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Sales Commission Payouts: You're Doing It Wrong

Aug. 18, 2017 — More than 80% of companies are inaccurate when it comes to their sales commission payouts, 18% don't provide reporting on commission results to sales reps, and 47% take four or more weeks to process incentive compensation payouts.

Plus, according to survey results from Xactly, a cloud-based incentive solution provider, companies that use highly complex compensation plans have a higher rate of sales rep turnover, lower quota attainment and more commission payout errors.

"Incentive compensation is one of an organization's most strategic and powerful weapons," said Christopher Cabrera, Xactly founder and CEO. "However, if managed incorrectly, it can quickly breed mistrust, demotivate reps and stifle performance. These survey findings validate the need that we see in the market to give reps greater visibility into their variable pay. With improved transparency, along with accurate and timely payouts, companies can motivate reps, build trust and keep teams focused on selling."

Respondents to the "2017 Sales Compensation Administration Best Practices" survey said sales compensation represents an average of 9.8% of their company's overall revenue. With this level of commission spend, even a 1% error can materially affect the business and cause mistrust among sales reps. The three biggest problems for administering sales compensation programs that sales reps named are:

  • Limited reporting capabilities (69%)
  • Poor upstream data quality (42%)
  • Highly manual and inefficient processes (30%).

The survey also found that more than one-third of respondents don't use benchmarks or survey data in their plan design process. Without the ability to benchmark pay and performance data, organizations could pay reps below industry levels — increasing the risk of turnover — or pay above industry standards — adding to the cost of sales.

Other key findings:

  • 23% of companies don't communicate plans and quotas until two months after the start of a fiscal year, dramatically lessening a plan's effectiveness.
  • 38% of companies said their analytics and reporting capabilities are insufficient or below average.
  • Companies with high-complexity plans are almost 2.5 times as likely to have payment accuracy rates of less than 80% than companies with low-complexity plans.

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