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Sales Compensation Reset: Best Revenue Recovery Solutions

In some cases, the collapse in revenue during the COVID-19 crisis was breathtaking.

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Select industries, such as travel, entertainment, restaurants and retail, felt the full brunt of the stay-at-home order. Other industries were sideswiped too; normal orders for commercial and industrial goods and services were curtailed. Falling sales meant less revenue for sellers to book for sales compensation credit. Some organizations had to take draconian measures, including seller layoffs and terminations. Others less affected, hunkered down with partial pay protection programs for the salesforce.

However, the reopening of the economy is going to provide great selling opportunities for those with the right products, the right pricing and the right salesforce. Sales compensation needs to help accelerate these emerging revenue prospects.

Pay Protection: What Companies Did
Two Alexander Group surveys on sales compensation/quotas (conducted March 30 and April 20) revealed that more than 80% of companies were implementing pay protection methods to replace some or all lost target incentives for sellers. The most popular methods included pay guarantees (percent of target earnings), quota adjustments and formula changes.

Some companies did a combination of these three techniques. The intent of these pay protection techniques is to replace a portion of the target incentive. But the challenge had nuances: Not all sellers were affected the same. Some solutions required a case-by-case assessment of the crisis’ impact on sellers’ earning potential. Management provided adjustments accordingly. One final observation suggests that sales management did not replace the full 100% of the target earnings, but instead some portion of this amount.

Time to Reset
During the slowdown, sales departments have been active with customers using digital gatherings, demos and one-on-one virtual customer meetings. In some cases, business continues to transact at historical levels, but in many cases, buying decisions were “put on hold.”

Now is the time to reset for the rest of the fiscal year. Sellers need to reactivate suspended opportunities and find new revenue. Select a date such as July 1: It marks the beginning of the third quarter for companies with a calendar fiscal year. Use this date as a leadership opportunity to fully reengage the salesforce and their selling efforts for the remainder of 2020. Give it a theme: 2020 Second Half Sales Success Program.

Develop a complete return-to-market sales strategy, including special pricing, buy early incentives, well-crafted value propositions, inspirational/aspirational sales leadership messages and updated incentive plans.

What About the Sales Rewards Program?
First things first: Discontinue all pay protection programs. They create a psychological crutch. The sooner you are past augmenting incentive pay the better.

Instead, use these revenue incentive solutions to accelerate sales revenue:

  • Action 1: Redo the quotas. Prior to July 1, sales leadership and finance will have a better grasp of expected revenue for the rest of the year. Redo the quota process used for setting the 2020 quotas. Take into account the new revenue purchasing patterns of customers. Some won’t be back for a while. Others will keep reordering and others will increase purchasing. Don’t baby the salesforce — give them stretch goals.
  • Action 2: Clean up territory clutter. At the same time you are redoing the quotas, reconfigure the territories to reflect the new going-forward buying realities of the customer base. You might need to rationalize and combine some territories. You may find that you have excessive headcount. Now is the time to correctly size the sales department job-by-job, person-by-person.
  • Action 3: Tune up payout formulas. The current payout formulas, including thresholds, incentive rates, accelerators and caps, should be brought back to the sales compensation planning group to ensure these features are still valid and applicable. If not, redo them. Make sure you conduct rigorous scenario cost modeling.
  • Action 4: Provide quick-start incentives. As an add-on, use a combination of contests and spiffs to generate excitement, motivation and engagement. Use an umbrella theme, but have lots of winning categories: total growth, win-back champions, best pipeline, new logo warriors and cross-sell success sellers. Use various categories to talk about what’s important. Keep the quick-start program short (a max of three months). Have at least 50% of all eligible sellers earning something under the quick-start program. Provide both cash and non-cash awards. As with any campaign, promote, promote, promote.
  • Action 5: Start 2021 planning. Most sales leaders make annual changes to the sales compensation program. Start this effort in August. Put together a task force to review all sales compensation plans for alignment, competitiveness and effectiveness. August is not too soon to start the pay program refresh effort for 2021.

Get Started Now
July 1 is arriving soon. Your sales team wants to succeed, so give them something to rally around. Give them strong leadership, commitment to revenue growth and provide rewards that reflect their post-pandemic sales success.

About the Author

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David Cichelli is a revenue growth advisor for the Alexander Group. Connect with him on LinkedIn.


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