The People and Politics of Sales Compensation

This is the first in a two-part series. Read part two here.

We updated this post, not because it’s an election year, but because this year the politics of sales compensation may be trickier than ever—with more at stake.

The people and the politics of sales compensation is about the softer side of sales compensation—who’s behind the scenes collaborating (or not); the steps in the process; how well the process works; how people work together; commonalities between the various functions involved; and solutions for challenges.

The human element touches sales compensation throughout the entire process. It happens during the year, asking sales managers to participate in the plan and convey how it’s working; asking sales operations and human resources (HR) to communicate and evaluate the plan. The human element assembles the compensation design team and establishes the principles for how the team will make decisions: who will crunch the numbers; who will evaluate the finished product and finalize the compensation plan. The human element determines the variety of perspectives included to make sure there is a well-rounded representation from the company. How they interact keeps it interesting.

Here are a few of the usual suspects:

  • The C-Suite.  The C-level is almost always involved to some degree. Very often we see the C-level person, perhaps the CEO, pop his head in the room to ask, “Is this going to cost me the same or less than it did last year?” Other times we’ll have CEOs actually at the table and involved in the process. CEOs have very different levels of involvement in the compensation process, ultimately because CEOs, based on their personal preferences, have different degrees of comfort with sales compensation. This year, one question on every CEO’s mind (and everyone else’s too) is, “How long will the lockdowns and partial lockdowns last, and how will business be affected?” While there are no exact answers right now—and where there are, different answers will apply to different industries and regions—we think it’s worthwhile to appoint someone on the comp design team to keep current on COVID-19 and share analyses, projections, reports, and news of a vaccine with the rest of the team.
  • Sales.  Sales, obviously, is at the table, and they’re always asking for something (more money) often in the form of a bigger accelerator. They may grumble that HR doesn’t understand sales or what sales needs. This year, it’s especially important for sales and HR to communicate and collaborate. The sales role has changed dramatically. Many field sales reps are now working remotely, making presentations virtually instead of in person, and some mistakenly being thought of as “inside sales.” HR should be aware of how the role is changing because the change could impact training needs and hiring standards—and it may require new job descriptions.
  • Sales Operations.  Sales operations sometimes drives the process and other times responds to the process by trying to keep meetings organized and trying to devise a system that makes sense. Depending on where sales operations resides in the organization, these people can have different points of view. Sales ops most typically will be within the sales organization, but sometimes will be within finance or even HR. Where they sit, very often, determines their point of view. As sales organizations reinvent the way they sell during the pandemic, it’s key for them to keep sales ops in the loop. This group may have insights on AI, machine learning, and other technologies that can give a sales organization a real edge at a time when the sales team is undergoing major change.
  • Finance.  Finance is typically at the table, either at the C-level or someone on the project team. They have an interesting negotiating position. This perspective often brings some old clichés about sales: sales is overpaid; they have no value. Finance wants to negotiate: “If we have an accelerator on the plan, what are we going to take away on the downside so we can pay for the accelerator?” If your sales organization is considering lowering thresholds, adjusting quotas, paying for billings vs. bookings, helping vs. selling, or making other changes, the case will need to be made to finance.
  • Human Resources.  Very often HR drives the process; and if they’re not driving the process they are certainly a partner. Their role is to look at what’s happening in the market and make sure everybody is aligned; to try to bring some discipline to the process; and to offer expertise if that doesn’t reside on the team already. Because an HR department has its finger on the pulse of healthcare benefits and recruiting activities, your company’s HR staff may be especially equipped to discuss the way COVID-19 is impacting your industry and what it is realistic to expect in the months ahead.
  • Marketing.  Marketing is not always involved in sales compensation, but sometimes they have an agenda, like sales. In a multiproduct or multiservice organization sometimes marketing tries to get a lever in the plan for each of the different products they represent, which can add complexity to the plan. This year, marketing may be particularly insightful and even creative regarding the organization’s selling strategies in response to COVID-19.

The sales compensation design process brings together many competing points of view and potentially competing priorities. We like to say that it puts the “fun” in “dysfunction.”

Who are the people involved in your sales compensation design? How can they share their expertise, their experience, their concerns, and their innovative ideas as companies nervously plan for an uncertain future?

For more insights and suggestions about sales compensation and how your organizations can work together effectively, read What Your CEO Needs to Know About Sales Compensation.

This post was updated November 5, 2020.