For sales organizations scattered throughout the world, sales compensation presents a unique challenge. Should you have one global pay plan? Or should sales compensation designers configure the pay plans to match local conditions and practices?
One camp insists that sales compensation plans should be universal: An account manager in the US should be paid like an account manager in the UK, Japan and Columbia. The other faction argues that selling is “local,” and pay plans should match the local job role. Frankly, both parties can see the merits of the others’ perspective. However, the biases remain: One team favors global solutions, the other favors local solutions. Oh, and don’t forget about the third camp, the folks who say, “well, it depends.”
As we consider the question of global sales compensation practices, here are truths we know.
Numerous surveys (examining country variances) found more commonality than disparate practices. As an example, one factor that should highlight pay plan variance among countries would be the degree of pay at-risk. However, survey responses seem to confirm only modest variance of at-risk pay among countries for the same job.
As the chart suggests, the degree of pay at-risk for the account manager varies by less than 5% among the listed countries.
Prevalence of practice is a benchmarking concept that uses market research to identify the most prevalent practice for adoption. “Let’s see what others are doing; that’s what we will do!” Unfortunately, prevalence of practice does not offer a definitive path for making sales compensation design decisions. Why? There are too many factors affecting the sales compensation design for a specific job at a specific company to reveal a dominant market practice. Variances will affect sales compensation such as product competitiveness, management philosophy, go-to-market strategy, value propositions, sales process model, job design, and rewards strategy. A summary of pay plans from other companies will not identify the best choice. Yes, the research will be educational, but not conclusive for plan design purposes. However, do collect market pay data to establish target total compensation amounts for each job.
One approach solves the perplexing issue of global versus local sales compensation plans: Adopt global sales compensation design principles for local application. That is, apply universal design principles to all jobs regardless of location. Fortunately, this approach avoids interpreting dissimilar region go-to-marketing practices, and yes varying local management philosophies—a practice that needs addressing elsewhere. Whatever is “different” will be inherent in the local job—for good or bad. The brilliance of this approach simplifies the question of differences by allowing (the local) job design to drive the sales compensation solution. Global sales compensation design principles use the same set of rules for each job, regardless of configuration. Job content determines the best pay plan.
Once designed, adjust for any local legal and regulatory requirements.
Here is a simplified example of global principles.
Additional principles address sales crediting, account assignments and pay/performance periods.
Use global sales compensation principles to design effective sales compensation plans regardless of differences found among divisions, regions and local leadership.
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©2021 The Alexander Group – All Rights Reserved – Issue No. 200421
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