Who Owns Sales Compensation?

By: David Cichelli Sales Compensation, Sales Compensation Program Management

2017-sct-survey-cover-290x243Sales compensation is a mission critical pay program helping to drive sales performance. It’s in integral part of the revenue team’s management process. However, it’s also a human resources program, part of the compensation package given to employees. Marketing people also have a keen interest in sales compensation as it directs sellers to achieve product objectives. It is also a costly expense for the company, frequently of high interest to finance. Not surprisingly, the general manager of the division also wants to ensure the sales compensation program aligns with business strategies.

Who own sales compensation? The “2017 Sales Compensation Trends Survey” provides insight into this question. More than 120 companies provided responses to governance and accountability questions. The responses provide a helpful overview of contemporary practices regarding sales compensation management. However, notice in the responses below, most “ownership” questions never identify a dominant owner—a greater than 50 percent response rate.

Sales Compensation Program Ownership
Many companies (40 percent) assign ownership of the sales compensation plan to sales management/ sales operations. The division leader (CEO, COO, president or general manager) is the second most cited owner of the sales compensation plan.

Sales Compensation Redesign Efforts

Most companies redesign their sales compensation program on an annual basis. Often, the changes are minor while other companies undertake a major redesign effort.

Once again, sales management/sales operations (40 percent) undertakes responsibility for the redesign effort.

Our preference is for companies to use a “sales compensation design task force” (28 percent) to review the sales compensation program. Such a task force approach can bring together the diverse objectives of sales, HR, marketing and finance.

Program Approval

Confirming the importance of the sales compensation program, 48.8 percent of the companies require the leader’s (CEO, COO, president or general manager) approval.

Sales compensation provides alignment between seller efforts and business objectives. Senior leaders want final approval authority to ensure this alignment.

Program Management

What about day-to-day program management? Almost 50 percent (48.8 percent) of the companies assign this task to sales operations (see the following chart).

Questions from field managers and plan participants regarding plan application often arise daily. And, sales compensation programs often have many tracking and reporting issues regarding quotas, sales crediting, adjustments and revisions. Sales operations is ideally suited to monitor and manage the program on a day-to-day basis.

Program Administration

Finance (32.8 percent) or sales operations (31.2 percent) are the typical administrators of sales compensation: calculations, record keeping and reporting.

Who Own Sales Compensation?

While the data from the “2017 Sales Compensation Trends Survey” does not provide conclusive ownership answers, the trends suggest the following:

  • Ownership: sales management/sales operations
  • Redesign: sales management/sales operations
  • Final Approval: CEO, COO, president, general manager
  • Program Management: sales operations
  • Program Administration: finance/sales operations

About the “2017 Sales Compensation Trends Survey”

More than 120 companies participated in the survey, which was conducted in November and December of 2016 and published in January 2017.

View the Executive Summary.

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David Cichelli

David Cichelli contributes his revenue growth knowledge and experience to a wide array of sales organizations. His clients include leading companies in technology, telecommunications, wholesale/distribution, financial services and healthcare. David helps clients redefine and deploy go-to-customer solutions to ensure optimal revenue performance. By applying the Alexander Group’s Revenue Growth Model™, he helps companies achieve their revenue objectives through the coordination of marketing, sales and service resources. These efforts include revenue planning, customer engagement design, sales force configuration, and program design and management. He is the Alexander Group’s sales compensation practice leader.

Widely recognized by national professional associations and trade publications for his work in linking sales compensation to management’s objectives, David is a frequent speaker on sales compensation topics. He is author of Compensating the Sales Force (3rd edition) and The Sales Growth Imperative, published by McGraw Hill. He serves a leadership role in the design of the firm’s revenue growth conceptual models. David is an officer of the company. He is also the author of the 2018 Sales Compensation Almanac, published by AGI Press.

Prior to joining the Alexander Group in 1985, David served for five years as a national practice manager in sales compensation for a leading compensation consulting firm. Previously, he had spent seven years providing support to the field sales organization of a multinational Fortune 200 chemical company. David has a B.A. from Pennsylvania State University and an M.S. from Michigan State University.