Three Guiding Principles for Sales Compensation in Uncertain Times, with Steve Herz
Jul 1, 2020
auto_awesome
Steve Herz, a sales compensation design expert, shares his insights on navigating uncertain economic times. He discusses the trade-offs sales leaders face between motivating sellers and managing cash flow. Herz emphasizes the importance of updating incentive plans quickly to boost morale but warns of potential future adjustments. He advocates for strategic, flexible compensation structures that align with long-term business goals, and highlights innovative approaches to incentives that adapt to market shifts.
Sales leaders must balance the financial stability of salespeople with corporate profitability, necessitating clear guiding principles to navigate uncertainty.
Establishing transparent communication and adaptable compensation structures helps maintain sales team morale and engagement during unpredictable market conditions.
Deep dives
Navigating Difficult Trade-offs in Sales Compensation
Sales leaders face challenging trade-offs in managing compensation during uncertain times, particularly between ensuring salespeople's financial stability and adhering to profit margins and corporate profitability mandates. Many leaders may not have previously grappled with these financial metrics, and navigating this tension becomes vital. This situation harkens back to the 2008-2009 economic downturn, but the absence of recent experience in such conditions amplifies the difficulty of decision-making. It is crucial for sales operations leaders to establish guiding principles in advance to guide their decisions and avoid reactive choices that may misalign with the company's cultural values.
The Importance of Guiding Principles
Establishing clear guiding principles is essential for effective compensation planning, especially in times of crisis. Companies must answer fundamental questions about how they recognize and reward contributions while bearing the financial risks associated with uncertain conditions. Decisions should stem from an understanding of the company's identity and values, ensuring consistency and clarity in actions taken regarding compensation. By addressing these overarching concepts up front, organizations can avoid haphazard decision-making that could negatively impact their workforce and overall culture.
Balancing Information Sharing and Decision-Making
During periods of uncertainty, companies must balance the need to provide sales staff with timely information while also making sound decisions amid unpredictable circumstances. Leaders should segment their decision-making process, managing short-term needs while communicating that plans remain fluid and subject to change as new insights emerge. This approach minimizes disruption and fosters trust, allowing organizations to maintain sales team engagement despite evolving scenarios. Leaders should strive to communicate transparently, providing regular updates on decisions to build confidence and understanding among their sales force.
Leveraging a Toolbox of Compensation Strategies
A range of compensation mechanisms exists, offering sales leaders numerous options beyond traditional quota relief when responding to challenging circumstances. Organizations should consider removing thresholds and adapting payout structures to create a more supportive compensation environment that fosters stability. By recognizing alternative levers, leaders can better engage sales teams, ensuring that strategies remain adaptable to evolving market conditions. It's crucial for leaders to educate stakeholders about these options, as an informed understanding of available resources will promote more thoughtful decision-making related to compensation plans.
This content provides sales compensation leaders an accessible, conversational version of Steve’s latest thinking on sales compensation design for uncertain times. Concepts reviewed include:
Sales operations leaders will face difficult trade-offs between protecting sellers’ incentives earnings and meeting company cash-flow needs.
Promptly updating an incentive plan improves seller morale, but moving too quickly in changing conditions may necessitate more changes later on.
After the most acute phase of selling disruption ends, available revenue forecasts will still be highly uncertain.
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode