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Design Techniques to Align Sales Compensation with a Talent Retention Strategy
We believe that salespeople can and do make a difference when a customer chooses to buy from a company instead of from its competitors. This is particularly true in B2B (business to business) markets characterized by high product parity. In such markets, the major players offer an equally high level of product quality and customer service. When this is the situation, one advantage a company can leverage is the quality of the relationship between customers and salespeople. This presumes, of course, that the company attracts and retains the right caliber of sales talent to do so. The compensation plan, particularly the incentive component, can play an important role in attracting and retaining the sales talent required for that competitive advantage.
Also, some companies use sales rep retention as a metric to evaluate compensation plan effectiveness. In its 2013 Sales Compensation & Performance Management Report, CSO Insights reported that 43.6% of its survey respondents used such a metric. Our own research and consulting experience indicate that there are at least eight plan design areas that companies consider when striving to align compensation with its sales force retention strategy, as follows:
- Job level
- Salary as an incentive multiplier
- Merit plan treatment
- No performance threshold (i.e., $1 payout)
- Quota tiers
- OA (over-achievement) rates
- Consistency performance bonuses
- Special recognition designation
We have posted an abbreviated slide deck related to these design topics (SlideShare Link). Used in conversations with our clients and hundreds of seminar participants at various conferences and workshops, the slides offer ideas or questions that a Design Team should consider when focusing on how to improve the strength of the relationship between the compensation plan and the company’s sales talent retention strategy.