Strategic Sales Comp

Adapting to a New Normal: Sales Compensation

This is unchartered water for all of us – both personally and professionally. We’ve been spending a lot of time thinking through the implications of COVID 19 on 2020 sales comp and goals.

One thing is certain: there will be a slowdown in sales productivity for the foreseeable future.

As a leader, your team is looking to you for reassurance and support. In our last blog, we shared some advice to CROs about leading during uncertain times. But what does this crisis mean for your sales compensation plans?

Comp and goals are two of the most critical levers at your command in driving sales behaviors. They take on even greater importance in times of crisis.

Here are a few key actions to consider:

  • Think Long Term: There will be costs associated with a decrease in productivity. This includes hard costs, opportunity costs, and soft costs. But there will also be many intangible impacts on things like sales organization morale. Leadership must think beyond the financial statements to consider the larger implications of any drastic cost cutting. For instance, layoffs aren’t likely the right answer given the effect on your incumbent reps and customer relationships. This too shall pass, and when it does, you will need a well-equipped and highly motivated sales team ready to quickly execute. There is no ‘write off’ for a demoralized sales team.

  • Shift Time Frame: Consider moving quotas from annual to discrete quarters. Many companies are coming to grips that Q1 and likely Q2 will be ‘write offs’. Actual performance against target will fall short for reasons outside of the rep’s control. Accept this reality and let the sales team start with a clean slate when the market bounces back.

  • Consider SHORT TERM “Tweaks” to the Compensation Plan: If you have a threshold, consider lowering it. If your pay curve pays less than 1:1 for underperformance, consider increasing the ratio. If your plan is highly leveraged, consider a shift in pay mix for more guaranteed. These short-term increases in cost-of-sales may outweigh the long-term impact of an understaffed and/or disgruntled sales team.

  • Set up a SWAT team: Now is time to create a cross-functional team to address how to handle compensation and goal-related decisions. The focus might include short-term plan changes, one-off bonuses, goal relief, and pipeline adjustments. There should be one team, clearly empowered and equipped to carry out any and all changes. Team effectiveness and dynamics are key. Make sure the members are collaborative, focused, and aligned around guardrails.

  • Over-communicate: Keep your sales team informed of everything you are doing to manage this quickly changing situation. Demonstrate you are there to support them, even in the face of shifting directions and fluid demands. The sales organization should clearly know the main, top-down communications channels to pay attention to. Other leaders and functions up-and-down the line must be consistent as they cascade and reinforce the messages.
  • Consider Relief: The SWAT team can work together to determine the parameters and circumstances where lower goals makes sense. We do NOT recommend a ‘peanut butter spread’ reduction in targets. Instead, consider relief on a case-by-case and highly targeted basis. Remember, there are some sales reps that are benefitting from this environment (certain medical product reps and certainly toilet paper reps!).

  • Step Up Recognition: While it’s counter intuitive to provide additional money when top and bottom-line goals are missed, small SPIFFs or add-on incentives can boost morale. The right program can strengthen the overall culture and maintain the team spirit. Again, when the markets bounce back, you want your top performers ready to go.

It’s clear we’re in a very fluid situation and changes keep coming fast. You’re stressed, but so are your field managers and reps. Done right, sales compensation programs can play an important stabilizing force.

Remember, we’re here to help in any way we can.  We’re happy to take even a quick call to talk through ideas, brainstorm solutions, and discuss other strategies we’re seeing out there. Whether a current or future client, our goal is your success.

We look forward to hearing from you – stay safe.

 

About The Author

Author photo Carrie is an experienced consultant specializing in sales analytics, organizational design, and sales process optimization. She is the co-author of The Sales Compensation Handbook as well as numerous sales research studies.

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