LeapComp - Sales Performance Management Blog

I recently talked about a few salary and incentive compensation surveys, but here is another one from the Alexander Group that focuses on Sales Compensation.

The 2009 Sales Compensation Trends Survey found that 40.34% of the 180 participating companies use a desktop solution such as a spread sheet or data base and that 29% use a custom in-house solution to administer their sales compensation program. Outside solutions represent 27.27% of the respondents: Custom Purchase (9.66%), ERP/Data Base Component (5.68%), Dedicated Commercial Hosted Solution (5.68%), Dedicated Commercial Enterprise Package (4.55%), and Outsourced to a Third Party (1.7%). The remaining participants selected “Other” (3.41%).

The survey included many large companies like American Express, Microsoft, General Electric, DuPont, and Kraft Foods, but it also included many smaller companies with only 20 sales personnel (or more). I think that this is why 40% of the companies surveyed still use a spreadsheet / desktop solution.

What I think is particularly interesting is to compare the on-demand and on-premise solution usage; 5.68% of the companies used an on-demand solution, while 4.55% of the companies used an on-premise solution. In other words, only about 10% of the respondents use a dedicated commercial sales performance management solution. Over the next few years, I believe we will see many of the companies moving away from spreadsheets or custom solutions to move to a commercial application.

I’m also very curious about what “Other” solutions 3.41% of the respondents are using… hand-written incentive compensation statements? I’m assuming that these companies probably use some sort of application to manage this; maybe a payroll system or a talent management application with an incentive compensation module.

The survey also provides several other interesting results:

• 3.0% was the average incentive payout increase in 2008.
• 4.4% is the average incentive pay increase planned for 2009.
• 5.6% is the expected median revenue growth for 2009; 6.0% occurred in 2008.
• 30.72% will increase staff in 2009; 44.69% will not change staffing levels; 24.58% expect a decline.
• 93.44% of the reporting companies will make changes to the 2009 sales compensation plan.
• 53.30% made some type of mid-year change to their sales compensation plan design in 2008.
• 78.14% of all companies use sales revenue as the primary performance measure.
• 55.19% say correct goal setting is the toughest part of sales compensation.
• 32.95% say the sales department is solely responsible for the sales compensation plan design.
• 90.0% was the median of the average quota performance reported in 2008.
• 45.39% of all companies made some mid-year quota changes during 2008.

I discussed how many organizations reacted to a recession by adjusting their sales compensation plans, but these results help back up this claim. About 50% of the respondents adjusted their compensation plan design and quota values during 2008, and more than 93% are planning to modify their plan for 2009!

As a side note, I recently contributed to the creation of OpenSymmetry’s Sales Performance Management survey, which will provide more insight about comp plan administration, SPM solutions, and challenges. Let me know if you would like to participate and I will let you know when it’s ready.