David Cichelli Blog: Aug 2013

2013 Sales Compensation Practices Survey to Reveal Program Management Trends

Posted on August 27, 2013 under Blog

The 2013 Sales Compensation Practices Survey will provide a contemporary snapshot of how companies manage and improve their sales rewards program.

This year’s survey probes the following key topics:

  • Governance and Accountability-Who is in charge?
  • Mid-Year Changes-How stable is your 2013 program?
  • Risk Assessment and Plan Effectiveness-How do you assess risk and effectiveness?
  • Automation and Administration-How many dedicated FTEs?
  • Contests/Spifs, Referrals, Long-Term Incentives-How much are they worth?
  • Program Communications-How do you communicate plan changes?
  • Sales Costs and Sales Confidence-What is the cost of sales?

Early findings from more than 70 major sales entities describe some interesting practices:

  • Governance and Accountability. More than 45 percent of the companies indicate that sales management/sales operations are responsible for the annual sales compensation program re-design effort. 25 percent report that a multi-function task force oversees the annual design process. 22 percent report that HR/compensation spearheads this effort. As our previous surveys have confirmed, there is no definitive owner of the annual re-design process; however, our experience suggests that a task force of sales, marketing, finance and HR stakeholders often produces a better, more effective and balanced outcome.
  • Mid-Year Changes. One method to test the “health” of a sales compensation program is to examine the extent of mid-year changes in plan designs. For 2013, 55 percent of the initial responders to the survey have made no changes to their sales compensation plan designs. We consider that result typical. Sales compensation plans (and quotas and territories) often need to “breathe” as market conditions change.
  • Risk Assessment and Plan Effectiveness. Less than one-half of the reporting companies (47 percent) have a formal risk assessment process and report for their sales compensation program. We advise our clients to invest in a comprehensive annual risk assessment to ensure legal compliance, accurate crediting and program guideline adherence. Sales compensation programs are expensive, have many opportunities for policy misapplication and harbor unforeseen legal land mines.
  • Automation and Administration. 45 percent of the reporting companies continue to use desktop applications, such as Excel and Access, to administer their sales compensation programs. We recommend that sales compensation programs be administered using commercial-grade applications from either ERP vendors or dedicated solution providers. Sales management can track, adjust, model and audit sales compensation programs with such dedicated software solutions.
  • Contests/Spifs. 51 percent of the survey participants provide one to five contests/spifs per year. One-third offer no contests or spifs. We believe that the moderate use of contests (one to five per year) provides sales management with extra tools to help focus sales efforts, particularly outside the normal sales compensation program. They are ideally suited to launch new products or drive special, unanticipated campaigns.
  • Program Communications. More than 83 percent of the companies require a signed acknowledgement (hard copy or electronic) of the sales compensation program. Signed acknowledgements, as part of the program communication, ensure sales personnel are fully informed of their program design and features. Both California and New York require signed acknowledgements of the sales compensation program.
  • Sales Costs and Sales Confidence. Two-thirds of the survey respondents will increase overall sales expenses by less than 5 percent in 2014. This is a conservative number reflecting the lingering uncertainty of the economic recovery. While cost cutting is down, additional investments are modest.