Predictive Modeling
When it comes to predicting the effect of a proposed sales comp plan design, rigorous and thorough modeling is essential. The Cygnal Group’s modeling capabilities include:
Incumbent modeling of the effects on individuals
The effects of the proposed plans on each eligible sales person and sales leader are modeled. If plan measures are the same as in prior years, we answer the question, “What would last year’s performance have paid on the proposed new plan, and how does that differ from historical compensation levels?” If plan measures have changed, we answer the question, “What performance will it take under the proposed plan to keep each person whole vs. historical earnings, and how does that compare to their historical performance?” View a sample incumbent model.
Modeling the aggregate cost of the plans
To model the cost of the proposed new sales complensation plans under a range of likely business performance scenarios, we first answer to the question, “What will the new sales commission programs cost at target?” We then answer the far more useful question, “What will the new plans cost if we have a distribution of performance from under-quota to over-quota based on our historical performance distribution?” We then take the historical distribution curve and “slide” it to higher and lower to understand how the real expected cost of the plans will move based on overall business performance. View a sample aggregate cost model.
We have not yet discovered any problem with the plans during the modeling and testing which caused us to change the basic structure being proposed. However, we almost always discover a few important parameters (e.g., acceleration rates, thresholds) that need to be tuned differently to treat sales people fairly and/or manage the cost of compensation to appropriate levels.
