Companies Fail To Communicate Comp Plans to Sales Managers

By Stephen Miller Jun 10, 2008
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Companies frequently change their sales compensation plans, and yet front-line sales managers are often the last to know, according to WorldatWork's Sales Compensation Practices 2008 study.

The survey of comp practitioners and HR managers found that 76 percent of organizations report revising their sales plans every year as a matter of course, but only 58 percent communicate these changes directly to the front-line sales manager.

“Organizations face increasing challenges recruiting and retaining sales talent, and better communication that motivates the entire sales force could be one solution,” says Jim Stoeckmann, a WorldatWork practice leader focused on sales compensation. “Better training ensures that front-line sales managers are equipped with the information and skills needed to effectively execute the new or revised sales plan.”

According to the survey report, many organizations report doing little to prepare the first-line manager, choosing instead to communicate directly to the sales force (14 percent), taking a decentralized approach (13 percent) or doing nothing (7 percent).

“Given the importance of the role of the first-line manager in the launch of any new sales initiative, the number of organizations taking time to prepare them, and gain their buy-in, is surprisingly low,” says Aaron Bare, CEO of the National Association of Sales Professionals (NASP) and CEO of CareerTours. “Sales teams ought to consider partnering with HR to communicate changes in plan design to make sure that such changes are disseminated in a timely and effective manner.”

The survey, conducted by WorldatWork in collaboration with NASP in January 2008, also indicates that:

  • The most prevalent base/variable pay mix reported for all sales roles in organizations is 80/20 (cited by 18 percent of survey respondents),followed by 70/30 (16 percent) and 60/40 (14 percent).

  • Pay mix varied considerably based on sales roles.The most prevalent pay mix reported for new account sellers was 50/50 (22 percent), with the next two most common pay mixes for this role being 40/60 (16 percent) and 70/30 (14 percent). Field applications engineers, on the other hand, were the most likely to have no pay at risk (14 percent) or 90/10 (19 percent).

  • The top role to lead the design process for the sales comp plan is usually sales management (42.5 percent), followed by compensation specialists (31 percent) and sales operations (10 percent). HR generalists trailed behind in fourth place, with just 5.8 percent taking the lead role in compensation plan design.

A Team Approach

While HR rarely leads in designing the sales compensation plan, its participation on the design team can be vital. "Our survey results continue to reinforce the importance of the design team in the successful launch of sales incentive programs,” Stoeckmann says. “This means a collaborative effort among sales management, human resources and finance. Involving these functions ensures that both the necessary expertise and diverse viewpoints are taken into account in the design process."

A total of 416 respondents participated in the survey; 44 percent of respondents work for organizations with more than $1 billion in sales revenue and more than half (54 percent) work for organizations with 2,500 or more employees.

Compensation for Sales Managers

Nancy McKeon and Steve Grossman of Mercer’s sales effectiveness practice say sales managers need a different compensation structure from sales reps.

-- Watch video clip

Stephen Milleris editor/manager of SHRM Online's Compensation Discipline.

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