Protecting Your Sales Reps and Incentive Comp During Disruptions

The recent wildfires in California caused widespread devastation, particularly in suburban and rural regions of the Los Angeles area (e.g., Malibu, Palisades, Altadena, Santa Clarita and parts of the Angeles National Forest). These fires, fueled by intense winds and dry conditions, destroyed more than 40,000 acres of land, including residential properties, commercial buildings and critical infrastructure. The economic disruption has been significant, with local businesses facing closures, damage to supply chains and a halt in tourism. In addition to direct property losses, the fires led to a loss of productivity, as tens of thousands of residents were displaced, forced to evacuate or left without power.

The longer-term impact on the real estate market, local services and recovery costs is expected to stretch for months, likely years, as the community works to rebuild and recover.

When disruptive natural disasters like this occur in localized areas, sales organizations often ask what guardrails or actions can be taken to protect field variable pay/incentive compensation (IC), considering access to customers will be significantly limited. Additionally, organizations should consider the nature of the disaster when approaching mitigation methodologies.

General Recommendations for IC Impact

Regardless of the type of disaster and its impact, a few general actions may help an organization and its business continuity efforts.

Focus on Well-Being First

For any disaster, first focus on well-being — both for customers and sales representatives. Emphasize and encourage reps to show empathy toward customers versus focusing on sales growth since not only is it the right thing to do but it can also help create long-term relationships and trust that will pay off over time. Ensure affected reps feel supported; remind them of organization offerings in these situations (e.g., hotel accommodations, emotional support hotlines, etc.) and proactively communicate incentives will not be adversely impacted. This messaging can relieve emotional stress in a time of crisis.

Determine the Impact on Sales

Evaluate the impact on sales by trending prior-period sales and comparing that with the impacted period sales for the affected area to quantify the degree of adjustment that may be required (also consider national performance). If the impact is localized and short in duration, sales may still appear at adjacent locations within the territory, resulting in minimal impact. However, for a widespread event that requires months of recovery, sales may decline or shift to adjacent territories, resulting in a loss in incentive earnings. Sales teams with smaller territories will likely feel the impact more since the event may affect the majority of their sales volume.

Adjust Earnings Appropriately

If the impact is deemed substantial enough for a correction, consider adjusting sales/earnings to account for the loss. The following adjustments approaches are commonly seen in the industry:

Trending sales to predict the territory performance in absence of the disaster, leveraging the prior three to 12 months of sales and factoring in national performance.
Providing a floor on earnings at 75% to 100% of target pay for the impact period (in the event of a highly disruptive disaster, providing pay when it’s needed is likely greatly valued).
Utilizing guidance from the Federal Emergency Management Agency (FEMA) or data providers on the geographies impacted and the level of impact (a combination of external guidance and internal analytics is often helpful).
Paying based on the average national or regional performance.

Differences in Disruption and IC Approach

Over a period of years, most sales organizations have likely established practices to manage natural disasters that have short-term impact (e.g., winter storms, tropical storms and hurricanes), and many of these practices can apply for wildfires as well. However, the wildfires in Southern California were more disruptive than recent wildfires, and it is important to evaluate if organizations need to consider these wildfires differently than established methods.

The disruption caused by wildfires and hurricanes can have different impacts on the sales process, and organizations should tailor event response to their specific characteristics. Both types of natural disasters create challenges, but the nature, timing and scope of those challenges vary.

Timing and Duration

A key difference between hurricanes and wildfires is the time of year when they happen and how long they last. This can impact the ability to be proactive in addressing such events, as well as the mechanism organizations can use to counter their effects on incentives.

Hurricanes. Hurricanes are typically more predictable, with warnings issued days or even weeks in advance. The disruption is often temporary and may be followed by rapid recovery (a few exceptions like Hurricane Katrina exist). After a hurricane, infrastructure may be severely impacted, but recovery can happen quickly once the storm passes.
Wildfires. Wildfires are relatively much less predictable. While they typically occur in dry seasons with high wind, they can start at any moment, giving individuals only minutes to evacuate. Additionally, fires can spread rapidly and in areas of population, causing long-term community displacement. The duration of disruption can be much longer, especially if a fire is uncontrolled. Recovery after wildfires may take months or years due to environmental damage, loss of homes and community disruption.

