One of the most critical issues facing sales organizations today is how to use compensation to retain the employees they want to keep. As the economy continues to improve, the challenge of holding on to top performers will increase significantly. We offer two pieces of information in support of our opinion about this challenge.
First, a recent Accenture survey¹ reports that 41% of US companies and 50% of global companies consider Sales as the most important function within their organizations. Next, HR Chally (experts in sales force selection) research on world class sales organizations reports that sales person effectiveness accounts for 39% of a customer's choice of vendor - more than price, quality or the ability to provide total solution. In many industries, we see sales reps as the glue between a company and its customers. Thus, a clear strategy and supporting compensation designs that help companies retain top sales talent is essential to business success.
The purpose of this Short is to provide our point of view about three topics that contribute to the effective use of compensation in retaining sales talent.
EXPLICIT STRATEGY REQUIRED
The right place to start is with a defined, explicit retention strategy. This should be agreed to by key stakeholders prior to the time of plan design. We find that shaping the right strategy requires answers to the following questions:
- Are the highest paid reps the best performers?
- Are tenured/experienced reps rewarded proportionately more than other reps? Is this the intent or an unintended consequence?
- Is the magnitude of opportunity for performance gained from high performers (top 20%) vs. core performers (middle 60%) quantified?
- Is the business impact of losing one rep - high performer vs. core performer - quantified?
- Are costs related to replacing one rep and replacing his/her sales documented?
BELIEFS ABOUT “STICKINESS”
Top sales executive beliefs about the role sales reps play in creating “stickiness” between the company and its customers have a significant impact on how compensation is used to retain sales people. The chart below summarizes our opinions about how these beliefs impact retention goals and the implications for compensation:
¹ High Performance Workforce Study, Accenture, 2010
DESIGNS/TECHNIQUES
There are many options from which to choose when a company’s goal is to strengthen the retention value of its investment in rewards (e.g., cash compensation, recognition, contests or SPIFFs, career progress). The design techniques that strongly foster retention of sales reps as summarized below. The right mix of these techniques depends on the explicit retention strategy and beliefs about “stickiness” (as described above).
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