Brexit Provides Lessons for Business Continuity in Sales Compensation

Brexit, Britain’s formal separation from the European Union, is causing a lot of uncertainty and speculation that company costs will rise due to increased compliance regulations, new tariffs and labour pool shortages. This has created a business environment where austerity and cost cutting has become a top priority. While many of these challenges aren’t exclusive to Brexit, it provides a good opportunity to “poke holes” in your total rewards strategy. This article will look at the best ways to attract, retain and motivate talent during business disruption.

First, one of the biggest dilemmas of all: If money is tight, how can you keep your best talent, especially if other global companies have more attractive compensation packages? How can you continue to attract top talent in a competitive market? Consider the following strategies.Â

1. Connect your compensation plan to the upstream disciplines of your business. When was the last time you aligned your compensation to the sales strategy? If you have reorganized your team, or the roles and responsibilities have evolved, there’s an impact on the compensation plan? For example, Brexit is influencing the macro-environment of European companies and those companies who do business with them. These changes will affect sales strategies and sales roles. If your sales strategy and sales roles are changing, the compensation plan should be evaluated in order to attract and retain top talent. Make any adjustments necessary in the sales strategy and sales roles and responsibilities before you modify the sales compensation plan. While good sales incentive plans can help retain talent, they still have to drive the correct behaviors.

2. Analyze your total target compensation and pay mix. Once your strategy and sales roles are aligned with the compensation plan, it’s time to focus on paying the high performers enough to stay loyal to your company, while simultaneously managing the cost of sales (always a C-level priority).  First ensure your total target compensation is in line with the market. For companies that find themselves in a non-competitive market, rather than raise base pay — which is a fixed cost — understand your tolerance to increase the incentive pay for each role. Also, make sure the pay mix is correct for the behavior you will drive. An aggressive pay mix is one that has a high incentive to base pay ratio (for example, 50/50). This is appropriate for sales reps out hunting for new business. The more pay at risk, the more sales-oriented a role becomes. The less pay at risk, the more the role is account-management.

3. Implement a strong upside to the plan. Upside is described as the incentive that is available to the highest performers once total target incentive and quota have been achieved. The more pay at risk, the more upside should be available for the highest performers. In order to manage the cost of sales and still reward high performance, the best course of action is to pay a lower rate for low performance, and richly reward the best performers, sometimes referred to as the Reverse Robin Hood Principle.

4. Implement performance thresholds. A threshold is the point at which a plan begins to pay incentive. It assumes a minimal level of sales performance must be achieved before the plan begins to pay. Thresholds are a good way to develop self-funding incentive plans; just make sure the thresholds are achievable.

Although Brexit is just one example of business disruption and its potential effect on the sales compensation plan, we can be alert for any necessary changes to the sales strategy or sales roles and the impact they have on a compensation plan. Develop an action plan and implement design changes to mitigate identified risks and manage costs, while motivating and retaining your best talent.

This article orginally appeared on WorldatWork.