Are You Paying Your Sales Reps What You Expected?

6 min read

This blog post is part of a five-part series that will answer critical questions that are top of mind for business leaders today. If you are a Finance or Sales leader, then you know that there is no room for inaccuracy when it comes to compensation and forecasting. There is also no excuse to pay your sales people less than your competition. This article discusses how Xactly Insights can help you discern if you are paying your reps what you expected to, and if you are making the right choices around incentive compensation payments. In case you missed it, last week’s article covered how to find out if you’re getting the performance you want and need from your sales reps. Have you ever gone out to dinner with a large group of people, only to be shocked by the amount when the bill shows up at the table? I’m sure many of us have had this experience – you get caught up in the great conversation, you splurge on a few appetizers, then someone requests a couple more bottles of wine. Before you know it, three hours of eating and drinking have transpired without a second thought as to the cost. Cut to the moment the bill arrives, and all of a sudden that dinner just cost you double what you had budgeted for. While this may be a temporary annoyance in your personal life – prompting you to eat a few more spaghetti dinners at home this month, a similar budgeting slip can be completely detrimental to a business. If a sales manager has unrealistic expectations for how reps are going to perform, or if sales compensation plans weren’t built strategically, then the company might end up paying quite a bit more than they had expected to. In a sales department, this usually comes down to how accurate your means of forecasting is. Imagine if you had the ability to see how precise your forecasts are as compared to others in your peer group, and learn how different organizations might be setting their expectations more accurately. For the time being, let’s stick with our restaurant analogy. Say there are two Italian restaurants a few blocks from each other. One is paying above minimum wage in addition to tips, and the other is paying below. These two owners have no way to observe which one of their payment plans is working out better. What if they could both have visibility into the effects of their compensation plans on both their waiters and their restaurants as a whole? Perhaps each would strive to meet somewhere in the middle. The idea is the same for sales departments at various companies. Without benchmarking data, it’s incredibly difficult to know if you are paying in the same range as your competition, and if your methods of payment are as effective as theirs. It’s even harder to be able to tell if their particular plans achieved better results than yours. That’s the benefit of having a bird’s eye view into ten years of empirical sales data, data that gives you a window into what your peers are paying and whether or not they are paying more or less than they expected to. Wouldn’t it be great to be able to compare your practices to others in your peer group? You’d be able to if you were paying way less than everyone else, or way more than anyone in your vertical. According to Xactly Insights, smaller companies paid 46% more in incentive compensation than larger companies with comparable quotas. This means that those smaller companies paid an average of 54,787 in variable compensation, while those larger companies ended up paying just 33,777. If you’re one of those smaller companies, and your variable compensation is far below industry averages, you might have just figured out why you’re losing some of your top performers. Find out more today about what Xactly Insights can help you discover about your company’s incentive compensation strategy.