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Perception is Reality with Salesforce Incentive Compensation
Arun Shastri, ZS Associates
Chad Albrecht, ZS Associates

Common misperceptions that circulate among salesforces include such notions as: “big territories can’t grow,” “there are not enough sales opportunities left,” and “marketing does not understand customer-level realities.” Left unaddressed, these perceptions can be accepted as reality and in turn may drive dissatisfaction with the sales incentive plan, quotas, and – in extreme cases – the job. It is imperative that sales and HR leaders verify the extent and veracity of perceptions, communicate to the salesforce what the realities are, and provide transparency around the decision-making process so that they can rectify the issues that need clarification and quell those that are distortions.

Three of the more common perceptions with respect to salesforce incentive compensation are:

• “If I exceed my quota this year, management will set an unachievable quota for me next year.” This is actually the reality for many companies. Sometimes it is done intentionally — sales management is counting on the best reps and territories to ensure quota are met. More often than not it is unintentional, incorporating a quota-setting process that is inherently unfair, such as expecting everyone to grow by the same percentage regardless of their individual current sales volume or market share. The quota-setting methodology must be reviewed each cycle to ensure that it is fair and not unduly overloading top performers. 
• “We are paid below market levels.” Target base and variable pay should be determined based on industry benchmarks and company philosophy. Transparency in communication of these decision drivers is essential. What companies were used as benchmarks? What drove the decision to pay at “x” percentile levels? Where are excellent to average performance ratios set. How these questions are answered plays an important role in retention of the best performers as well as attracting talent to the sales organization.
• “Quotas are unfair.” Few – if any – sales representatives are happy with their quota, and most feel theirs is unreasonable. Fairness of the quotas must be tested before being communicated to the salesforce. We often recommend that front-line sales managers work directly with their sales representatives to plan activities against targeted customers so that goals are realistic and achievable.

Whether these or other common perceptions are actually true is beside the point – if the salesforce thinks they are true, that is the reality that must be confronted. To do that, HR professionals should lead the way in auditing the sales incentive plan. As part of the audit, perceptions can be tested against data. Also, conducting interviews or focus groups with the salesforce can be a useful exercise, especially if it is communicated that concerns have been heard and are being addressed. If certain perceptions are true and corrective action is planned, let the salesforce know of the company’s intentions to fix them. If there are false perceptions, initiate a communication to the field that shows the results of the research and refutes the myths. Verification, communication and transparency: these are the keys to earning the trust of the salesforce and getting the most from a sales compensation plan.

Arun Shastri is Managing Principal of the ZS Associates office in Boston. He heads the firm’s B2B incentive compensation practice and has significant experience in marketing and salesforce strategy, having worked with clients in the financial services, pharmaceutical and health care industries, among others. His experience prior to joining ZS Associates includes lecturing at the Kellogg School of Management, Northwestern University and the Mathematics Department at Virginia Tech University.

Chad Albrecht is an Associate Principal with ZS Associates. Over the past decade, Albrecht has consulted with clients across a diverse range of industries to create and implement motivational sales incentive plans, set fair and challenging sales goals, and implement incentive administration systems.

ZS Associates is a global management consulting firm specializing in sales and marketing consulting, capability building, and outsourcing with more than 1,000 professionals in 17 offices around the world. For more information on ZS Associates, call 847-492-3602 or visit www.zsassociates.com.

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