Avoid Sales Compensation Benchmark Gaffes With This 4-Step Plan

Benchmarking tools often match compensation by job title. However, titles can be misleading. You understand the risks of getting this process wrong. However, there are still times you slip up and mismatch compensation plans and could cost your company huge sums of money. It’s difficult to grow revenue faster than your industry’s growth rate and faster than your competitors.

Why? Because Sales compensation benchmarking takes into account different variables than benchmarking for other positions. And you’re not always feeding your benchmarking tool the information it needs. As a result, you could have incentive compensation plans that don’t get you to your revenue goal. 

Don’t want to make that mistake? Follow these four steps for accurate Sales compensation benchmark matching. To go deeper, leverage the Sales Compensation phase of the How to Make Your Number in 2018 . Turn to page 395 of the Sales Strategy section to review emerging best practices for compensation planning.

Consider All Compensation Variables

When matching any job with the right compensation, you have to take into account the Total Target Compensation for that position. The Total Target Compensation is usually comprised of the following:

• Sum of variables (benefits, perks, etc.)

• Base salary

   

This list may be sufficient for your standard operational or marketing benchmarking, but it’s not for Sales.

There are more variables involved in Sales compensation. Therefore, you have to start with your Total Target Compensation, and then factor in other conditions.

For example, many top performers in Sales get rewarded for over-achieving. Let’s say a Sales leader is bringing in 200% of his quota. He’s going to receive a lot more money than someone who just made his on-target earnings.

As a result, when considering Sales benchmarks, the HR leader must understand the following: A large variety of salespeople may have the same base salary, but the top 10-20 percent of performers will receive more for their work.

Therefore, the list of factors to take into account for Sales benchmarking includes:

1. Total Target Compensation 

• Base salary
• Benefits and other salary package elements 

   

2. Rewards for performance 

Understanding these variables are important, that’s why we’ve created the Sales Compensation Scorecard. Use the Scorecard to evaluate your sales compensation plan and identify any weaknesses. Download the Sales Compensation Benchmarking Assessment Scorecard.

3. Flesh Out Specific Job Descriptions 

Benchmarking tools often match compensation by job title. However, titles can be misleading.

There are a couple of reasons for this:

• Companies use different titles for similar roles. What one company calls an Account Executive another might call a Strategic Account Manager.
• Companies inflate titles. Most clients want to think they’re speaking to a senior level manager, so the company will change someone’s title to make them seem of a higher rank.

   

For these reasons, it’s crucial to match compensation based on job descriptions rather than simply job titles.

In order for these matches to be accurate, job descriptions should be as specific possible. You will need to clearly identify what each person does, who they interact with, and what distinguishes their job from the next guy’s.

Here are some examples of what to include for each job description:

• Detailed roles and responsibilities
• Metrics they are responsible for
• Hunter or Farmer? (Are they actively calling on prospects or increasing organic sales from existing customers?)
• Managing or Supporting role?

   

Once you have job description, you can go into your benchmarking tool.

4. Make Your Matches

For the most accurate and effective matches, take these factors into account, in this order:

• Job Title. If you get a match on a job title, then you have to take a look at the job description.

   

• Job Description. This is the most important factor, as it provides the most detailed look at the role in consideration.

   

If your title and your job description both fit the compensation, then you most likely have yourself a match.

If they don’t match, narrow your search by keywords in job responsibilities and competencies. This should bring up more results that you can look through.

If—even then—you still can’t find a good match, consider that you may be trying to match a hybrid role. Search for the two separate roles in the benchmark tool, and assess what percentage is applicable to one role versus the other. Then, your benchmarking tool should be able to deliver a hybrid-based compensation range.

Beyond the job description and job title, you’ll need to match the following factors:

Keep in mind that there are different ways to define tenure. For example, tenure can represented by overall experience in the industry or just time at one specific company.

• Industry
• Company size, based on employees or revenue
• Geography: What does this person need to make for a living wage, based on their location?

With these factors in your benchmarking system, you should be able to come up with effective compensation matches.

Still, colleagues and cynics may scoff at such a detailed process. That’s where the final step of this guide comes into play.

You know that this is the most effective way to match compensations. But others may not understand it. You should succinctly be able to describe what you’re doing and why you’re doing it. It’s not always good enough to just execute the strategy and show the numbers. In order to provide credibility, you must support and defend these steps with conviction.

Why is this important? Compensation plans are often too complex, and other times they are too simplistic. As your company evolves its strategy and you evolve your sales strategy, the compensation program needs to keep up. Old compensation concepts are both a blessing and a curse. Stick to the way you have always done things and you are sure to miss your revenue targets but over-rotate to the new concepts, and you will push talented reps out the door. It is imperative to refresh the incentive compensation program at least once per year if you want to hit the revenue target.

Make sure your team gets this right, you’re the one who takes the hit if the company pays 10 people for the same deal. Now, with these four steps, you can be sure that won’t happen.

Have expectations gone up and left you wondering if you can make your number? Here is an  that will help you understand if you have a chance at success. Take the Revenue Growth Diagnostic test and rate yourself against SBI’s sales and marketing strategy to find out if:

• Your revenue goal is realistic
• You will earn your bonus
• You will keep your job