Rethinking Sales Compensation Strategies

Sales compensation practices changed overnight with the pandemic, but the systems used to support the objectives stayed the same for a majority of companies, according to a survey of more than 200 CEOs.

Across most industries, Covid’s blow to the bottom line was sudden and unexpected, and considering B2B companies have reported spending as high as 25 percent of their annual revenue on sales compensation, maximizing the rate of return on these investments was a critical component to navigating the negative effects of the pandemic on business.

Yet, according to a survey of 231 U.S. business leaders conducted by Chief Executive Group and OpenSymmetry in March 2021, 57 percent reported making little to no change to their sales compensation strategy through the crisis.

The data, indeed, shows CEOs of private companies are confident that their sales compensation systems can withstand disruption to the degree encountered with the pandemic: overall, 62 percent reported being “very confident” their current sales compensation program is aligned to their go-to-market strategy—with an additional 32 percent saying they are “confident.”

That is a high proportion considering the about-face most organizations had to make in light of the pandemic restrictions imposed on sales teams. And while anecdotal evidence shows minimal chances of U.S. businesses sticking to a fully virtual sales environment once pandemic-related restrictions are lifted, many companies have come to realize significant savings by instituting new ways of doing business, and sales compensation systems and strategies would benefit from being revised accordingly.

Only 12 percent of the CEOs participating in our study said they will revert back to their original sales compensation strategy once the pandemic has been contained. This suggests companies have an unprecedented opportunity to reexamine and improve on their pre-pandemic strategies to streamline the business well into the future.

Some considerations to improve alignment between sales compensation plans and the new ways of operating include ensuring the company has the flexibility to review and make changes to plans and systems as they deem fit. Solutions that enable business users, rather than the IT department, to make adjustments within a few weeks rather than months, give businesses the ability to adapt more quickly in a crisis.

Furthermore, for sales compensation programs to be effective at motivating the workforce, employees need to understand how the plan works. Communication and transparency into the plan are always critical, but they become even more important when changes are being made. Why are the changes being made? How long will they last? How will that affect each employee’s compensation? The use of real-time dashboards, utilization and ranking reports, and what-if tools for instance enable a sales representative to see the path to the outcome they want to achieve.

Having the right compensation system can provide much-needed visibility into the adjustment being made and its impact on both personal and team levels. In turn, this will help foster engagement and higher motivation levels while enabling sales teams to feel empowered to hit their goals and drive growth.

In a paper produced in collaboration with OpenSymmetry, we lay out a series of other considerations for CEOs and their leadership teams as they reexamine the alignment of their sales compensation programs to the new post-Covid model.

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On August 3, we will also be hosting a webinar on this issue, featuring a case study with UScellular, to discuss how the company implemented radical approaches to its sales plans/quotas to reduce the impact of the pandemic and ensure business continuity. Join us!

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