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 our collective client experience, surveys and research.
2020 Sales Compensation Changes
Before we talk about the future, let’s reflect on the past. Last year, 93% of technology companies in our annual trends survey said that they made changes to their sales compensation plan. A majority of them made significant changes to some or all roles. In addition, we also know that roughly 80% of companies made a midyear quota or sales compensation adjustment to their plans to accommodate the market disruption.
Why are companies making so many changes? Sales compensation is an alignment program. The plan must align seller’s pay with strategic goals, the desired behaviors for each job and best-in-class design principles informed by market central practices.
Below is a list of the top five company dynamics that are impacting technology sales jobs, and consequently their sales compensation plans today.
- Recurring revenue focus
- Product/pricing model changes
- Partner strategy evolution
- Digital transformation
- Reaction to the market disruption
2021 Changes and Typical “Big Rocks” Topics
While most companies made significant changes to FY20 sales compensation plans, what is predicted for 2021? Plan changes in FY21 will be higher than ever.
What change will tech firms make? There are several “Big Rocks,” or hot topics, that we’ve seen across the tech industry that we have split into three categories to help explain our predictions:
Aligning Plans to Strategic Initiatives
These initiative include:
- Compensating for various Identify, Land, Adopt, Expand and Renewal (ILAER) motions
- Closing multiyear business while optimizing annual recurring revenue
- Driving cross-portfolio selling and migrating customer to the cloud
- Rewarding on-going persuasion in pay-as-you-go consumption models
- Aligning profitability metrics to the right level in the org
- Driving partner neutrality and/or tracking influence revenue
Aligning Plans to Evolving Jobs and Behaviors
This initiative includes all of the typical jobs, from core representative to the customer success manager. As companies evolve their strategies and jobs, they must also evolve their sales compensation plans. In other words, strategy drives job design and desired behaviors, which then drives sales compensation plan design.
Aligning Practice and Policies to Best-in-Class Principles
This initiative is informed by market central practices. Key topics here include:
- Building governance model and processes that enable effective and on-time plan design
- Setting global pay mix structures that accommodate local norms
- Creating market competitive pay curves
- Managing quarterly vs. annual focus
- Driving individual accountability for widely deployed jobs on ‘galactic’ quotas
- Encouraging the appropriate teaming and crediting with multi-national and global accounts
- Accommodating new/ramping sellers.
- Ensuring fair practices when employees go on parental leave
Alexander Group Guidance
For companies wrestling with any of these issues, Alexander Group can provide some guidance. While tempting, do not just jump to figuring out a sales compensation solution. Spend time upfront clarifying with cross-functional leaders your strategic goals, desired behaviors for each job, your guiding principles and, if available, market data. Investing time upfront will pay dividends during the design process.
If you are struggling with any of these “Big Rocks” or other issues, please do not hesitate to reach out to one of our technology practice leaders. We would be happy to schedule time to discuss your unique situation.
Sign Up
You may also be
interested in:
Author
Rachel Parrinello is a principal in the San Francisco office. She is a leader in the firm’s Sales Compensation, Media Sales and Technology practices. In this role, Rachel delivers sales compensation expertise to many client engagements and directs the firm’s sales compensation IP and benchmarking methodology. Rachel’s fact-based, practical and aligned sales compensation solutions help her clients drive profitable revenue growth. She frequently speaks on sales compensation topics at various associations and partner events. Rachel has authored several articles and whitepapers including How Revenue Planning Drives Sales Compensation Success.
