Some Companies Fail to Communicate Compensation Plans to Their Sales Managers

May 29, 2008—Companies frequently change their sales compensation plans, and yet, front-line sales managers are often the last to know.

In a newly released WorldatWork survey of compensation practitioners and HR managers, 76% of organizations report revising their sales plans every year as a matter of course. However, the same survey found that only 58% of organizations communicate these changes directly to the front-line sales manager.

“Organizations face increasing challenges recruiting and retaining sales talent, and better communication that motivates the entire sales force could be one solution,” said Jim Stoeckmann, a WorldatWork practice leader focused on sales compensation. “Better training ensures that front-line sales managers are equipped with the information and skills needed to effectively execute the new or revised sales plan.”

According to the WorldatWork survey report, many organizations report doing little to prepare the first-line manager, choosing instead to communicate directly to the salesforce (14%), taking a decentralized approach (13%) or doing nothing (7%). “Given the importance of the role of the first-line manager in the launch of any new sales initiative, the number of organizations taking time to prepare them, and gain their buy-in, is surprisingly low,” said Aaron Bare, CEO of the National Association of Sales Professionals (NASP) and CEO of CareerTours. “Sales teams ought to consider partnering with HR to communicate changes in plan design to make sure that such changes are disseminated in a timely and effective manner.”

The findings of the Sales Compensation Practices 2008 survey report were discussed last week during the Sales Compensation Forum at the annual WorldatWork Total Rewards Conference and Exhibition in Philadelphia. The survey was conducted by WorldatWork in collaboration with NASP in January 2008. The survey gathered information about some of the key elements of sales incentive plans, such as plan design, trends in plan changes, plan launch and communication, and plan governance.

Key survey findings:

• The most prevalent base/variable pay mix reported for all sales roles in organizations is 80/20 (18%), followed by 70/30 (16%) and 60/40 (14%).
• Pay mix varied considerably based on sales roles. The most prevalent pay mix reported for new account sellers was 50/50 (22%), with the next two most common pay mixes for this role being 40/60 (16%) and 70/30 (14%). Field applications engineers, on the other hand, were the most likely to have no pay at risk (14%) or 90/10 (19%).
• The top three roles to lead the design process for the sales comp plan are sales management (42.5%), compensation specialists (31%) and sales operations (10%). HR generalists came in fourth with 5.8%.

"Our survey results continue to reinforce the importance of the design team in the successful launch of sales incentive programs,” Stoeckmann said. “This means a collaborative effort among sales management, human resources and finance. Involving these functions ensures that both the necessary expertise and diverse viewpoints are taken into account in the design process."

A total of 416 respondents participated in the survey; 44% of respondents work for organizations with more than $1 billion in sales revenue and more than half (54%) work for organizations with 2,500 or more employees.