Is Your Incentive Compensation Program Aligned for Growth?

Ultimately, the purpose of an incentive compensation plan is to drive sales. What makes a plan successful? Strategic alignment. Or, in other words, getting your salespeople to focus on key areas of growth for your organization. However, Varicent’s latest incentive compensation management (ICM) benchmarking study uncovered that strategic plan alignment appears elusive to many organizations, regardless of size or industry.  

There’s No Growth Without Goals

Let’s state the obvious: revenue growth is directly tied to your sales team. That’s why attracting and retaining sales talent is top of mind for many sales leaders. While current sales employee turnover rates remain in line with historical benchmarks, two-thirds of the study indicated that a company’s ICM program is a primary initiative that it should support. 

 Should is the operative word. Despite it being a priority, only 44% of these companies rated their incentive compensation plans as being effective for retaining talent. There’s a similar gap for talent acquisition, for example, initiatives designed to hire the ideal number of salespeople and other people responsible for revenue growth.  

The Bottom Line: Think Beyond It 

So, how do you attract and retain your sales talent? The natural response is to look at pay, and there’s no denying this comes up a lot in exit interviews. But this isn’t just about the bottom line. Skeptics of exit surveys would argue that pay is a faceless scapegoat, often used to avoid incrimination of a bad manager, or difficult-to-justify perception of limited career growth.  

 Pay increases work when the company has systematic and widespread competitive pay gaps. But what’s stopping a competitor from stepping up and offering your already-well-paid talent even more? Retention bonuses only buy time. It doesn’t fix the root problem when the company is already paying competitively.  


Cultivate Your Growth Plan  

While the ICM benchmarking study indicated that strategic plan alignment is a struggle for many firms, regardless of size, however, smaller companies tend to struggle a little more. Whether the issue pertains to opaque performance goals or unreliable pay data, management in smaller, high-growth companies tend to focus on short-term results at the expense of longer-term initiatives that enable sustainable revenue growth.  

 The talent issue is both strategic and operational. Talent retention requires more than competitive pay, or a quick response to save a disengaged salesperson. People, like companies, need a plan for growth. Growth in their career, income, or time spent on the more engaging parts of their job. Sales management has an important role to play in helping each of their team members with a plan for growth.  

3 Ways to Dial-Up Engagement 

 Understand why your sales talent leaves, and why it stays

This latter question is more helpful in the long term, and more actionable in the short term. What works for one person might not for another. Expect that many of your plans for increased salesperson engagement and retention will be personal and dynamic.  

Develop personal growth plans

Have your sales managers talk to their team to collaborate on each person’s plan for personal growth. Are their income growth goals short- or longer-term? How does a person’s risk tolerance and short-term financial predicament align with their job’s incentive plan structure and variable pay opportunity? What are any non-cash opportunities for recognizing their performance? What are the non-monetary needs for job growth and change?  

Make data-driven predictions

Most companies have a treasure trove of customer and employee data can be analyzed to predict why good salespeople throw in the towel. Making sense of this data can require relatively sophisticated analytical tools, so plan accordingly. 

It’s a competitive job market, notwithstanding current uncertainties for short-term business growth. The continued demand for talent and the shifting attitudes towards job mobility and fulfillment require new and creative ways to mitigate salesperson churn and help ensure revenue growth. Sales compensation is just one of several tools available to management for motivating employee engagement and revenue growth. Revenue leaders need to thoughtfully plan for required changes to better align their incentive plans with the company’s revenue growth initiatives, and employee expectations.  
The right Incentive Compensation Management tool can help find insights in the data, help your team outdo past performance, and drive profitable revenue growth. Make sure you don’t miss all the insights and see our your incentive compensation management program is stacking up against your peers by reading the full ICM benchmark study.