Geographic Scope

The extent of the impact on economic disruption is often directly correlated with the geographic span. There are exceptions, of course — a hurricane impacting Manhattan will have a greater impact than one that hits the coastal Carolinas, despite the disparity in size. Different disasters can have varying geographic scope.

Hurricanes. Hurricanes generally affect a specific coastal or inland region, and the impact tends to be more contained geographically.
Wildfires. Wildfires can affect vast, often remote areas. While the immediate destruction might be localized, the power outages, smoke and air quality can affect a much broader area, including large cities far from the fire itself. This can make it difficult to gauge the full impact immediately.

Adjusting Sales Incentives

Given these differences, consider adjusting sales incentives based on the impact level of the disaster and the expected timeline of recovery.

Considerations for Short/Localized Disasters

With a localized disaster that lasts for a limited time, the focus is on making changes quickly (and often proactively in the plan design) and focusing on bringing the process back to normal as soon as possible.

Short-term adjustment. Due to the more predictable nature of hurricanes, the sales team might need to focus on adjusting their short-term goals. Incentives could be temporarily altered to account for productivity loss during the immediate aftermath (e.g., the first one to two weeks). Often for short-term disasters, sales may bounce back within a few weeks and adjustments may not be needed at all.
Recovery focus. Post-hurricane, sales incentives could shift to focus on quick recovery and renewal of business. Sales reps could be incentivized to prioritize customers in hurricane-affected regions, with a focus on reviving the business and share of voice in the affected area.

Considerations for Large/Disruptive Disasters

For larger disasters (such as the ongoing wildfires in Southern California), a different approach may be needed due to greater impact and a longer road to recovery.

Long-term focus. Since these events may disrupt operations for longer periods, organizations may want to factor a more extended timeline for sales incentives. In these situations, consider providing 100% target pay so reps have money when they need it most and can focus on longer-term recovery rather than immediate sales.
Changes in sales patterns. Organizations may also need to understand any data trend shifts around impacted geographies (e.g., they may now see higher footfall in geographies where hospitals that were less impacted). Account for this in rep effort prioritization and incentives planning. For example, if the footfall increases in accounts outside the impacted geography, the rep from the impacted geography may need to collaborate with reps from neighboring geographies to drive impact and customer engagement. This may give way to a need for collaboration in terms of a component/team or area-level joint IC goal.
Emotional intelligence. During and after wildfires, a sales team’s approach may need to be more empathetic and supportive. The IC team can adjust incentives and offer guarantees so the sales team can focus on behaviors that go beyond closing sales, such as helping affected customers with special accommodations, contributing to local relief efforts or promoting products that are relevant to the recovery process.

Levers Beyond Incentives

Given the long-term impact and large area impacted by these recent wildfires, organizations may need to engage levers outside of IC. Examples of steps an organization can take include:

Provide temporary financial aid to reps directly impacted (situations where their homes may be lost, or family members may need medical or financial aid).
Evaluate the territory’s long-term viability and make changes to the sales team alignment to account for the changes in demand origination.
Evaluate supply-chain and other logistical constraints that impact the area, and develop alternative strategies for the reps and customers to acquire the product.

Focus on Relationships and Support

In summary, while the conventional approach toward natural disasters such as hurricanes may serve well for other events such as wildfires, a large-scale disaster such as the current California wildfires may require a customer-centric approach.

With conventional disasters such as hurricanes, short-term adjustments, rapid recovery incentives, contingency bonuses related to resilience and a focus on affected geographic areas may be prudent. However, with larger disasters, longer-term recovery focus, incentives for emotional intelligence, and empathy in customer interactions and adjustments for regions impacted by power outages, smoke and environmental damage should be prioritized, and solutions beyond incentives should be considered.

In both cases, the sales and incentive process needs to be flexible, with a strong emphasis on customer relationships and long-term support during recovery periods.

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