Nearly half of sales executives (44%) said their ability to implement compensation plans to drive selling behavior needs improvement, according to CSO Insights‘ 2010 Sales Performance Optimization study. However, a nearly equal number of respondents (43%) said their ability to deploy compensation plans to drive selling behavior ”meets” expectations, the study said. About 8% said their compensation plans “exceeded” expectations.
What’s more, those companies reporting “Meets” or “Exceeds” expectations also reported higher rep achievement in selected performance measures, such as quota attainment (54% and 62% , respectively) and the ability to cross-sell and up-sell (52% and 66%, respectively).
The survey, which was released in February, took the pulse of 2,800-plus sales executives, including VPs of sales and senior sales executives.
The study found a linear correlation between increased pay and increases in desired behavior. For example, 42% of respondents said the ability of a compensation plan to drive rep behavior needed improvement among sales reps earning between $50,000 and $100,000 in commission; but only 7% said comp plans needed improvement for sales reps earning more than $200,000 in commission.
However, the study stressed that while directly tying sales reps’ compensation to desired behaviors and being willing to adequately compensate those behaviors can translate into higher level sales performance, that is different from compensating for desired results; that begs the question about whether paying for behaviors versus results is appropriate.
“If a rep does everything you ask of him and he falls short of sales goals, should he receive full compensation? Or, if a rep is more free-wheeling and does not adhere to desired behaviors, but exceeds her sales goals, should she be punished? The answer in each case is not necessarily,” said Jim Dickie, managing partner of CSO Insights.
He added: “But you must also recognize that the questions themselves are faulty because they assume the two approaches are mutually exclusive. A more balanced and nuanced approach would be to ask if some component of variable/incentive comp could be paid for exhibiting desired behaviors (e.g., following the sales process in a consistent and transparent way).”
CSO Insights surveys thousands of sales executives each year, with comprehensive database of sales effectiveness metrics and trends. The company publishes four major research reports on these surveys annually, as well as hundreds of smaller reports designed to help organizations formulate sales and marketing strategies.