Not yet a Member?
HR Magazine is highlighting the next generation of HR leaders.
Is your employee handbook ready for the New Year? With SHRM’s Employee Handbook Builder get peace of mind that your handbook is up-to-date.
30+ HR education programs, including 4 NEW programs on hot topics, are available for registration.
Join us in Chicago for the latest trends and technology in talent management, and what to expect in the future.
Complex plans can demotivate, turn off top performers
The economic environment is driving sales compensation plans toward higher payouts for overachievers and increasing the role of incentives in the pay mix, according to a new study.
Sales Compensation Programs and Practices, draws from a survey conducted in July and August by WorldatWork, a nonprofit association of total rewards professionals, and consultancy OpenSymmetry. Responses were received from 246 WorldatWork members, mostly from large North American companies, earlier this year.
Clear and Focused Metrics
The survey revealed that 71 percent of responding organizations use three or fewer performance measures in their sales compensation plans, such as total revenue and key sales objectives or milestones showing across-the-board importance for all of the salesforce.
"As best-in-class sales teams push for more aggressive goal-setting and higher rewards, simplicity in the sales plan design is key to tracking performance and shaping sales behavior in a more focused and impactful way," said David Blume, senior vice president of sales and marketing at OpenSymmetry. "Highly complex sales compensation plans with too many performance measures can demotivate sales teams and contribute to rainmakers scattering their efforts amongst too many targets or just jumping ship, period. Furthermore, having a few key performance measures allows sales compensation plans to remain agile enough to change quickly in response to shifting corporate goals, industry tide and regulations."
[SHRM members-only HR forms:
Commission Incentive Plan and Payout Schedule]
Get Managers Onboard
According to half of the respondents, providing training and communicating with sales managers to gain their support is critical for a successful sales compensation program.
In situations where sales managers or sales reps didn't understand or support the comp program, respondents were likely to deem their sales compensation programs unsuccessful.
"The news these days is highlighting the importance of communicating clear expectations and having a strong culture of accountability in sales compensation, and with that, goals need to be set at a level where they're challenging but attainable," said Kerry Chou, CCP, senior practice leader at WorldatWork. "Effective communication is at the core of the top critical success factors in this survey, whether through selecting the appropriate mix of professionals for the design team who understand the expectations and culture of accountability, having an effective goal-setting process, getting that buy-in from management or providing consistent messaging from management."
When a sales compensation plan has an unsuccessful launch or execution, "it shouldn't surprise us that some of those same communication factors are revealed as lacking."
Among other survey findings:
Related SHRM Articles:
Keeping Sales Compensation on the Rails,
SHRM Online Compensation, June 2015
Applying Analytics to Sales Incentive Plan Design,
SHRM Online Compensation, January 2015
Boosting the Effectiveness of Sales Compensation,
SHRM Online Compensation, February 2013
Was this article useful? SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more.
Join/Renew Now and let SHRM help you work smarter.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Choose from dozens of free webcasts on the most timely HR topics.
SHRM’s HR Vendor Directory contains over 3,200 companies