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When Sales Compensation Goes Horribly Wrong

A few years back, the CEO of a large bank testified in front of congress, struggling to explain how and why his employees had created millions of fraudulent customer accounts in order to hit their sales targets.

In case you missed it, here’s my review: It was a horror show.

While it’s difficult to see how anything positive could come out of something as nefarious as what happened, it does have value as a cautionary tale. In fact, it’s an extreme example of the unintended consequences warned about in our guide to “Designing Sales Comp Plans That Actually Work.”

In the guide, it’s recommended that you proactively attempt to poke holes in your sales compensation plan long before rolling it out. Try to anticipate how the system could be gamed and abused over time. Look for the downsides and unintended consequences that could result, even if the odds are very low.

Going further, you should involve your most cynical sales managers. Ask them what they would do to maximize their compensation under the proposed comp plan. Then ask them what the most unscrupulous salesperson they’ve ever known might do under the very same plan.

In many cases, they will identify potential loopholes, opportunities for abuse, and unintended consequences that you would never have considered.

When it comes to sales comp, it’s easy to put the blinders on and only look at the potential upsides and positive outcomes. But you have to go further. You have to play the skeptic and try to spot all of the things that could possibly go wrong. And, you want to do this before the plan is actually put into practice and the damage is already being done.

Now, you might be thinking that the unintended consequences in your business would surely never rise to the level of a congressional investigation. But who knows? The chief executive of Wells Fargo may have thought that, too.

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