Sales Compensation Costs to Increase 3 Percent in 2014
In the Alexander Group’s recently published 2014 Sales Compensation Trends Survey, most companies plan a 3 percent (median response) increase in compensation costs for 2014.
2014 Incentive Budget
2014 Average Change in Base Pay
2014 Increase in Total Earnings for Primary Sales Job
102 sales departments participated in the 12th annual 2014 Sales Compensation Trends Survey. Participants provided data in December 2013 on what occurred in 2013 and what they plan for 2014.
The following are additional noteworthy observations from the survey:
Sales Volume. Sales departments increased sales volume 6 percent in 2012. Although this was the same increase for 2012, it was below the anticipated 8.4 percent planned for 2013. Meanwhile, sales leaders expect sales revenue growth of 8 percent in 2014.
Staffing Changes. About 55 percent of the companies plan to increase staffing. The other half will either keep staffing levels constant or reduce staff. The staffing expectations for 2014 are the same as were the staffing expectations for 2013 made at the end of 2012. Turnover remains constant at 10 percent—both projected and actual.
Plan Changes. Each year, more than 90 percent of the companies make changes to the sales compensation plans. This is consistent with ensuring measurement and reward alignment with each company’s business objectives. About 10 percent to 15 percent make major revisions to their sales compensation plans each year.
Performance Measures. Most sales compensation plans have three or fewer measures with revenue performance as the key metric. An MBO incentive element is not a common practice.
Quota Outcomes. In 2013, companies reported the median quota performance was 95 percent with 49 percent reaching quota. Most companies prefer to have the average quota exceed 100 percent of objective with 60 percent to 70 percent of sales personnel exceeding quota.
Incentive Payments. Only 35.5 percent of the companies paid (matched) their incentive budget in 2013. 25.9 percent were above the budget and 38.7 percent paid below their budget. This is a common occurrence indicating that “coming-in on budget” is a difficult objective for sales compensation programs.
2009 to 2014 Sales Revenue Trends
2013 sales growth was 6 percent. Survey participants are projecting a positive 8 percent growth for 2014. Since 2011, survey participants have overestimated revenue growth (projected as compared to actual) between 1.5 percent and 2.4 percent. This disparity was 2.4 percent for 2013.
2009 to 2014 Sales Compensation Payouts
Survey participants plan to increase sales compensation spending by 3 percent (median) in 2014. Sales departments overspent their planned sales compensation budget increase of 3 percent for 2013 by 2 percent for a total spend of 5 percent.