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The 5 Cs of People and Performance in Sales Compensation: Part 2

RS
Wednesday, July 20, 2016
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Sales compensation dashboards are common, but they usually only tell half the story. There are actually two sides to your dashboard that lead to growth: performance metrics and people metrics. In Part 1 of this series, we examined the first two elements—connection and causation—of sales compensation: connection and causation. Now, let’s explore contrast, contribution, and change.  

Contrast – Differentiating Talent 

Analyzing pay mix offers some important data points. Of course, the sales role should determine the pay mix.  

Hunter roles are often 50 percent base and 50 percent incentive; farmer roles are closer to 75 percent base and 25 percent incentive; and support roles can be even shallower at 90 percent base and 10 percent incentive. When you analyze what people are actually earning, you want to make sure their pay mix aligns with the design and that the highest earners are making their pay in upside incentive.  

In addition, those high performers should have the ability to earn significant upside (200+ percent) and there should be a substantial differentiation between top, average, and low performers. If you’re analytics don’t reflect that, ask: What is performance? What is our threshold for incentive pay? Is it too low? What else is delivering pay?  

Contribution – Quota Attainment 

In high performing sales organizations, 50 percent to 70 percent of sales people achieve quota. If your team is significantly above this, it’s possible your quotas are too easy. If more than 50 percent of your organization cannot achieve quota, you may have a quota setting issue, or a larger problem with coverage or sales strategy. 

You also want to see a predictable distribution of quota attainment, without major surprises in either direction (everyone achieving quota or no one achieving). If you have sporadic quota attainment year-over-year, ask why? Is this a quota or performance issue?). 

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Next, review your performance data without quotas. You want to see year-over-year consistency in absolute performance by rep. If performance is consistent but quota attainment is not, ask why? Are quotas set historically? Setting quotas based purely on history can cause problems. According to a recent SalesGlobe study, 47 percent of companies say their number one quota setting challenge that quotas are based on historic data without taking into account market conditions. 

Finally, look at your overall company goal attainment. You want to see improving company results and steady or increasing quota attainment, year-over-year. If your quota attainment doesn’t line up, ask: Why is quota attainment declining? What risk does this create for the company? 

Change – Assessing the Climate 

Change is a necessary part of sales compensation design. Whether it’s a mid-year tweak or a major incentive overhaul, change happens. It’s a different level of difficulty for each sales organization, and analytics can help you determine the best course of action.  

Typically, you can expect the following from your sales organization: 

  • 20 percent will accept the new plan without argument. 
  • 50 percent will wait and see, but will eventually come around. 
  • 30 percent will object to the new plan or try to sabotage it. 

Within that 30 percent of resistors, people fall along a spectrum from passive resistors to active resistors. On the passive side, behaviors include confusion (real or not), hesitancy to act, and lack of urgency. The key to working with passive resistors is to connect and communicate at the field level to understand their resistance points. If ignored, their resistance can become contagious. And then they can become the nastier version: active resistors.  

For active resistors, behavior includes outright opposition and loudly demonstrating why the program will not work. They’ll test leadership’s resolve for change and possibly try to derail the initiative. However, if the management team is determined to make the change and the company has an executive in place who has created a clear mandate for change, using the velvet hammer can smooth the process.

RS
About the Author
Rebecca Sandberg is executive director of consulting services at SalesGlobe and co-author of a chapter on sales compensation ROI in The Compensation Handbook.
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