Don’t Be a Sales Compensation Benchwarmer: 5 Paths to Pitch In

It’s painful to hear an HR/compensation professional confess: “Well, I would like to help with the sales compensation program but the sales department (or the general manager, or the finance function, or the sales operations function) has ownership. We provide market data when asked. But, truthfully, we are the sales compensation benchwarmers — ready to contribute but not invited to play.” Well, it may be time to fix that!

If you are in HR/general employee compensation, you can bring much-needed expertise to the sales pay program. You are likely able to provide market practices, assessments, a policy framework, a design process and analytical tools to help the sales compensation program be more strategic, effective and motivational.

The Traditional Point of View

Let’s contemplate this for a minute. Why doesn’t the sales department — and/or others involved with this aspect of pay — seek your help? Frankly, you may need to see it from their standpoint. Sales management generally considers the sales compensation program as an integral part of the overall performance management ecosystem, which includes sales supervision, customer relationship management (CRM) tracking, sales reporting, territory/account assignment, quotas, sales crediting and commission accounting. Getting “design help” from the HR department and its compensation pros may seem “disconnected” to sales management.

Be assured, though: The sales team does need your help. Sales compensation programs are notoriously short-lived and sometimes wobbly. More than 90% of all companies make changes to their sales compensation program on an annual basis. Not all individual plans change, but many do. Why? The most common reason is a change in performance measure selection and weighting, reflecting a strategic shift in priorities.

The life span of a sales compensation program is between six and eight years. At some point, the program will need a full, top-to-bottom overhaul. Any activity tied to a merger and/or acquisition also will trigger such a review.

Right now, you might be aware of “challenges” with your company’s sales compensation program. This is your chance to help. Below are five techniques to get you “off the bench” to make a welcome and impactful contribution.

Five Scenarios, Five Value-Added Engagement Techniques

Let’s look at five typical scenarios that offer you an opportunity to engage with sales management. You may not face any of these scenarios at the present time, but you could in the future. Each of these suggested engagement techniques features a “partnering” opportunity with the sales department, your client organization. The fifth scenario offers a surprising warning for potential “czars of sales compensation.”

Scenario #1: Missing in Action

You want to help but have no connection with the owners of the sales compensation program. (Others in the profession share your pain.) Absent a mandate from the top, you need to start with a cautious but proven approach.

Suggestion: Offer to conduct a market pay analysis. You likely will need to spend money on industry market surveys. Plot job family data featuring the 10th, 25th, 50th, 75th and 90th percentiles of both market and organizational data on the same chart. Be unbiased. Display conclusions with a center variance chart listing the market comparison (50th percentile) for each job from below market to above market.
Bonus offer: Not to be confused with a job title rationalization effort, offer to group titles into “platform jobs” for sales compensation design purposes. You will need to examine each title, conduct job incumbent interviews and confirm job content with field management. While you might have many titles, you will likely find that you have a limited number of platform jobs. Sales compensation plans are generally the same for all the titles assigned to a platform job.

Scenario #2: Assessment — Beyond Providing Market Data

You provide market data to the sales compensation stakeholders. (That’s a good step.) They trust your data, analysis and findings. It’s time to up your game. Sales compensation programs should have an annual assessment.

Suggestion: Present a program assessment process in anticipation of next fiscal year’s planning cycle. Describe how you will collaborate with sales operations and sales finance to evaluate the incentive plan outcomes, compare payouts to performance, confirm job content and objectives, document known symptoms, and assemble sales manager issues. Provide a summary score for each plan, coded as red, yellow and green. Suggest improvement changes.
Bonus offer: Offer to conduct a “seller time” allocation survey identifying: 1) the split between selling and non-selling time, and 2) the allocation of time among new and existing customers and new and existing products.

Scenario #3: Develop Pay Plan Policies

Progress has been made. Well done. You are off the bench and out in the field. You provide valuable market data and compelling plan assessment insights. It’s time to create design policies. Remember, each year, the sales department considers changes to the sales compensation program for the next fiscal year. This is your chance to craft plan policies.

Suggestion: Use a task force of stakeholders from sales management, sales operations and finance to develop a set of design policies that — based on job content — specifies design practices regarding plan eligibility, target compensation levels, pay mix, leverage (upside), number and types of performance measures, and performance and payout periods. Remember, each platform job gets its own sales compensation plan consistent with these policies.
Bonus offer: Conduct a sales compensation education session for process stakeholders. Show how the company’s new sales compensation policies are consistent with proven design principles. Invite representatives from sales management, sales operations, commission accounting and product management.

Scenario #4: Managing the Annual Design Process

You are now ready for the big leagues. Strolling out to the pitching mound, you are ready to lead the annual sales compensation review and design process. What does that mean? Well, you will be the “project manager” for the redesign effort.

Suggestion: Develop a time-task chart broken into four phases. You will manage these phases of the review. Be ready to play all nine innings.

Conduct a program assessment (you are already doing this based on Scenario #2).
Confirm the sales strategy by meeting with your senior executive steering committee to confirm your understanding of next year’s sales objectives. Use this session to re-validate the company’s sales compensation design policies.
Use a taskforce to design/revise plans for next year.
Recruit communication specialists to help with implementation of the new program.

Bonus offer: If you are a global company with semiautonomous regional business units, offer to share your best practices with all regions.

Scenario #5: Czar Versus Sales Compensation Champion

You are now at the pinnacle of sales compensation proficiency, impact and role. In fact, you are no longer on the team. You are the team manager. Your title might be director or vice president of sales compensation. You have consistently worked with line management to ensure the pay program functions as a strategic, positive and motivational management tool. Your implemented design is financially aligned with cost objectives. Fortunately, you have avoided becoming the sales compensation czar (an isolated, self-proclaimed expert who generally frustrates the ambitions of sales management).

Suggestion: Continue doing the good things you are doing. Meet with stakeholders. Determine needs. Inform your steering committee of upcoming changes. Publish program assessment reports. Use a taskforce each year to review all plans. Be a sales compensation champion and not a sales compensation czar.
Bonus offer: Establish a sales compensation review board consisting of sales management, finance, sales operations and product management to assess sales compensation investments such as sales compensation automation software, quota practices, sales crediting rules and account assignment practices. Use this review board as an escalation path for requested program exceptions. Have this review board request internal audits of potential program leakages.

Benchwarmer No More

You have much to offer. Add sales compensation to your professional competencies. Become proficient in its best practices. Read books and articles. Attend conferences and classes. Raise your hand to contribute to related projects.

All of this is challenging and impactful, and the outcomes of your efforts are likely rewarding.

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