Shawn P. Rossi, Principal, Mercer Sales Performance Practice Leader, @mercerinsights
While sales compensation is not the end all be all for driving sales effectiveness, it is a critical lever that most companies try to optimize. We recently conducted some research to test this claim and approximately 100 sales leaders agreed by putting sales compensation in the top three drivers of sales productivity (see the chart below).
Interestingly, our research also shows about one third of companies do not feel their compensation plans are effective. This is surprising and indicates there is significant opportunity for improvement in the marketplace. That said, how does someone identify what should be improved? Or, to walk before you run, make a value judgment for the effectiveness of the sales compensation plans?
I like to say effectiveness, like beauty, is in the eye of the beholder. What I mean by this is plans should be seen as effective based upon the strategy and goals of the organization. For many organizations it comes down to one word: GROWTH. For others, it is making certain sales compensation spend is a certain percent of revenue or ensuring top performers are making premium pay that is well differentiated from average performers. The list can go on, but the important thing is to know the list and how the items on the list are ranked in terms of priority.
Once you establish this point of view, then the data can tell you how effective your plans are functioning. Running the data through compensation effectiveness analytics will provide the visibility as well as insight required to understand how well your plans are functioning. There are some common analytics which are very valuable, but coupling them with custom view/”cuts” as well as business and/or industry specific analytics will shed even more light on what is working vs. not working and ripe for change.
Please join us for a webinar (May 30th) to further this discussion. This practical, high impact presentation will provide attendees with key practices for how to understand the effectiveness of their sales compensation plans and where to look as they seek to make improvements.
About the author: Mr. Rossi has over eighteen years experience working with software, hardware, telecommunications, banking, insurance, and medical device companies to improve sales and marketing effectiveness. He has developed leading edge, innovative frameworks for the definition and implementation of sales performance management solutions that drive maximum sales results. You can contact him at: shawn (dot) rossi @ merer (dot) com