More revenue and bigger sales rewards predicted for 2016
Businesses are planning an average 12% hike in revenue in 2016 according to the 2016 Sales Compensation Trends Survey by the Alexander Group. 152 companies across a range of industries participated in the survey.
To achieve this increase in sales, primary sales roles will be awarded a 3% increase in their base pay with an average total earnings increase of 7%.
50% of companies surveyed will also hire more salespeople.
There is no pay cap for primary sales roles for 78% of the companies surveyed indicating the big juicy carrot is being waved for bigger juicier results. However, 60% of companies surveyed use a claw back compensation paid if overall performance is below par.
Interestingly, 95% of the companies surveyed identified a need for a windfall/bluebird policy but 41% do not have a written policy and 32% do not have a stated definition for windfalls/bluebirds.
What is also interesting is 45% of the surveyed companies indicate sellers’ goals match the
sales department’s goal. The remaining 55% of companies surveyed do not align their sales incentive plan to company goals, which contravenes best practice.
Communication of the sales incentive program also appears to be a challenge for many of the companies surveyed. Only 53% of companies surveyed will roll out the 2016 compensation plan within one month of the new fiscal year so how will the sales team know what they are aiming for and what their sales rewards will be?
In summary, businesses are optimistic 2016 will be a growth year. Half of the businesses surveyed are seeking to hire new sales staff and modest increases in earnings will be awarded. In many businesses, the sky is the limit for sales people once they have achieved their quota. But because nearly half of the businesses surveyed do not align sales goals with company goals, how will the contribution of salespeople be measured? It is likely windfall deals will cause confusion and conflict due to the lack of a clear definition and policies. This could be remedied by a clearer documented sales incentive plan.
2016 Sales Incentive Program Trends:
- 90% will change their sales incentive plan
- 65% say setting quotas is the key challenge
- 84% will not use management by objectives
- 85% reported sales revenue as the key performance measure
- 77% use 3 or fewer performance measures
- 35% use a bonus formula paid against achievement of quota
- 30% use a 50/50 base/incentive pay mix
- 52% use a threshold on the key performance measure