Salary Shakeup Needed?
Incentive-based sales compensation packages may not be driving optimal sales figures, according to a new report released this week by the human capital practice at Deloitte & Touche.
Fifty-six percent of 130 companies surveyed see room for improvement in their sales compensation plans. In fact, 79 percent of companies have made six or more changes to their plan in the past two years. Despite these frequent changes, the majority of companies polled is still dissatisfied with company comp plans, and report that sales productivity goals are not being reached.
The survey shows that companies frequently change their sales compensation plans, but these changes fail to address the underlying business strategies that could really drive sales and deliver productivity, which will ultimately help companies achieve balanced pay-for-performance compensation.
"Too often companies fall into the trap of thinking that sales underperformance is primarily a compensation issue. Many companies fail to do the hard, but strategic work of segmenting customers to identify those offering the greatest value to the company," Larry Montan, a partner in Deloitte & Touche's human capital practice, said in a statement about the survey.
"Even companies that have segmented customers frequently have not organized their sales force and compensation programs to drive behavior that supports strategic objectives, such as selling into new channels, pushing new products, or targeting the most attractive customers," Montan said. "Instead, basic compensation programs continue to reward sales reps for selling any products, rather than those that are a tougher sell, but more strategically important to the future of the company."
The survey indicates a backlash to the numerous changes companies make to their comp plans, namely that the confusion the changes create within the sales force leads to decreased productivity.
Based of the survey's findings Deloitte & Touche offers companies the following recommendations to improve their sales organizations' performance:
Maintain and reinforce tight linkages between sales performance and compensation;
Ensure that the plan supports the company's strategic goals, aligns with customer segments, and differentiates top and middle performers;
Simplify the compensation plan and its administration to help bring order to the increasingly complex selling environments by using new technology and software products that are available.