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Sales compensation governance does not need to be painful

by Dave Egloff  |  February 15, 2019  |  Submit a Comment

Recently, Gartner did a study and found that of the sales leaders identifying sales compensation as one of their higher priorities, 32% said plan effectiveness was their top concern.  No surprise here.

The revelation was that 21% of these sales leaders said that improving sales compensation governance was their biggest concern.  In fact, this was the most common response when you examine what sales leaders put into their top 3 initiatives – 68% of these sales leaders identified sales compensation governance in their top 3 priorities.

Governance can sound painful and bureaucratic – perhaps painfully bureaucratic.  However, it doesn’t have to be.  It can be quite simple and lead to improvements in both control and effectiveness.  It starts with three questions:

What should we do?

What can we do?

What will we do?

comp governance

As a VP of sales operations, or perhaps the head of sales compensation, your goal is to get the right people in the room to answer these questions.

What should we do?

When you link the compensation strategy to the sales strategy, the sales leaders best answer this question.  Sales leaders are held accountable to specific sales results, plus they have the most connectivity to front-line sellers.  Sales leaders can easily rattle off the sales imperatives and drivers.  This must be done in a facilitated conversation led by the sales compensation leader, who can help sales leaders prioritize and see both the opportunity and opportunity cost of their requests.

What can we do?

Armed with the sales leader ideas, the sales compensation leader needs to identify systemic capabilities and operational liabilities.  Poor data, processes and systems will prevent great compensation ideas from materializing into a deployed sales compensation plan.  The last thing anyone wants is a great idea to become a source of headaches, mistakes and distractions to front-line sellers.

To help identify systemic capabilities, the sales compensation leader should regularly coordinate with stakeholders across HRIS, sales technology, IT, etc.

What will we do?

Now that the sales compensation leader knows what you should do to drive sales results and what can be operationalized, the last step is in getting executive sign-off.  The executive committee should have a holistic perspective on sales compensation and is often comprised of senior executives from sales, finance and HR.

Each executive will tune in to discuss: how does a compensation plan harmonize with sales strategy, is the compensation plan financially sustainable, will it properly motivate sellers?  These perspectives will help keep the organization strategically aligned for sustainable success with strong employee engagement.

Sales compensation governance is not just about compensation plan changes.  It can and should be easily applied to mid-year occurrences like spiffs, quota relief, exceptions, etc.  Obviously, not every request will formally circulate through three groups.  However, the sales compensation leader should evaluate each request from the perspective of what should we do, what can we do and what will we do.

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Dave Egloff
Senior Director
1 years at Gartner
20 years IT Industry

Dave Egloff is a Senior Director, Analyst in the Gartner for Sales Leaders practice. His current work focuses on key initiatives in sales strategy, sales operations and sales compensation. Read Full Bio




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