As a search consultant I have the unique opportunity to talk with many executives across a number of industries and in companies of all sizes.  I gather a bunch of information each year about the shifts in compensation, benefits, fringes and perks.  One of the hardest positions to accurately compensate is sales.  Inside sales, outside sales, major accounts – across the board these positions cause company leaders much anxiety.

I’ve noticed some pretty significant trends emerging in the sales compensation area, and thought I’d take some time to share:

  1. Commissions are smaller and more immediate The millennial generation is a hard working bunch, but they don’t have a long attention span.  I’m seeing companies pay “spiffs” on activity or mini milestones, rather than only on the closed deal.  This is a good idea for a couple of reasons: as a company you are spreading your cash outlay over a longer period of time and, as an employee you are being rewarded for the activities that lead to the close – not just the close.  This may result in a better selling professional and better discipline long term.
  2. Base salaries are increasing in some sectorsThe total package numbers are staying the same, but base salaries are going up.  There are a couple of external influences that are causing this to happen.  First, you’ll need to hire a person with the right level of experience to gain access at the executive level in your target companies.  A C-level executive at a mid or large corporation isn’t going to take a meeting with (nor respect the words of) someone that could be their son or daughter.  The experience it takes to “hang” in the executive suite requires some “greyish hair.”  Secondly, the housing collapse and resulting changes in what it takes to get a mortgage mean that you may not be able qualify for a home loan on a commission based compensation package.  I’ve seen $40k bases salaries shift to $80k base salaries for this reason alone.
  3. Floating packages I’ve seen a couple of innovative companies use floating compensation based performance.  For instance, if your sales exceeded your quota last quarter, your base salary increases for the coming quarter.  You can keep that salary as long as you exceed your quota.  However, if you have a bad quarter, your salary will go down for the subsequent quarter.  The incentive to continue to produce at a high level is definitely in play here.  We don’t mess with the commission, only the base.  Think about it!
  4. Pick your comp package I’m a fan of this approach.  Start with the OTE.  Offer 3 packages – 1. 30/70 base/commission. 2. 50/50 base/commission. 3. 70/30 base/commission.  Everyone selects a package coming in – and may change to a lower base option once in the first year.  They can change again the following year, but only to a lower base, never the other way.  This puts the responsibility for ramp-up in the hands of your team, and simplifies the structure altogether.  No more guaranteed draw during ramp-up!

One final note – remember to stay in touch with your market when designing your compensation packages.  The selling process is changing, as a result your compensation packages need to change.  As always, incent the behavior you want to see in your team!

Happy New Year!

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