Sales Compensation Reaction to COVID-19

The nation’s response to the COVID-19 crisis is forcing a change to most companies’ sales processes. Many outside sellers are having to rely on phone and electronic means to communicate with their customers and prospects vs. being able to visit them in person. The bigger issue is that many companies are experiencing a slowdown in their business and the extent of that slowdown is unknown.

The question many companies are facing during this time of crisis: Are changes to sales compensation necessary to keep the sales team motivated and engaged during this period of uncertainty?

The short and easy answer is yes. The hard part is determining where to start and what changes are needed.

A Path Forward

This post outlines a path forward that your organization can take to approach these decisions in a thoughtful and organized way.

Set up a Sales Compensation Committee

• This is a cross-functional team including a leader from HR, Finance, Sales Operations, and Sales that should meet on a regular basis (monthly or bi-weekly during the times of crisis).
  
• The committee will develop changes to sales compensation in reaction to the challenges your organization is facing.
  
• This committee is given the authority to make decisions on behalf of the company up to certain limits and knows when further approvals are required.
  

Determine if certain sales roles or sales channels are impacted more or less than others.

• Assess the impact of results (sales or profitability) or earnings opportunity for each role.
  

– You can prioritize and determine the type of change based on the level of On Target Earnings (OTE) impacted.

– We recommend starting with groups whose OTE has been reduced by at least 10-15%.

Take this time as an opportunity to revisit your policies and practices and determine if any temporary changes are necessary.

Quantify how much you can afford to increase your cost of sales.

• Incentive pay is variable meaning your incentive compensation costs will be less than what you budgeted for when your business results are expected to decrease.
  
• If you don’t take action, chances are your sellers will no longer be motivated by their sales compensation plan due to the following distractions:
  

– Their cash flow will most likely be impacted.

– Chances are they will have to work harder to earn less.

– They will have other personal distractions like keeping their family safe and managing child care.

Next Steps: Incentive Options

So, how do you limit the financial shortfall to your sales organization caused by factors outside their control?

Below are a few incentive options that you can consider:

• Rollout a new SPIF or contest – this shows your sales team that you are invested in them and increases their potential take home pay.
  
• Create a team bonus – this creates an environment that everyone is working together towards a common goal. This would be on top of their current plan.
  
• Offer a guaranteed minimum payout level – this reduces uncertainty during an uncertain time.
  
• Consider reducing quota – this may be the right thing to do to keep your sales team motivated with more realistic targets.
  

There are several tools available (and several others not mentioned above), but the key is to think through any unintended consequences. Avoid options that encourage sellers to slow down their selling efforts. Also, try to stick to choosing one or two modifications to avoid adding complexity with too many changes, as well as keeping your cost of sales in line with what you can afford.

Written by: Erik Berman, BCR Consultant