Editor’s Note: Workspan Daily will be publishing a monthly sales compensation column from the Alexander Group for the benefit of our readers and to encourage further discourse on topics vital to compensation professionals. New to WorldatWork? Please feel free to join the discussion in our Online Community or send your thoughts to firstname.lastname@example.org.
The COVID-19 pandemic played a major role in organizations making sales pay program changes for 2021. This was confirmed by companies across the country in Alexander Group’s “2021 Sales Compensation Trends Survey.”
In fact, research produced several “first-time” occurrences in the 19-year history of the survey.
More than 100 participating companies felt the pandemic’s impact on revenue performance. Although the impact varied with some industry sectors suffering significant revenue declines and others meeting their sales forecast, a surprising few accelerated revenue performance. One of the most notable findings: For the first time in the survey’s 19-year history, 100% of the survey participants plan to make changes to their next fiscal year incentive program.
Companies were disappointed in the performance of the pay program in 2020. For the first time in five years, less than 50% of the participants reported that their sales compensation program was effective in 2020. Only 46% rated their sales compensation plan as effective.
Revenue Performance Skidded
Revenue leaders had anticipated a 6% revenue growth in 2020 at the end of 2019; yet, the actual median revenue growth was only 2%. Revenue performance was 90% of anticipated budget. However, companies are planning for a robust revenue increase of 8% in 2021.
What About Sales Compensation Budgets?
Incentive costs declined -1.5% in 2020. 2021 will see modest budget increases in base pay (3%) and total compensation costs (2%).
What Is Happening to Turnover and Headcount?
Turnover dropped from the traditional 10% turnover rate for sellers to 5% in 2020. Management expects low turnover for 2021, anticipating a 5% turnover. The number of companies planning to trim headcount in 2021 more than doubled from 8.5% planned in 2020 to 17.5% for 2021.
2021 Focus: Grow Revenue From Existing Accounts
67% said senior management is focused on growing revenue from existing customers in 2021.
Partial incentive pay protection was common for 2021 changes. Many companies provided some degree of pay projection for those significantly impacted by COVID-19 market disruptions. Companies made adjustments on a case-by-case basis, sometimes changing quotas and formulas and, in other cases, providing sellers a minimum pay guarantee (less than target incentive) for those highly impacted by COVID-disrupted revenue performance.
Most likely, with the start of the new fiscal year, armed with new quotas and prospects for a more predictable year, sales compensation programs will once again meet revenue leadership’s performance expectations.