Sales Compensation Plans: Can Finance help create your plan?

Looking to create a compensation strategy that looks beyond top-line sales to truly motivate your sales team? There’s someone else you need to invite into the room. Here’s why it pays to make friends with finance when it comes to assessing—and rewarding—sales performance.

How “Pay for Performance” has changed

“Pay for Performance” used to be simple, and it all boiled down to one single question. Did the sales team hit their numbers? If so, you could reward them accordingly.

These days, though, there are a lot more factors at play when it comes to calculating compensation for your salespeople. Top-line sales are just one measure—and in today’s more complex world, metrics like profitability, customer satisfaction and repeat business are increasingly important. And how do you bring elements like team selling and cross-selling into the mix?

That’s where finance can help. Finance teams are becoming adept at navigating today’s ever-changing business landscape, and exploring ways to keep costs and sales steady. They’re well placed to help you formulate a sophisticated incentive plan for your sales team.

Sales vs. Finance

The relationship between sales and finance is not always easy. How many times have you seen finance concoct a beautiful strategy that holds sales costs, revenue and profitability in a delicate balance, only for an unexpected sales outcome to throw everything into disarray?

Traditionally, compensation has been calculated on the basis of orders or revenue; finance, however, would much prefer to take margins into account. Reporting is another bone of contention. Finance favors “self service” reporting and analytics, which keeps costs low. Salespeople? Not so much. They resent the additional administrative duties that take them away from what they find most valuable: face time with customers.

Starting the conversation

Sales and finance have not always seen eye to eye, but we recommend giving them a seat at the table when you’re developing a sales compensation plan. Finance has a wealth of expertise when it comes to analytics, reporting and compliance—all key elements of any plan you put together. Why not make finance part of the solution?

Technology has a part to play here, too. When you invite finance into the process, you’re bringing two separate business units together to manage and model a sophisticated new incentives plan—potentially creating even more complexity. The latest technology solutions can help you work together effectively, enhancing the speed and transparency of your systems to ease the path towards seamless collaboration.

A way forward

What, then, does the future look like for compensation plans? Just as “Pay for Performance” has gone beyond mere top-line figures to encompass a range of metrics, we predict that sales compensation as a business process is expanding too. It’s no longer enough to have a system that simply pays salespeople accurately and on time. Instead, we see a variety of processes that can do a lot more:

  • Align sales behaviour to wider corporate goals and strategies.
  • Have the agility to correct mid-course.
  • Deliver reporting and analysis that enables sales managers to make data-driven decisions.
  • Create trust in the commissions process so that salespeople spend more time with customers and less time shadow accounting.
  • And, of course, continue to pay salespeople accurately and on time.

Creating these processes might well involve finance and human resources, as well as sales. With the right technology in your corner, you’re all set to transform the way you incentivize your sales team.