Return to Article Archive  |  E-Mail Page  |  Print Friendly Page

Excerpts from a Synygy Magazine Roundtable Discussion

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

In November 2008 I was invited to participate in a virtual roundtable discussion for Synygy Magazine on sales compensation in the context of the current economic turbulence. I and three other consultants participated in the roundtable, offering our insights to a series of questions. As a partial preview of the forthcoming article (due out in January), the roundtable questions and my responses are recorded below.

Synygy: How has the volatile economy started to affect sales organizations and how they're approaching their compensation plans?

Davis: Companies are increasingly rationalizing every dollar they spend. It was popular before the economy headed downward, but companies are putting increasing effort into trying to measure and ensure a reasonable return on their sales compensation investments. The first challenge is one of understanding the role of sales compensation and, on that basis, defining success. More often than not, it involves more than simply dividing sales compensation expenditures by the corresponding revenue production.

Synygy: What aspects of sales operations (e.g., compensation, quotas, training, territories, channels, strategic account management, etc.) are being affected most, and how?

Davis: Right now, quotas are a focus for a lot of companies heading into a new fiscal year. Many companies are struggling with how to show incremental growth in their budgets and quotas for 2009. At the same time, many are concerned with keeping talent in an economy where growth will be a challenge and upside incentive compensation potential may be limited.

Synygy: How can companies adjust their sales compensation strategies to survive market swings?

Davis: I'm advising clients to scrutinize the performance range for their sales compensation plans heading into 2009. How companies define minimum threshold performance as well as excellence must keep pace with the realities of the market. In an environment where companies are trying to contain sales compensation expenditures, it's even more important to ensure that the allocation of sales compensation is aligned with those who are really contributing.

Synygy: What are some common mistakes companies make during economic downturns, in regards to sales compensation plans?

Davis: Leaving the plan alone and assuming everything will turn out OK. I've encountered companies who are afraid to make a change in a tough economy. However, if positioned well, the right change can be viewed very positively by the field. For example, broadening the performance range (i.e., lower threshold and higher excellence) could be communicated as giving the sales force a chance to succeed as well as protecting the company against potential volatility in a difficult economy.

Synygy: Companies often look to cut costs during a down economy. How can sales managers protect compensation strategies when the cost-cutting starts? What's the best way to continue to receive C-level buy-in of compensation plans, even when sales are down due to the economy?

Davis: The sales comp plan must stay current with a company's evolving business objectives and go-to-market strategies. If a troubled economy causes business objectives and strategies to change, the sales compensation plan also may need to change in order to remain relevant. Sales leadership must be clear on the role of the sales organization vis-à-vis the broader business objectives, and that requires staying close to the C-suite. However, as opposed to being reactive to changes in strategy, Sales leadership must be out front driving the formulation of the go-to-market strategy and the resulting sales compensation strategy.

Synygy: If a downturn continues for an extended period of time - say, two to three years or more - how will that affect sales organizations and what should companies do to prepare?

Davis: In one sense, it will be more of the same in terms of needing to build a fact base to understand changing market dynamics, and to provide the basis for effective and quick decision making. Sales leaders will need easy access to meaningful data. They'll continue to have to set goals, measure performance, constantly monitor progress across a variety of initiatives, stay close to their customers, and be flexible enough to make adjustments on the fly.