What changes will technology companies make to their 2021 sales compensation plan? We don’t have a crystal ball, but we can share our predictions based on their collective client experience, research and studies. Hi, my name is Rachel Parrinello and I’m a principal and sales compensation leader at the Alexander Group. Thank you for tuning in to this market update.
Before we talk about the future, let’s reflect on the past. Last year, 93% of companies made changes to their sales compensation plan. A majority of them made major changes to some are all roles. In addition, we know that roughly 80% of companies made a mid-year quota or compensation adjustment to their plans to accommodate the market disruption. Why are so many companies making changes?
Well, sales compensation is an alignment program. The plan was aligned. Our sellers pay with our strategic goals, the desired behaviors for each job and best-in-class design principles informed by market central practices. Let’s spend a minute reflecting on strategy changes that are impacting technology sales jobs today.
- Recurring revenue focus
- Product/pricing model changes
- Partner strategy
- Evolution for digital transformation
- Market disruption
We talked about how most companies made significant changes to their 2021 sales compensation plans and why. So our prediction for 2022 is these plan changes will be higher than ever. What are they changing when we work with our technology clients?
Here’s a list of the typical hot topics we call big rocks. They need our help with. We split them across three categories. The first category is aligned plans with strategic initiatives. These initiatives include compensating for various ILAER motions (land adopt, expand, renew), closing multi-year business while optimizing annual recurring revenue, driving across portfolios, selling and migrating customers to the cloud. Rewarding ongoing persuasion and pay as you go. Consumption models. Aligning profitability metrics to the right level in the organization. And driving partner neutrality or tracking influence revenue.
The second category is aligning plans to evolving jobs and behaviors, which includes all the typical suspect core jobs listed here from account executives all the way to the customer success manager.
The last category is aligning practice and policies to best-in-class principles informed by market central practices. Key topics here include building governance models and processes that enable effective and on-time plan design, setting global payment structures that accommodate local norms, creating market-competitive pay curves, managing quarterly versus annual focus, and driving individual accountability for widely deployed jobs on galactic quotas. Encouraging the appropriate timing and crediting with multinational and global accounts. Accommodating new and ramping sellers and ensuring fair practices when employees go on parental leave.
Here is some guidance for companies wrestling with these issues. While tempting, do not just jump to figuring out a compensation solution. Spend time up front clarifying with cross-functional leaders your strategy, desired behaviors for your jobs and your guiding principles. If available, include market data investing. Time up front will pay dividends during the design process.
If you’re wrestling with any of these big rocks or others, please do not hesitate to reach out to one of our Technology practice leaders. We would be happy to schedule a complimentary one-hour session. Alternatively, subscribe to our Insight newsletter, a tentative event, follow us on social media or visit our website, www.alexandergroup.com for more information. Thank you for tuning in.
