Sales Research Publications

Closing the Pay/Performance Gap

Executive Summary

In 2007, CSO Insights received more inquiries about quota setting and territory assignment than in all prior years. Questions surrounding compensation design and implementation also came up repeatedly. The competing interests of incenting increased productivity and reducing overall cost of sales seemed to ignite a new level of curiosity and anxiety. These queries suggested a deeper dive into the area of sales compensation was in order and led us to conduct our first ever sales compensation survey. The flip side of the pay-performance coin, of course, is performance. How is sales performance measured and compensated? And how should it be? This report summarizes the findings of our inaugural Sales Compensation & Performance Management analysis.

This paper explores in more detail the following findings in the study:

• 62% of responding companies target sales compensation at more than $100,000 (base plus variable)
• These compensation plans are highly leveraged with the majority of firms reporting >40% variable pay
• Only 14% of companies reporting feel their compensation plans consistently drive desired rep behaviors
• Two-thirds of firms in our SPO study report easily/accurately calculating commissions is not a problem
• Revising compensation programs ranks eighth in sales effectiveness initiatives for 2008
• Many companies are not using incentive management strategically to impact top and bottom line results
• Incentive management as an enhancement to CRM will be considered by fewer than one in five firms, though it is a vital component to closing the gap in sales optimization.

A gap clearly exists between what companies want from their sales reps and what they reward. Desired behaviors include:

• accurately forecasting business that will close;
• cross-selling and up-selling;
• farming existing accounts;
• introducing new products;
• achieving higher margins/lower discounts, etc.

You know the list, and you also know that many of these things are not happening in your organization at the level you desire. We start must reinventing how we deal with the issues of incentive compensation management and sales performance management. The remainder of this report discusses why these key disconnects occur and how this expectation/results gap can be closed in sales organizations.

$295.00