With 2016 upon us, odds are that you have introduced a new sales compensation plan. Reportedly, 80 percent of companies make a change, minor or major, to their sales compensation plan annually. A new client recently shared with us that their last compensation plan was viewed by Human Resources “…as far adrift.” They were concerned as it also paid out incentive earnings viewed as excessive and unanticipated.

To avoid a similar concerning situation, here are three key performance indicators, with helpful questions, along with a qualitative tool to assist you in your sales compensation planning efforts.

Incentive Leverage

Analyze the ratio of the average earnings of the top 10 percent of your salesforce compared to the bottom 10 percent. The ratio should tell you something about the type of selling. The less impact and influence the sales role has on the selling process, the smaller the ratio should be. Two questions to ask are:

  • How does the ratio compare to historical pay data?
  • To what extent do sales support and technicians participate in the selling process? Is this support available evenly across the entire salesforce?

Motivation

Compare the actual distribution of performance across the entire salesforce with the expected performance distribution.  It is valuable to conduct this type of analysis midway into the year.

Sales leadership is responsible for the achievement of corporate sales goals and objectives.  Yet it is understood that not all members of the salesforce will meet their individual targets.  You may question, for example, whether your targets are being set appropriately if far too many salesforce members exceed expectations.  According to recent Korn Ferry / Hay Group findings, only 5 percent of sales people achieved the maximum amount of incentive earnings.

Pay Mix for Different Roles 

Financial budgets and operating schedules are designed around expected levels of performance and pay mix. With all the merger and acquisition activity that occurred in 2015 and with 2016 expecting similar activity, sales role clarity and internal logic may need to be examined closely.

When you take into account that the pay mix will vary by role, e.g., sales representative vs. national accounts manager, then the actual mix should reflect the impact the role specifically plays in the selling process.

  • Is the appropriate market data being used to establish or confirm the proper competitive pay mix for the various sales roles?

Salesforce Survey  

An online survey conducted with both the salesforce and headquarters’ management can yield useful information by trying to measure factors that have an influence on the effectiveness of the company’s total sales effort.  Topics such as sales targets, marketing and advertising activities, sales manager’s role, time allocation, competitiveness of the sales compensation program are among the topics that should be included in the survey.
Survey results will give a broader and more holistic understanding of the incentive plan’s environment.  Also, in a number of past surveys conducted for clients, a wide (and surprising) disparity was evidenced between the salesforce’s views and those of headquarters’ management. This disparity indicated other factors needed attention in order to get the desired “bang for your incentive buck.”
 

Contact Us

We welcome your feedback on our Salesforce Alert eNewsletters and would like to talk with you further regarding your salesforce experience and input. Please feel free to contact Tim Weizer at (312) 479-6411 or tim@salescne.com or Neil Lappley at (847) 864-8979 or nlappley@lappley.com.
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