About half of surveyed U.S. employers (51 percent) intended to revise their sales compensation plans in 2011, according to a WorldatWork survey, Sales Compensation Programs and Practices.
From July 12 to Aug. 6, 2010, WorldatWork surveyed its members—predominantly HR, compensation and benefits professionals working in large U.S. companies. The top reasons respondents gave for planned sales compensation changes in 2011 are:
1. Improve alignment between sales incentive pay and business strategy (stated by 83 percent).
2. Place more emphasis on sales profitability (41 percent).
3. Place more emphasis on business development, winning new business and selling new products (36 percent).
The study found that while 51 percent of companies planned to revise sales compensation plans in 2011, less than half (48 percent) had documented guidelines governing the process, manner and frequency in which sales compensation plans are reviewed and revised.
For the first time since the survey’s inception in 2005, a majority (55 percent) of organizations reported making no changes to their sales compensation plans in 2010, most notably companies in banking/finance (62 percent) and pharmaceuticals (64 percent).
“The turbulent economic environment of the last couple of years has challenged sales teams across the board. In 2010, organizations kept changes to their sales compensation plans to a minimum, focusing instead on the basics of getting their forecasts right and setting smart goals for their sales force,” said Jim Stoeckmann, CCP, sales compensation practice leader for WorldatWork. “In 2011, with a sluggish economy in the forecast, organizations are going to rethink their business strategy and will want to realign incentive pay with it,” he added.
Among other key points highlighted in the survey:
• Types of sales roles. Nearly eight of 10 organizations used “hybrid” sales roles— those that include responsibility for new business and existing accounts. Less than half of organizations reported using specialized sales roles that separate responsibility for managing existing accounts and new accounts.
• Pay mix. The 60/40 and 70/30 pay mix ranges continued to be the most popular since the survey began in 2005.
• Performance measures. Total revenue was the most prevalent performance measure for all sales roles except new account sellers, which was more likely to use new account revenue. Gross margin and sales milestones were the next most common performance measures. While most organizations reported using three or fewer performance measures, smaller organizations (fewer than 999 employees) were far more likely to use only one performance measure than larger organizations.
• Approval authority. Among key stakeholders, the CEO had ultimate approval authority for changes to the sales compensation plan at nearly half (46 percent) of surveyed organizations. The top HR executive had ultimate approval authority in only 2 percent of organizations surveyed.
A video discussion about the survey can be viewed here.
Stephen Miller is an online editor/manager for SHRM.
May the Sales Force Be with You, HR Magazine, September 2010
Experts: Design Commission Plans Carefully to Avoid Litigation, SHRM Online Legal Issues, August 2010
Sales Pay Mix Varies by Position, SHRM Online Compensation Discipline, October 2009
Compensation Is Not the Only Tool in Your Sales Toolbox, SHRM Online Compensation Discipline, May 2009
Small to Mid-Size Businesses Shift Sales Comp Strategies, SHRM Online Compensation Discipline, April 2009
For Sales Personnel, Incentive Targets Lead to Bigger Bonuses, SHRM Online Compensation Discipline, October 2008
Complex Compensation, Global Operations Challenge Sales Force Performance, SHRM Online Compensation Discipline, July 2008
Companies Fail to Communicate Comp Plans to Sales Managers, SHRM Online Compensation Discipline, June 2008
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