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A team approach is changing the way sales professionals are compensated.
This is according to a Korn Ferry analysis of sales team compensation plans at more than 425 organizations in a wide range of U.S. industries.
The analysis found that this year, 36% of companies report that they take into account corporate-wide performance when determining incentive pay such as bonuses, compared to only 29% doing so last year. In addition, when determining individual incentive pay, the performance of the district/region is taken into account by 20% of the organizations, compared to 14% the prior year.
“The shift in how incentive compensation is calculated reflects a move toward selling solutions – not just products – which involves a team of people and creates a longer sales cycle. This means performance cannot be based solely on how an individual performs,” said Korn Ferry Senior Client Partner Marc Wallace. “While star performers who make an impact will always be rewarded, the embrace of the lone wolf mentality is waning. Sales professionals increasingly need to think team, solutions and company first.”
When it comes to elements analyzed to determine incentive pay, revenue/growth is the most common measure, with 60% of organizations saying they use that metric. That is up from 53% the year prior. 13% say they use discretionary/subjective metrics, which is up from 6% last year. A full 25% said they use other metrics not traditionally used to measure incentive pay. That’s up from 19% the previous year.
Sales teams leaders said the greatest areas of focus are reducing turnover, building global teams, succession planning, and leadership and culture.
“Increasingly, sales team members are being rewarded for a broader view of their market and industry, and there is less of a focus on aggressive sell tactics that may not be in the best interest of the customer,” Wallace said. “Creating a collaborative culture and environment where sales professionals have the ability to grow and learn and be rewarded for teamwork is the best way to enhance retention and ultimately sales.”
The study also looked at key predictors of sales professional retention and compared employees who indicate they plan on staying two years or longer to those who say they will remain on the job less than two years.
- Nearly three-quarters (73%) of employees who say they plan on staying with the company for two years or more say they believe their organization is effectively managed and run well. 51% who plan on staying less than two years agree their organization is run well.
- Nearly two-thirds (64%) of those with longer expected tenure say they are confident they can achieve their career goals while 31% who plan to leave within two years believe they can achieve their career goals.