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3 reasons to give sales reps more visibility into compensation

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Content Marketing Manager, IBM

Compensation is critically important for driving the business priorities. It’s one of the major—if not the major—motivator for employees to work hard. This incentive is particularly relevant for the sales team which, in many organizations, is the core link between corporate strategy and customer-facing activities.If sales reps can exceed quota and receive two times the payout you can bet that they will do everything they can close their deals. Investing in a variable-based compensation solution offers clear ROI when it comes to driving the desired behavior from the sales team.  

Unfortunately, many organizations do not invest in the compensation management area of their business. In fact, according to CSO Insight’s Sales Compensation & Performance Management study, 62.4% of organizations still leverage spreadsheets or a manual tool to develop, calculate, process, and distribute commissions to sales reps. In addition, fewer than 1 in 10 firms feel their comp plan consistently drives the precise selling behaviors they desire. In some cases, it can take months from the time a sales rep closes a deal to the time they actually see their commission. Where is the motivation in that?

Here are 3 main reasons sales reps want, and from a sales organization’s perspective should, have more visibility into their compensation:

  1. They want to spend less time on mundane, administrative work

Many people get into sales because it is an exciting, fast-paced and competitive role that gets you out of the office. Unfortunately, the reality is that a sales rep still needs to spend time in the office on administrative tasks like account management and follow ups. However, for those organizations leveraging spreadsheets or manual tools for compensation, sales reps end up spending much more time in the office.

Why is this? The short answer is shadow accounting. Shadow accounting is a popularized industry term where sales reps spend significant time double checking their compensation pay. Knowing that 88 percent of all spreadsheets contain errors, they don’t trust that they are being paid accurately and feel they need to double check the work of the sales compensation manager.

By leveraging a sales compensation solution that is fast, accurate and trustworthy and by giving sales reps instant visibility into their compensation, they can get back to doing what they truly love, selling.

And, more time selling equals more time driving revenue for the business.

  1. They want to feel connected to the company’s business priorities

For a sales organization to be effective, employees must feel connected to their organization’s goals. If employees have a strong understanding of the corporate strategy, they can align themselves and their work accordingly. This knowledge results in more productive work, higher performance and ultimately higher employee satisfaction. However, if a sales rep's compensation does not align with these priorities, they can be torn between doing what is right for the business versus doing what will provide them with a higher commission.

Sales compensation solutions enable agility and allow compensation plans to be adjusted easily as the company’s priorities change. Also, they provide sales reps visibility into these changes, which drives a greater understanding of corporate priorities and allows representatives to change their behavior accordingly.

  1. They want to drive real business results and be rewarded for it

Sales reps hold an interesting position in that they are on the front lines of the business. They are in the field driving real results for the business every day. Of course, other departments are driving real results for the organization, but those results happen more directly for the sales team. Sales reps work hard to find, advance and close deals. At the end of the day, like all of us, they want to be rewarded for their hard work.

The compensation process, especially in a manual world, can be challenging and involved. Ensuring everyone is happy can be a daunting task for a sales compensation manager. Many compensation managers admit that before investing in a compensation management solution, a significant portion of their day was spent challenging commission disputes with various sales reps. There are so many variables to consider to ensure fair compensation consideration – employee tenure, performance, geography, product focus, annual salary, volume vs. value and more. Sophisticated compensation solutions, however, can help with this process and make it easier to develop efficient and fair compensation plans for the Salesforce.

Also, many advanced sales compensation tools allow sales reps to leverage “what if” scenario modeling capabilities which can be used to predict commission on an upcoming deal. This type of capability is extremely effective in motivating sales reps to close deals quickly.

For more information on how compensation management solutions enhance sales reps' visibility, check out this product tour of IBM Incentive Compensation Management or visit www.ibm.com/spm.

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