David Cichelli Blog

How to Pay the ‘Big Four’ Sales Jobs

Posted on August 21, 2014 under Blog

Last month, we launched a survey focused on the pay practices for the Big Four sales jobs. Do you ever wonder how other sales leaders pay their primary selling roles? You are not alone. In fact, 185 companies from a wide range of industries completed the survey. The survey reveals the hard-to-know-information regarding how companies configure their sales compensation plans. For example: How many measures? Are plans capped? What about thresholds? In addition to plan design, participants answered questions on base pay administration, quota management and sales crediting practices. Some of the results were expected, but some were surprising.

What are the Big Four? The Big Four sales roles, as the term implies, are the chief roles in the sales organization. These roles represent approximately 60 percent of all sales personnel. They are:

  • Strategic account manager
  • Key account manager
  • Territory representative
  • Channel/partner manager

Most surprising – uniformity of design. Frankly, we were expecting noticeable plan design differences among the four jobs. This was not the case. Almost all design choices feature the same preferred practice and, interestingly, almost the same prevalence of practice score. We consider design features selected by 50 percent or more of all respondents as prevalent practice. Several primary design features met this criteria, across all four of the sales jobs:

  • sales revenue as the primary measure
  • no use of MBOs
  • no caps
  • the use of clawbacks for lost business

Thus, the survey findings indicate these design features are not only common, but also highly prevalent across industries for these roles.

Somewhat surprising: thresholds. The use (or non-use) of thresholds also rose to the level of prevalent practice (more than 50 percent of respondents), but the answer was split between role types:

  • the use of thresholds for key and strategic account managers
  • no use of thresholds for territory and channel/partner manager roles

The use of thresholds for key and strategic account managers is actually not that surprising. These roles are responsible for existing accounts with run-rate business. Designed correctly, thresholds focus incentive dollars on incremental growth in existing accounts. Thresholds are not appropriate for hunting roles or roles with higher churn, which is more frequently the case with territory representatives. The most surprising? Low use of thresholds for channel/partner manager roles. These roles frequently manage run-rate business sold primarily by channel partners.

Other common practices. The participants also identified several designs as common practices across all four of the Big Four sales jobs, in other words, these designs represent the top most popular answer, but chosen by less than 50 percent of the participants.

  • Two performance measures in the plan, except for the channel/partner manager, which uses only one measure
  • The preferred calculation method is bonus formula
  • The pay mix is 60/40 except for the channel/partner manager, which is 70/30
  • The companies pay all four jobs monthly against an annual plan

How do the incentive plans for your primary sales roles compare? Perhaps more importantly, are they working? Are they effectively supporting the business and sales objectives of the company?