Inserting the Missing Link in Sales Incentive Compensation: Why Comp Changes Aren’t Fixing Sales Force Productivity Concerns

Inserting the Missing Link in Sales Incentive CompensationPosted by Rob Dicks and Sam Tepper on January 25, 2013

We recently had the chance to present some results from our new Deloitte 2013 Strategic Sales Compensation Survey at a Dbriefs webcast (The missing link – How incentive compensation can fail sales organizations). The survey results pointed to a paradox or “missing link” in sales incentive compensation, in that compensation doesn’t driveperformance, a finding that jibed with our informal polls of webcast participants.

The survey found that only about 50 percent of executives say they are satisfied or very satisfied with their sales forces’ productivity (which is close to the average 47.5 percent satisfaction rate observed over the last six years/four surveys from 2006–2012). Less than half of these execs are satisfied with their sales compensation programs. Yet a majority of executives surveyed in the 2013 study think their sales compensation programs drive the “right” behaviors (47 percent say they drive them well, 29 percent are neutral).

So if they aren’t satisfied with their sales forces’ productivity or their compensation programs, but are generally satisfied that they drive the right sales behaviors, what’s the disconnect? Is there a plan “secret sauce” that’s missing?

Some organizations clearly think there is a missing link to their comp programs. In fact, in the 2013 survey, many organizations (61 percent) reported making changes to their programs in the last two years and 31 percent reported they review their plans annually. However, those with more frequent changes do not report higher levels of productivity or satisfaction. In fact, the more frequent the plan changes, the less productive the sales force.

Given the high frequency of change, organizations may not be taking the time to evaluate the effectiveness of their compensation plans before beginning the search for another solution, which will likely not be effective if it hinges on compensation alone. Addressing sales force effectiveness requires a strategic and holistic view that considers a number of factors that inform and help steer the eventual compensation plan. These include external forces like the market landscape, competitive pressures, customer needs and expectations and technology as well as internal factors like sales strategy, channel strategy, marketing and branding.

It also includes understanding how the sellers themselves fit into this picture. This means paying attention to sales force design; the sales coverage plan (number and placement of sales reps); sellers’ role definition (responsibilities, accountabilities, rules of engagement, measures of success); and performance expectations, as well as training, coaching and other development activities. And yes, compensation plans that reward and incent behaviors that lead to profitable growth are also part of this picture—compensation needs to reinforce these strategic decisions; it can’t drive them.

What makes a sales compensation plan more likely to achieve the desired results? A few critical success factors we’ve observed:

  • Garner top-down support—Execution and sustainability of any decision becomes difficult if sales leaders aren’t interested in addressing the problems or don’t agree with recommended solutions. Leaders and managers must buy in to the need for plan updates.
  • Focus on desired results—Define success by role and then define metrics. Once this is done, collect data. Without good data it’s a challenge to identify or confirm problem areas, quantify recommendations and continually follow up and monitor progress.
  • Think comprehensively—Consider all the elements of sales force effectiveness when making changes in any particular area or when looking to make improvements in productivity —no one element stands alone, including compensation!
  • Involve the sales force—Be inclusive in these types of situations. Have the sales force represented on the design team or involved in the interviews. It will make the understanding of the overall issues richer and future buy-in from the field more feasible. Be transparent in execution.
  • Give it time to work—One of the biggest mistakes organizations make is to keep tinkering with the plans, rather than strategically changing them based on sound data and analysis, and then giving them a chance to work. Once changes are made, move on to better enabling the sales force to succeed.
  • Keep it simple—Sales plans should not be overly complex. Sellers become frustrated with complex plans and spend a good deal of time “shadow tracking” to confirm they are getting paid properly, which, of course, erodes trust and lowers morale.
  • Communicate, communicate, communicate—Too often, a tremendous amount of effort is expended on plan or systems design while communication is neglected. It pays to make sure the sales force understands why changes were made, the intricacies of the plans, what new behaviors or results are expected and how success is defined and measured.

Rob Dicks Rob Dicks is a principal in Deloitte Consulting LLP’s Sales Effectiveness practice and the leader of the firm’s Financial Services Human Capital team. He works with organizations to achieve their business goals through the use of innovative human capital and sales force effectiveness programs.
Sam Tepper Sam Tepper is a senior manager in Deloitte Consulting LLP’s Sales Effectiveness practice. He works with organizations to help them transform them and grow revenues by taking data-driven approaches to bring insights in new and interesting ways and impact the bottom line.

As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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