Sales Compensation Blog

Is your compensation program too expensive? Your CEO probably thinks so. Have you allocated too little for incentive pay? Your reps probably think so. You feel like you can't win! It is a delicate balancing act, but it is possible to add a little ‘science' to the process.

It starts with understanding your company's overarching compensation philosophy. Your philosophy will depend on how you hire and grow your employees. For example, your company may want you to pay top dollar to hire the best and be in the 90th percentile of pay. Others may want to fall directly in the center of the range - i.e. 50th percentile of pay.

Next, you need to find reputable sources for compensation data. Getting details on sales compensation is harder than general compensation. There is a plethora of firms offering statistics on compensation data but you really need to read the fine print to be sure it covers sales. They range in price from $500 - $6000 per year.

The most important things to look for are:
• What industries are included?
• What job roles (read the descriptions)?
• Do they have statistics on sales compensation? At a minimum, you should be able to get target total compensation and the salary/incentive mix.
• Can you segment the information by geography and company size?
• How fresh is the information? Do they only update once a year? Or is it ongoing?

Best practices recommend you pick 2-3 sources because the level of quality across all job roles can vary even within one source. Here are a handful of favorites for High Tech. All cover sales roles in sufficient depth:

	Industry	Stats	Segmentation	Frequency of Updates/Survey Size
Culpepper Sales Compensation Survey www.culpepper.com $495/year-$1825/year	Software, IT Services, Medical Devices	TTC, Mix, Draw, Pay as % of Sales, Revenue per rep and more	Industry, Company size, Geography, and Quota Level	Ongoing, 750+ companies, 50,000+ incumbents
Radford Sales Survey www.radford.com First year report free with participation $300-$700/year	Aerospace, Electornics, Software, Other High Tech	TTC, MIX, Pay as % of Sales, Revenue per rep and more	Industry, peer group, revenue, geography	Twice yearly, 475+ companies, 110,000 incumbents
Western Management Group- High Tech Sales Survey www.wmgnet.com $1450-$7950	Software, IT Services, Telecom, Medical Devices, Other High Tech	TTC, Mix, Pay Frequency	Product code, Company, Size, Geography	Annually, 84 companies, 100,000 incumbents

 

With the economy in the current state some companies are looking at changing the Target Total Compensation (TTC). TTC is the amount the company plans to pay the sales rep at 100% performance, precisely making every goal. This is also referred to as On Target Earnings (OTE). Each year I recommend an evaluation of your company TTC compared to your industry and geography. This is valuable information and helps you understand where you are in the marketplace competing for the valuable sales resources you need.

Recently jobs have been either flat or up slightly year over year. This year it appears the TTC is going down for some jobs.

Are you planning on reducing your TTC next year? Reducing TTC is like a pay cut and can have negative effects on the motivation of your sales force. If you reduce the TTC, how will you keep the sales force motivated while taking away real earning capability?

Will you reduce the quotas or goals to reflect the reality of the economy? Remember when developing a good sales compensation plan you want a team of winners, so the goals may need to be adjusted downward so that even in this economy at least 50% of your reps are at quota or above.

Have you thought about increasing the upside, handsomely rewarding the reps who exceed their quota in this economy? An enhanced upside potential may be just what you need to soften the blow of lower TTC.

Teanna Spence
Compensation Director
Makana Solutions