Most U.S. Companies Expect to Revise Sales Comp in 2011

By Stephen Miller Nov 12, 2010

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).

Lacking Guidelines

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.

Additional Findings

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.

Related Articles:

Related Multimedia:

SHRM Video, Compensation for Sales Managers

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