(4 votes, average: 4.5 out of 5)
Loading ...I recently read a blog post on the topic of who owns sales compensation. I get asked this question a lot and it got me to thinking about recent trends in “ownership” and the potential implications. Earlier this year OpenSymmetry conducted a survey on compensation management practices. The survey builds on the research my old colleagues and I conducted the previous seven years and several of the questions deal with ownership of the sales compensation program. Of the 100+ companies that participated, 31% indicated that sales owns the program, 21% said finance and 17% said HR (the remaining responses were equally divided amongst other functional areas, no formal ownership and shared responsibility). This breakdown varies significantly by industry and has not changed much over the last 8 years or so.
What has changed is the degree of centralization associated with both the design and administration of the program. In this year’s survey 58% of the respondents indicated that they use a centralized process for designing the compensation program. Another 20% indicated that the process is led by corporate with varying levels of decision making by individual business units or local geographies. Both of these numbers represent significant increases from years past. Some of the increase may be a reflection of sampling bias, but I have definitely seen a trend towards more centralization. Increased consistency of roles, greater emphasis on cross-selling and improved efficiency are all cited as reasons for the move. The same trend can be seen in the area of program administration. 33% of this year’s respondents indicated that their programs are administered globally. Another 15% have some form of global oversight. Both numbers are up substantially from years past. Certainly increased consistency of the plans allows for more centralization (i.e., fewer local exceptions). There is also no question that cost and efficiency play major roles in this shift, as well as the availability of technology solutions that make increased centralization possible.
So, what are the takeaways? From a program ownership standpoint the data suggests that it comes down to a combination of industry and each company’s unique circumstances. Legacy ownership, compensation philosophy, relevant skill sets and resource capacity all play a role. I will say that my bias is that the sales compensation program is a tool for sales executives. Sales leaders should be in the best position to understand what motivates their sales representatives and links them to the company’s sales priorities. All things being equal I prefer to see decisions about the program structure (e.g., measures, weights, mechanics) made by sales leadership.
In terms of the plan design process and program administration there is an undeniable trend towards increased consistency and centralization. We started to see this trend even before the current economic situation and anecdotally (we’ll see more formally after next year’s survey) there is nothing to suggest it is slowing down. It might make perfect sense to manage everything locally. But it might also be time to revisit your current approaches and make some changes.
Mike Meisenheimer is a Sales Performance Management and Technology Executive. He can be contacted at mike.meisenheimer@opensymmetry.com
Interesting results Mike.
We recently wrote a piece on our blog at http://www.salesresourcegroup.ca/blog/blog.aspx posing the same question; this seems to be a hot-button topic right now.
We followed this article with an informal poll and the results we similar in ranking, however the percentages were slightly different. Of 35 responses, 62% indicated that Sales is responsible for the compensation program. In our survey, more respondents noted that Human Resources(15%) should own the sales comp program than Finance(6%).
What i found most interesting in comparing our results, was the number of respondents that believed there should be a shared responsibility for the sales compensation program. While the shared responsibility option received little consideration in your results, 18% of those who participated in our poll said there should be a shared responsibility between all functional departments (Sales, HR, Finance and IT).
While your research might have been more in-depth than our informal poll, it is still interesting to see the overwhelming belief that Sales should hold responsibility for the compensation program. I think the stronger support for shared responsibility, in our poll, hints at the belief that while Sales should be held accountable for the compensation program, each department should have a hand in it’s development and administration.