Every year CSO Insights publishes the largest study of sales compensation and trends in the US. The report is 37 pages long. We can learn a lot from it. Below are some of the key points on firms under $50 million:
- Quotas remained consistent from 2012 averaging $1.2 million per rep
- Quota attainment remains at 56%
- Compensation plans have shifted to rewarding high performers will less payout to the lower producers
Wow what a dismal number: a little bit more than half of the Sales Force makes their quota. And that is despite quotas not being increased.
2 + 2 No longer equals 4
CSO Insights points out that a great deal has changed in sales. Everything from CRM, IT, management, Gamification, etc. and while…
- Sales Management has gone from 1.0 – “Hit your number or we’ll find someone who can.” To…
- Sales Management 2.0 “Create a positive culture, i.e. love is the killer app
No matter because the report also tells us that BEHAVIORS HAVEN’T CHANGED.
Yeah I guess I could have figured that out since only 56% of people are hitting their number
Screwed Up Compensation Plan Explains A Lot
Hitting the number remains the top priority of all compensation plan. That’s a good thing. That is the reason a Sales Force Exists. However other metrics are used to judge the effectiveness of a compensation plan. Below they are listed in order.
Tell me – what conclusions can you draw from these priorities? Are they good priorities? Are they ranked correctly?
- Revenue Attainment versus Plan
- Return on Investment
- Sales Rep Satisfaction
- Sales Rep Retention
- Average Rep Attainment versus Plan
- Ability to Attract Quality Sales Talent
- Margin Contribution
- Account or Market Penetration
- Market Share Improvement
- Success of New Product Introductions
How is it possible that Market Share and Account Penetration rank near the bottom? That means not only are they a low business priority but salespeople are not rewarded for performance in those critical areas!
The same is true for the success of new product introductions. That ranks at the very bottom. So after spending tons of money and resources the majority of Sales Managers don’t care if those new products sell?
Crazy huh!
What To Do?
There are some good ideas on how to improve quota attainment from its failure level of 56%. I’ll blog about that in a later post. However let me SHOUT the starting place:
FIX THE COMPENSATION PLANS.
Align them with business goals. If you’re more concerned with your culture or turn over rate than how effectively you’re selling into your market and your accounts you’ve seriously got you head up your ass. Sorry, but can I be real with you?
Look at the Top Two Priorities:
- Hitting the number
- ROI of the Sales Force
How would you accomplish either without the very things least important in the majority of Sales Compensation Plans, namely
- Margin Contribution
- Account or Market Penetration
- Market Share Improvement
- Success of New Product Introductions
You simply CAN’T. Fix this. Later we’ll discuss some other findings in this report and implement them.