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Recent Findings from a WorldatWork Survey

By: J. Mark Davis, Managing Principal, Valitus Group, Inc.

I recently co-authored the WorldatWork survey entitled, "Key Sales Incentive Plan Practices." The survey was administered in October of 2006 and we've recently completed analyzing the results. Not surprisingly, the survey results highlight something I touched on in my two-part article, Assessing Sales Role Prominence, namely that how a sales role is defined or constructed makes a world of difference on the design of the sales compensation plan.

Survey Background

The WorldatWork survey reflects 440 respondents from the WorldatWork membership base, representing a varied industry demographic. The survey covered a number of sales compensation practices, including incentive plan eligibility, key incentive plan elements, and incentive plan implementation activities.

Survey respondents were asked to answer certain sales compensation design questions, differentiating their response by sales role. There were three primary sales roles highlighted in the survey:

• New Account Seller - a sales role focused exclusively on acquiring new accounts
  
• Existing Accounts Seller - a sales role focused exclusively on managing and penetrating existing accounts
  
• Blended New and Existing Accounts Seller - a sales role with both new account acquisition and existing account management responsibilities

For each of these three primary sales roles, respondents were asked to indicate their company's sales compensation practices for the following incentive design elements:

• Pay mix (the percentage of the target total cash compensation delivered in base versus incentive)
  
• The performance measures used in the plan
  
• Whether performance is measured on an individual versus team basis.

Survey Results

For this article, I highlight the difference in survey responses between the new account seller and the existing accounts seller only as these two roles represent the starkest contrast in core job responsibilities.

• Pay mix - New account selling roles are typically more prominent than existing accounts sales roles in that they require more persuasiveness and creativity to successfully execute their role (see my Sample Prominence Analysis for an illustration of how prominence is assessed). Consistent with the higher relative prominence, and as is shown below, new account sales roles typically have more pay at risk than do their existing accounts counterparts.

• Performance measure selection – While there is significant overlap in the top five performance measures cited for both roles, there are also some interesting differences. First, new revenue and new accounts combine for 45.0% of the responses for the new account seller role. Not surprisingly, the new accounts performance measure does not appear among the top five measures for the existing accounts seller role and new revenue (from existing accounts) comes in fourth with 18.4% of the responses. Another notable difference is that gross profit appears to be less important in the new account selling role than in existing accounts. This is reinforced by respondents indicating that for both roles, well over 70% of respondents use three or fewer performance measures. Lastly, one interesting similarity is that key sales objectives/milestones measure, which is often account- or territory-specific, came in as the third most prevalent measure for both roles. Admittedly, I expected this measure to be more prevalent in an existing accounts context. One possible explanation is that for a new account seller operating in a long sales cycle environment, milestones are sometimes used to reward desired sales activity known to directly contribute to the eventual closing of a sale.

Performance Measure Ranking	Top Five Performance Measures (% of total responses by role)
	New Account Seller
1	Total revenue (33.2%)
2	New revenue (26.6%)
3	Key sales objectives/milestones (18.9%)
4	New accounts (18.4%)
5	Gross profit (17.0%)

Performance Measure Ranking	Top Five Performance Measures (% of total responses by role)
	Existing Accounts Seller
1	Total revenue (47.0%)
2	Gross profit (23.6%)
3	Key sales objectives/milestones (19.5%)
4	New revenue (18.4%)
5	Select product sales (15.0%)

• Performance measurement basis - Not surprisingly, and again reflective of its higher relative prominence, the new account seller role is more likely to measured on an individual basis and less likely to be measured on a team basis. An existing accounts seller, particularly one selling to large, strategic accounts, must frequently coordinate a host of resources in order to successfully execute the sales and service delivery process. Thus, a team-based measure of performance is more common.

Conclusion

As these highlights from the WorldatWork survey illustrate, the sales compensation plan must be designed to fit a given sales role. A clear definition of the sales role in the context of an organization's business objectives and go-to-market strategy is the starting point for the design of sales compensation plans. For a specialized, multi-role sales force, a one-size-fits-all approach won't work. Likewise, for a smaller sales organization where there is insufficient scale or market coverage to specialize the sales force by role, the sales compensation plan will be less prescriptive or targeted in order to reward the generalist seller for wearing multiple hats. In short, where it's practical, specialize the sales force. Sales force specialization improves sales effectiveness.