Sales Compensation Plan and the Human Resources Impact.

by on June 30, 2009 · 0 Comment POSTED IN: HR Info Center

Sales compensation plan design helps HR make a real time impact on the bottom line

Sales compensation plans are one of the areas particularly in a down economy where HR people can have a direct and immediate impact on the bottom line of the organization.

Across the board, it’s important for us to focus on retaining our A players. Even if, I met with a company about a month ago, they’re an auto parts manufacturer dealing directly with Ford, GM, Chrysler and Honda. They have literally laid off 50% of their workforce. They had a thousand employees. They’re down to 500 employees.

And so, as we kind of talked about the implications of that retaining their A players was critically important. There was a shift in where they set that performance bar. In other words, they eliminated the bottom half of their organization in terms of performance.

One percent below the old average is the current worst performer

And so, now, the person who was at that 51st percentile, they were spot on the average in terms of performance. When we eliminate everybody below you, you’re now the poorest performer in the organization. That causes a shift in the entire organization in terms of how do we define those A players. And it becomes even more important that we retain them and motivate them.

Most organizations look at their compensation every three to four years. From a sales compensation and a design perspective, it’s important to look every year at sales compensation plan design.

And to really link a sales compensation plan, my philosophy is to pay the winners like winners and the losers like losers and to link compensation of our 90th percentile performer to the 90th percentile of the market or better. At the opposite end of the spectrum, we should be looking at the 10th percentile of our performers in sales and linking that to the 10th percentile of the market.

Edited remarks from the Rapid Learning Institute webinar: “Executive Compensation Trends: New Benchmarks & Changing Regulations” by Edward Rataj and Kevin Nussbaum

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