Top Five Sales Effectiveness Elements to Assess Annually

Top Five Sales Effectiveness Elements to Assess Annually
September 15, 2023 5 mins

Top Five Sales Effectiveness Elements to Assess Annually

Top Five Sales Effectiveness Elements to Assess Annually

Sales teams have unique compensation programs that are critical for aligning selling behavior and outcomes to business goals. Here are five considerations to prepare plans for the year ahead.

Key Takeaways
  1. The first step to promote sales effectiveness is reviewing or creating a formal sales compensation philosophy to gain cross-functional clarity and buy-in.
  2. To prepare for the new year, organizations should confirm that pay levels are competitive and plan designs support strategic objectives.
  3. Over time, the annual sales incentive planning cycle can become shorter and less daunting if there are consistent health checks on the program year-over-year.

Better Informed

HR professionals and sales managers responsible for the sales compensation program know that feeling at the end of summer — the fourth quarter is approaching and it’s time to make sure any changes are ready for roll-out by January 1. While most sales teams won’t completely redesign their incentive plans every year, best practice recommends conducting a health check annually.

Sales compensation plans should be assessed annually to ensure they are still market competitive, strategically aligned to business goals and cost effective.

Between now and the beginning of the new year, here are five sales effectiveness areas to review.

1. Sales Compensation Philosophy. A sales compensation philosophy will help bring order to the plan review and design process, which can often become unwieldy without the right guidelines and program expectations. The philosophy should cover key sales incentive program areas, including:

  • Guiding principles
  • Plan governance/decision rights
  • Standardization vs. customization of plan designs
  • The role of pay in the employee value proposition
  • Desired pay position to market
  • Pay mix guidelines

2. Job Architecture. Review job titles and levels in the sales organization to make sure that there is proper coverage across selling motions and levels of experience. After a year of adding jobs and headcount to the sales organization, titling and leveling may require cleanup and consolidation to go into the new plan year with a clearer and coherent set of job roles. Once the architecture is set correctly, it's important to audit or match job roles to a third-party compensation survey. This will help prepare for competitive assessment, the next element to consider.

3. Competitive Assessment. Assess the competitiveness of base salary, target incentive and target total cash pay levels against a peer group based on reliable external survey data. Results can be used to understand which jobs and individual employees fall outside of competitive pay ranges, guiding compensation adjustments for the new year.

4. Incentive Plan Review. Review plan metrics with three questions in mind:

  • Do my plans still align with strategic business imperatives and financial goals for the upcoming year?
  • Can I reliably track and measure plan metrics?
  • Does the sales team understand and have adequate control over the metrics tied to their incentive pay?

Check that the mechanical elements of sales incentive design — such as thresholds, accelerators and excellence points — are set appropriately to encourage the right distribution of performance and desired pay differentiation among the sales team.

5. Cost Impact. Now that the annual review is complete and any necessary changes are proposed, leaders across the sales, HR and finance departments need to assess the total costs of proposed changes. To do this, use historical performance data and stress-test the cost structure through future state and simulated performance-pay scenarios. Confirm that cost is financially feasible and within budget parameters for the coming year.

Better Decisions

Ideally, the sales team would have three to four months to complete a robust review before implementing changes for the new year. However, the health check can be as high or low touch as is appropriate given available time and resources.

Quote icon

Conducting a health check of the sales compensation plan will put the sales team in a stronger position for success and encourage proper governance and maintenance of the sales compensation program.”

Marco Madero
Associate Partner, Talent Solutions North America

By following these five steps, companies will experience a shorter — and less daunting — annual sales compensation planning cycle. Learn more about how Aon can help your organization with sales force effectiveness.

Aon's Thought Leaders
  • Marco Madero
    Associate Partner, Talent Solutions North America
  • Marco Sneider
    Director, Talent Solutions North America

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The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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