Best Practices to Consider for Sales Compensation Administration
In most organizations, the sales compensation planning and administration process are typically managed by three groups: Sales Operations, Finance, or Human Resources. According to one survey, Sales Operations has a bigger stake in sales compensation management when compared to the Finance or Human Resources departments.
It is normal for compensation plan ownership to be based on how the company views it as a function or process. Finance owners may tend to see it as a function of control. Finance may also own administration. There is a common belief that Sales Operation may not be able to remain objective and provide consistent control if it is too close to Sales.
Another practice is to determine where the company is in its lifecycle. If we look at startups or early-stage companies, sales operations are the function that primarily owns compensation plans. However, companies in industries that are highly regulated have Human Resources as the function that holds major control on the sales compensation process.
Additionally, it has been observed that a majority of organizations, close to 88 percent, use excel as a tool to support their compensation process from planning, designing, forecasting, and quota selling. The use of benchmarks and survey data was also common in the process of planning and designing.
When it comes to best practices in sales compensation, the process involves multiple steps with oversight from a primary team. The process is initiated by setting up the company strategy and defining the sales strategy that is in line with the company’s objectives. While people have begun to socialize their pay more, the pressure on companies has been increased for them to let their competition know more of what is being offered.
Companies that aim to make the most in sales compensation will focus on three areas:
1. A sales compensation plan review with a specific focus on the complexity of the plan.
2. The creation of a cross-functional design team, including Sales, Sales Ops, Finance, HR, and IT that meets on a regular basis throughout the year to monitor plan effectiveness via metrics and discuss future plan design changes.
3. Investing in technology to enable the planning process and to automate as much as possible in the administration process. Additionally, take an end-to-end look at your compensation administration process maturity and reporting and analytics strategy.
The spend on sales compensation and the desired ROI presents an opportunity to take advantage of.
If you want to know more about best practices for the sales compensation process, click the link below for more information.
