How to Revise Your Sales Compensation Plan during Covid-19

Should you make any changes to your incentives and sales compensation plan in the current economic landscape? We say yes, here’s how.

In earlier times when people used to refer to bygones, the timeline was marked as before and after, according to the major events in their lives – like a war, a death, or an epidemics. For us, it is going to be 2020, when things as they were changed forever.

Just the beginning of the year when most companies were declaring their first-quarter earnings, the future was bright for projected earnings. But things changed within a matter of days. A March survey from Willis Towers Watson found that 75% of companies did not plan on making adjustments to sales compensation plans at that time.

Sales Compensation Plan

The Covid-19 outbreak has put the breaks on sales projections of most companies. Nonprofit workforce researchers WorldatWork released a report in late April that said 36% of organizations had begun addressing sales compensation in light of the crisis, and another 49% were developing plans to do so.

Industries across all spectrums have had to adjust their earning capacities and take a reality check on what can be delivered in terms of services and products.

revise incentives sales compensation plan COVID coronavirus crisis

“It makes sense that sales compensation is a major focus right now as businesses have been hit hard in recent months,” Scott Cawood, president and CEO of WorldatWork, said in a statement. “The impact has been sudden and extreme, and in every industry sector the scales have been tipped.”

Companies and consumers both are spending less, and as a result just about any sales projection for 2020 is going to need an adjustment.

Pay cuts have been a common cost-cutting measure, with 143 out of 151 public companies surveyed by Gallagher reporting pay reductions for at least their CEO. In the same survey, 16% of companies reported reductions for salaried employees as well.

The WorldatWork survey results found that 22% of organizations are likely to be re-thinking sales compensation models for 2021 while 35% believe their sales organization will “recover in the second half of the year” and regain potential losses from the first half.

Steps To An Effective Sales Compensation Plan During The Covid Crisis

Here are some common actions that can be implemented for new sales projections and revised sales compensation plans:

Adjust sales projections

First and foremost companies need to adjust their sales projections and what they need to achieve in the foreseeable future. This means bringing down the quota assigned to salespeople to fulfill. All adjustments should be based on a realistic and detailed forecast of what to expect in these hard times of Pandemic.

Realistic performance measures

The Performance Measures of the salespeople too need to get a hard look. In these times, setting strict quotas to be fulfilled is unrealistic. Whatever the salespeople bring in has to account for a more conservative buying environment in the Pandemic. Also look at the conversion rate (or win rate), which measures what percentage of leads ultimately become customers. Fewer leads will likely lead to a lower rate.

Adjust according to market performance

The sales team as a whole needs a revised plan for team compensation. There is a threshold performance that determines a special payout for good performance. When looking into corrective action, it’s critical to go beyond the usual adjustments of a lower payout, etc. 

Conduct analyses specific to your company’s size, market, and industry outlook.

Sales compensation is routinely adjusted to market performance and demands even in normal times. In crisis times a whole new model needs to be developed. 

Compensation Relief Committee

Set up a compensation relief committee to delve into the matter and come up with metrics that are suitable to the changing times.

The same team can form the best practices benchmark for achieving targets, quotas and measurement periods in times of crisis. This should include timings, the best performers and the retention of the same and paybacks that need to be worked out.

David Rock
David is the author of the business best seller Your Brain at Work (Harper Business, 2009), as well as Quiet Leadership (Harper Collins, 2006), and the textbook Coaching with the Brain in Mind (Wiley & Sons, 2009).

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