Sales Leaders Plan to Increase Sales Compensation Costs 3 Percent in 2016By: David Cichelli Sales Compensation
Low wage inflation continues into 2016 for sales personnel. The trend over the last five years is to budget for a 3 percent (median survey results) increase in total compensation, base pay and incentive payments for sales personnel. This continues for 2016, according to the results from our “2016 Sales Compensation Trends Survey.” However, sales compensation budgeting is one thing; actual payments are another reality. Our multiyear survey results, on a forward and backward look, reveal that total sales compensation costs tend to be higher than the budget amount, sometimes as much as 4 percent as it occurred in 2014. In 2015, the over-budget payment amount was 2 percent, i.e., the actual compensation costs increased 5 percent even though the planned increase was 3 percent.
The annual Sales Compensation Trends Survey gathers information about important sales compensation and sales employment statistics. (Read more in the Executive Summary.) Revenue growth expectations jumped to 9 percent for 2016 as compared to the projected and actual revenue growth of 7.5 percent for 2015. For those granting base pay increases (62.9 percent), they expect to provide a median increase of 3 percent in base pay. Overall, sales compensation costs also are slated to grow at 3 percent.
2011 to 2015 Sales Compensation Plan Effectiveness
56.5 percent of the reporting companies rated their 2015 sales compensation plans as effective. Correspondingly, 14.9 percent rated their sales compensation plans less than effective. Except for 7.7 percent population in 2013, a consistent 15 percent of the reporting companies have trouble with their sales compensation program on an annual basis. This consistent finding indicates that sales compensation plans need continual oversight. Sales compensation plans can easily become misaligned as buyers, products and strategic focus changes. Sales leaders must commit to an annual assessment and review of the sales compensation plans to ensure alignment and effectiveness.
What about Windfalls/Bluebirds Orders?
Most sales compensation plans “pay for persuasion,” the act of securing revenue commitment from a customer. A windfall/bluebird falls into a gray area where the sales representative unexpectedly captures a mega order without obvious seller influence. Almost 95 percent of all companies experience windfalls and bluebirds. Some companies treat such orders as regular revenue and allow the seller to earn exceptional payouts. Others (20.1 percent) have a published and enforced policy to address such orders, often providing a good payout but less than the conventional sold revenue.
Windfalls/Bluebirds – Published Policy: Do you have a published policy for large, unexpected windfall or bluebird orders?
49.3 percent of the surveyed companies plan to increase headcount in 2016.
62.9 percent of the reporting companies plan to give base pay increases in 2016.
85.4 percent reported sales revenue as the key performance measure for the primary sales job.
40.9 percent of the survey participants do not have a published windfall/bluebird policy.
72.5 percent of all companies report having access to adequate or better market survey data to price sales jobs.
About the 2016 Sales Compensation Trends Survey
More than 150 companies participated in this year’s annual Sales Compensation Trends Survey. The survey was conducted in December 2015 and published the first week in January 2016.