually inevitable to forget something when packing for a big trip – whether it’s an umbrella, a phone charger, or enough pairs of socks (we’ve all been there – hello, foreign laundrymats). To get ahead of this, you might try to picture the entire day, from sunrise to sundown, to ensure your packing list includes everything you could possibly need for the trip.

Testing your commission plans isn’t all that different. If you made a list of everything you need to build and test, you’d probably remember most things – but there’s always that one use case that isn’t accounted for in testing. For example, even if the team deal crediting worksheet is built correctly, the commission calculations will still be incorrect if the referenced hierarchies are outdated.

Bottom-up testing could look like this:

• Bottom: Updating commission plans with new inputs like dates and rates.
• Middle: Test every scenario on multiple reps, plans, and dates. Strategically prep the dummy data to achieve tiered targets, test bonus calculations, and even clawbacks or hold & release logic.
• Top: Use a sandbox or a dummy rep to simulate the entire commission process, from syncing your data to publishing the statement. Notate any errors experienced and start back on the detail level to correct.

Document Everything (Yes – Everything)

There are few things worse than having a system admin leave with the full torch of knowledge on the system. To avoid this, it’s best to document all changes made to the commission plan, including how to handle new use cases, where to start when troubleshooting, and how to make the most of any new features or processes incorporated into the system. Your documentation will be your first line of defense, so do your future self a favor and notate everything. This also resets our cycle of year-over-year best practices by giving you an easy place to notate tech debt, pain points, and other areas of opportunity to revisit with the next plan rebuild. 

Rolling over compensation plans effectively requires more than just updating numbers – it’s about creating a strategic, sustainable framework that aligns with your company’s goals and operational needs. By continuously addressing tech and operational debt, aligning top-down strategies with plan design, rigorously testing, and documenting everything, you can create a smoother rollover process each year. Implementing these best practices allows for fewer disruptions, more precise payouts, and better alignment with performance objectives, ensuring your team is set up for success in the coming year.