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Best Practices for Building a Successful Global Sales Compensation Function

istocksdaily / iStock

There are nuances to various local markets around the world to take into account, but multinational organizations must first standardize their global sales strategy to achieve the highest level of success.

In its day one session at WorldatWork’s Spotlight on Sales Comp Conference and Exhibition in Chicago, Axtria, a global provider of cloud software and data analytics, emphasized the importance of building out the right global sales compensation function to enable successful strategy in local markets.

Daniel Stewart, director, commercial excellence at Axtria, said the level of detail and prescriptiveness a company needs to deploy depends on their own sales team composition.

“One axis to that frame is your go-to-market strategy and how similar it is in these local markets. If it’s really similar and these sales roles are doing the same types of things, then that puts you on the high end,” Stewart said. “Operational environment is the other axis and it’s based on cultural nuances, regulatory local laws, data constraints and availability. You want to look at how similar or different that is across your organization.”

In the session, Axtria provided some reasons why organizations are centralizing their sales compensation function globally.

  • Global Strategy and Guidance: It establishes global sales compensation objectives in alignment with franchise and regional sales strategies and provides guidance and oversight globally.  
  • Cost and Time Savings: It leads to increased purchasing power and lower cost of ownership. It creates more efficient operating models with increased time in local markets to focus on strategy.  
  • Leverage Best Practices: It allows them to regularly update the institutional knowledge base while facilitating the sharing of best practices across markets. It also increases plan design effectiveness and fairness.
  • Excellence of Execution: They are able to leverage enterprise-grade sales compensation processing capabilities to improve accuracy and reduce risk and overpayments.
  • Global Monitoring System: They can holistically measure sales force performance across markets, and it harmonizes reporting and tracking of sales compensation strategy.

“There were a lot of learnings that if strategy was cross-deployed it would have helped those markets come out with a different performance,” said Vineet Rathi, principal, commercial excellence at Axtria. “People are realizing the value in building this cross-pollinated strategy and operations while still accounting for local market differences.”

Abhijit Paul, director of sales operations and strategy at Axtria, added to the point by referencing a common business axiom of “think globally, act locally.”

“While providing best practices from a global perspective is very important, getting input from local and regional teams helps in a few things,” Paul said. “One is in terms of the adoption of the sales compensation plan and program and ensuring the right kinds of behaviors are being driven. What the challenge tends to be is how [to] balance out the global versus local components? We’ve seen that working across different customers, it leads into different KPIs.”

What organizations must be cognizant of, along with regulatory differences across markets, is different motivating factors for salespeople in different markets, which could change the incentive plan design. Rathi noted that while it’s typically standard to payout incentives on a monthly or quarterly frequency in the United States and Europe, in other cultures the prospect of a large yearly payout is often more of a motivating factor.

“Underlying KPI might be the same, but depending on brand maturity, competitive landscape, we’ve seen differences on how companies structure various pay incentives and ancillary components,” Rathi said. “Companies need to understand those differences and nuances and put those into their design framework.”  

Determining Success

For any commercial organization, at the end of the day success is going to be measured by key revenue or profit-generated numbers. Driving sales, market share and customer acquisition and retention are synonymous across markets.

However, Stewart noted, KPIs within sales compensation is where cultural differences or nuances tend to show up from market to market at a global sales organization. Most organizations will have established guiding principles, but the prioritization of those and how they get measured will depend based on those local cultural nuances and sales compensation philosophy in those markets, he said.

A common differentiation in measuring success across markets is that of a team versus individual standard, Stewart explained. Another is meaningful engagement rate, which measures what percentage of the sales team is getting meaningful pay from the sales compensation plan. There are companies in the U.S. where that might be relevant, Stewart said, but there are global markets where it’s far more important.

Establishing the importance of these metrics across the sales organization ahead of rolling out a global sales compensation strategy is critical, Stewart said.

“When you’re thinking of your sales compensation globally and how well it’s working as a functional shared service, you’re looking at things like reduction of administrative burden on local markets, so leaders can focus on strategy and execution,” Stewart said. “Total cost of ownership or these performance management platforms that help coordinate sales operations and show salespeople their performance — those are measures of success and when you expand your view globally, think about overall sales compensation from a global organization.”

About the Author

 Brett Christie is the managing editor of Workspan Daily.

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