Sales compensation is a mission critical pay program helping to drive sales performance. It’s in integral part of the revenue team’s management process. However, it’s also a human resources program, part of the compensation package given to employees. Marketing people also have a keen interest in sales compensation as it directs sellers to achieve product objectives. It is also a costly expense for the company, frequently of high interest to finance. Not surprising, the general manager of the division also wants to ensure the sales compensation program aligns with business strategies.
Who own sales compensation? The 2017 Sales Compensation Trends Survey provides insight into this question. More than 120 companies provided responses to governance and accountability questions. The responses provide a helpful overview of contemporary practices regarding sales compensation management. However, notice in the responses below, most “ownership” questions never identify a dominant owner—a greater than 50 percent response rate.
Sales Compensation Program Ownership
Many companies (40 percent) assign ownership of the sales compensation plan to sales management/sales operations. The division leader (CEO, COO, president or general manager) is the second most cited owner of the sales compensation plan.
Sales Compensation Redesign Efforts
Most companies redesign their sales compensation program on an annual basis. Often, the changes are minor while other companies undertake a major redesign effort.
Once again, sales management/sales operations (40 percent) undertakes responsibility for the redesign effort.
Our preference is for companies to use a “sales compensation design task force” (28 percent) to review the sales compensation program. Such a taskforce approach can bring together the diverse objectives of sales, HR, marketing and finance.
Confirming the importance of the sales compensation program, 48.8 percent of the companies require the leader’s (CEO, COO, president or general manager) approval.
Sales compensation provides alignment between seller efforts and business objectives. Senior leaders want final approval authority to ensure this alignment.
What about day-to-day program management? Almost 50 percent (48.8 percent) of the companies assign this task to sales operations (see the following chart).
Questions from field managers and plan participants regarding plan application often arise daily. And, sales compensation programs often have many tracking and reporting issues regarding quotas, sales crediting, adjustments and revisions. Sales operations is ideally suited to monitor and manage the program on a day-to-day basis.
Finance (32.8 percent) or sales operations (31.2 percent) are the typical administrators of sales compensation: calculations, record keeping and reporting.
Who Own Sales Compensation?
While the data from the 2017 Sales Compensation Trends Survey does not provide conclusive ownership answers, the trends suggest the following:
- Ownership: sales management/sales operations
- Redesign: sales management/sales operations
- Final Approval: CEO, COO, president, general manager
- Program Management: sales operations
- Program Administration: finance/sales operations
About the 2017 Sales Compensation Trends Survey
More than 120 companies participated in the survey, which was conducted in November and December of 2016 and published in January 2017.