Dave Eddleman: Hello everyone, Dave Eddleman here from the Alexander Group. Thank you for joining us. Today, I want to review some of the highlights from our 2024 Sales Compensation Trends survey. We do this survey every year. We’ve been doing it for several years with over 300 companies involved from a lot of different industries, but many of them are from the financial services industry.
I want to start off with a general sense of optimism for 2024. Starting on the left-hand side, our research shows that the companies expect to grow 13% in 2024, which is up three points from 2023. I think it’s a good show of optimism and it’s a good indicator that we have to do something a little better in 2024. The 2023 GDP rate was about 2.5%, although the last quarter of 2023 was up to 3.3%. I think there’s a little optimism and maybe a little bit of aggressiveness in this data from respondents. Again, that’s the general sentiment and trend of this survey data for this year. On the lower left, over half of the sellers are predicted to achieve quota. This is what we would typically expect. In fact, we typically like to see about 55-65% of sellers achieving quota or better on a 100% of plan or better.
If it’s below 50%, that’s typically a cautionary flag; we don’t want the minority of sellers fail to hit their sales plan and become ineligible to earn outstanding pay. On the right hand side – 61% increase in headcount. This is pretty high, the highest since Covid-19, and only 12% are expected to decrease headcount. I think this aligns with the anticipated growth and the corresponding need for more sellers. And the second point here, which is a good segue, is that employee turnover is expected to fall to 9%. That’s down from 14% in 2022. So, a lot calmer situation says something about our expectation of growth as well as the marketplace. So, that’s a 35% reduction in expected turnover. And you can look at different types of sellers like an inside seller for example, where you’d have a lot higher turnover rate. In general, this is a global metric that indicates a decrease in turnover, which is good for minimizing disruption. Lastly, 38% are looking at the eligibility of sales roles. As a practitioner, I can tell you that we spend a lot of time looking at job roles and their activities and are they influencing someone to buy something. So, if they’re in an adjacent role but still have customer contact, that coverage model and role is being looked at as maybe there’s some pay-at-risk possibilities. While not always the case, this sentiment and optimism suggest we should put everyone on a sales plan that ought to be on a sales plan.
The next slide is looking at the same type of sentiment in a way; we’re really trying to drive pay for performance. What does that mean? This means there’s probably less pay if you achieve less than 100% and more pay if you overachieve at 100%. This approach steepens the slope and increases the aggressiveness of the payout curve. Thus, two-thirds of the respondents are saying they want to implement this strategy. Another way to that is to drive more of individual metrics instead of team metrics. Team metrics seem to dilute the incentive plans or don’t make them quite as aggressive.
So, there’s lots of things they can do, but I think the overall sentiment is there’s probably a lot of pressure on on PE ratios and companies these days. Therefore, we’re trying to put more performance-driven metrics on the reps. Similarly, on the right side, the focus on profitability has increased. This doesn’t necessarily mean it’s a calculated profitability. It can be a pricing proxy. There are lots of other mechanics that can be put into place, but profitability metrics are number one in terms of popularity this year. Not a big surprise. The last two – a shift in sales strategy and the introduction of new products. These are also important and more of a usual suspects and commonly drive plan changes.
The last slide here shows the plans were changed. As practitioners considering plan changes, what do we think might be changing in 2024? Measures and weightings are the top two factors under consideration. Let’s shift to the right side of the slide here. These are always important. Right. So, for example, if you have a cross-sell metric, if 30% weighting of the variable pay, and I move that weighting to a 50%, don’t change the measure, but I move it to a 50%, you can really change that. You can see that really changes the messaging to that rep that’s in that example. Over half of their time would focus on cross-selling and the other half would be on other core measures. Again, as practitioners, we consider changing the weighting rather than the measure itself. And maybe we do put a new measure in there. In the financial world we see a lot of regulatory and compliance measures. It’s not in this list. But in other words, we expect the appropriate level of conduct and adherence to regulations.
That would also be under the category of measurements as a general rule. Regarding the last point on pay levels and quotas, but especially pay levels, there’s a lot of pervasive data out there with bigger companies. And they know that for this job role, you pay X amount. It’s not about the exact amount; the X could be off by plus or minus 10%. But it’s about how we get there, what that achievement represents. For example, if the target is 150,000 TTC, if I climb that hill, I’ll get to the 150. It’s not that the target of 150 is wrong, but whether I’ll be able to climb the hill. And what kind of measures do I have? So, we do look at pay levels as a part of our designs and we do look at quota setting especially, which typically is one of the number one challenges in comp plan design – being able to set goals and allocate quota and individuals. However, these considerations are lower on the priority list this year. At the top of the list are measures and weightings that truly align with the company’s strategy.
Thank you for joining; I really appreciate your time today. If you’d like more information or to schedule a full readout of the Sales Comp Trends survey, please let us know. Thank you.
