Addressing the Impact of COVID-19 on Sales Compensation

Addressing the Impact of COVID-19 on Sales Compensation

Addressing the Impact of COVID-19 on Sales Compensation

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Author: Bill Thane

The effects of COVID-19 on the business; including travel restrictions, loss of clients, and furloughs, have had a noticeable impact on sales. Unfortunately these disruptions will likely will continue well into 2021. Sales operations professionals are having to adapt across many industries. In the interim, many companies are asking sales employees to do more with fewer resources. Customers have experienced negative impacts, and thus buying patterns have been disrupted.

Valued sales employee retention should become a strategic initiative. As many companies begin to reevaluate their operations, address the health and welfare of their employees, and look for innovative strategies to regain their momentum, the question of sales compensation becomes more important.

How companies react to these changes will impact the future. What are some of the changes and remedies that companies should consider? 

Questions?

Alignment with Executive Compensation Adjustments: 

In large companies, executive compensation may be changing to address the changing business conditions. Incentives, such as options and equity-based compensation, may shift to more salary or fixed compensation. Companies should look at these changes and modify the downstream compensation plans to be in alignment including those of the sales units.

Rebalance

As part of this alignment with executive compensation, consider rebalancing salary versus incentive compensation in sales plans. This needs to be addressed quickly, but also requires careful planning. A new compensation plan needs to be documented rather than making minor ad hoc changes. 

Communicate

If changes in compensation are made to address the economic impact of COVID-19, communicate these changes to all those affected. A one-hour teleconference meeting to address the changes and the reasons behind them must occur. Emailing them with a “corporate” message with no opportunity for feedback will backfire. 

Lower or Eliminate the Payout Gates

Sales compensation plans often have “gates” that prevent commissions or incentive payments unless certain performance metrics are achieved. If this is the case, consider lowering the thresholds of these gates. In the case, where these gates are not achievable, eliminate this form of compensation and replace it in the plan with other forms. The goal is to get as many people engaged, motivated, and actively selling as possible.

Questions?

Lowering Quotas

If the company expects a 10% decrease in revenue, this needs to be reflected in the revenue achievement goals of sales as well. This is a time for executive management and sales to align to ensure the retention of key sales executives and strengthen morale. Once again, communicate this change clearly and if this or any compensation change has an expiration date, put it in writing. 

One Time Incentives

One time incentives such as bonuses, “spiffs”, or sales contests are excellent ways to incentivize without changing your long term compensation plans. This is an excellent way to get everyone involved and focused. These don’t always need to be cash incentives, so be creative. 

If the Situation Warrants, Cap Incentive Pay (Temporarily)

Fortunately, there are some businesses that the effects of COVID-19 have had a positive effect on revenues. In those cases, incentive pay may become an unsustainable “windfall”. There is a delicate balance between capping high performers and retention. Consider this carefully, but a temporary solution to change the incentive to a reasonable fixed amount may satisfy both parties. Again, communicate this clearly and explain the business reasons behind this change. Remember, great employees don’t complain, they just leave. 

Tread Carefully on Clawbacks

Much like capping incentive pay, companies that incorporate clawbacks into their compensation plans for sales need to take a longer view on their impact during this health crisis. Each instance needs to be analyzed as to whether the events creating this compensation recovery were related to the COVID-19 events. Depending on the financial health of the company, consider suspending or modifying this component of sales compensation and review quarterly for revision. 

Questions?

Companies across the board are facing impacts from the worldwide pandemic and, for the time being, we are all trying to navigate uncharted waters. Fortunately, there are ways to stay afloat and come out stronger on the other side. Sales Operations, and in particular, sales commissions, are one area where companies can take action and make a positive change during this time. Be sure to consider these possible solutions and how they can benefit your business in the short and long-term.

If you’re still unsure about what is best for your sales commissions, or you’d like to learn more about these possible remedies, reach out to our team at www.canidium.com/contact, or click the button below. We can perform a health check, walk you through the benefits of using an SPM solution, and help provide a strategic roadmap.

Find the author on LinkedIn: Bill Thane, SAP CPQ Sr. Consultant, Canidium

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