Blog: Susan Major Welcome to the sales performance management blog. This blog will be focusing on incentive and variable compensation, quota management, territory management, and reporting and compliance. We will also discuss how new policies may affect the sales performance management world. I welcome your questions, suggestions and articles for discussion. You can also contact me at to share your thoughts. Copyright 2012 Wed, 28 Apr 2010 12:35:27 -0700 New Incentive Compensation Regulations Impact Companies of all Sizes Incentive compensation regulations are changing the way companies of all sizes manage, monitor and report on their incentive compensation plans. 

The U.S. Securities and Exchange Commission (SEC) recently began requiring that public companies address their compensation and incentive compensation plans for all employees, not just executives.  All public companies, regardless of size, have to identify and report on their compensation programs that present potential risks to the business. 

Generally, most larger companies have automated, controlled and auditable incentive compensation management solutions, while most smaller companies still use spreadsheets to manage their incentive compensation programs. 

Regardless of company size, spreadsheets will no longer be adequate for managing incentive compensation plans. 

The underlying issue is risk.  How risky is it for a company to not know their compensation obligations?  While larger companies may be managing larger amounts of payment, smaller companies are likely to be managing larger percentages of their total revenue.  A particularly good quarter for one or two high performing sales people could create a significant issue for a smaller company.  What CFO wants that surprise at the end of a quarter, or the end of a year? 

Incentive compensation plans can be risky.  Both the company and the employee are making a bet - if the employee does X, they'll earn extra compensation.  It's a calculated bet designed to drive specific behaviors from employees.  But without the right automation, controls and processes, that bet can backfire on the company. 

The key to avoiding surprises is to have control, visibility and awareness of potential risks.  With the right approach to incentive compensation management, a CFO could know the best case and worst case scenarios for each quarter.  For example, he or should could know the answer to "What is my payout if all my employees earn their quarterly incentives?"  or, on a more strategic level, "How do I assess revenue and profit while factoring in compensation payouts?"

These answers not only mitigate corporate risk, but they also provide the path to more strategic incentive compensation plans.  Oh, and by the way, if you are publicly traded, you'll now be required to know those answers.

For more information on incentive compensation and regulation, sign up for a live Webinar taking place on April 28. 

]]> Incentive Compensation Management Wed, 28 Apr 2010 12:35:27 -0700
The Intersection of Incentive Compensation and Regulation Incentive compensation can sometimes be the "dirty little secret" of corporations.  Executive compensation is often "public information" - public companies must reveal the compensation packages of key executives.  Private companies are not required, but often there is a board of directors aware of, and monitoring the compensation packages of executives.

However, the sales force, earning incentive compensation packages, often lacks any transparency.  The "hard" numbers are known - a sales person's base pay - but the overall package, once incentives and bonuses are paid, can be a "hidden" number.  Perhaps the CFO is looking at the total pay of top sales earners; perhaps not. 

The lack of transparency in incentive compensation packages is more a result of out-dated processes than a deliberate action to hide the total numbers.  Out-dated processes for incentive compensation include managing earnings and payouts on multiple spreadsheets, lacking formal processes for disputes, an inability to document and track adjustments to compensation and even lacking a single source to track both base pay and incentive pay.

Companies that lack comprehensive Incentive Compensation Management systems and processes will soon find themselves up against regulations.

In December 2009, the Securities and Exchange Commission passed regulations regarding incentive compensation for institutions under their rule.  The regulations come out of the recent financial crisis; the goal is to create accurate risk management of incentive and variable compensation plans.  All institutions overseen by the Securities and Exchange Commission will need to adhere to these regulations.

What can organizations expect in these new regulations for incentive compensation?

  • Stricter reporting requirements
  • Limits on the total amounts paid
  • Audit and traceability restrictions

Companies need to assess how they are currently tracking, monitoring and measuring incentive compensation and understand if those processes will provide the transparency and information required of the new regulations. 

The days of tracking incentive compensation on multiple spreadsheets are soon ending.

These institutions may be the first to change how they manage incentive compensation, but others will soon follow.  Will you be ready to make that change?

For more information on incentive compensation and regulation, sign up for an April 28 Webinar, at: .

]]> Incentive Compensation Management Tue, 06 Apr 2010 12:45:04 -0700
Making the Business Case for Sales Performance Management In a recent sales performance management Webinar with Ritu Thakur of Smart Tech Inc., I provided an overview of how to select a sales performance management vendor.  The first step in the process of selecting a vendor is to make the business case for sales performance management.


The benefits of sales performance management are myriad; but benefits alone don't make a business case.  Hard numbers and real problems are what build a business case.  Let's take a look at the do's and don't's for building a business case.



  • comprehensive Key Performance Indicators (KPIs) across sales people and processes and existing technology.
  • Do...include tangible benefits and expected hard costs.
  • Do...know your current sales metrics (including quota, territory, product, etc.,) and future target sales metrics.
  • Do...set short-term and long-term return-on-investment (ROI) measurements.
  • Do...understand the implementation model options for sales performance management and how they will fit within your organization.



  • Don't...focus only on the technology solution.  The most effective sales performance management solutions use enabling technology to change processes and improve the performance of sales people. 
  • Don't...ignore intangible benefits and soft costs. 
  • Don't...forget to consider your organization's culture.  Understand that a general rule of thumb for change is that 1/3 of the people will be enthusiastic about change, 1/3 will not be enthusiastic but will go along with change, and 1/3 will resist change.
  • Don't...forget to identify automation opportunities.  Think about your current sales performance management and incentive compensation management practices.  This is the opportunity to eliminate duplicate spreadsheets, implement workflow and alerts and streamline any number of manual processes. 


There are many approaches to building a business case for sales performance management.  Some organizations pull together cross-disciplinary teams, some organizations hire consultants, and some use a combination of internal and external resources.


Ultimately, whichever approach you use, it is vital you focus on why your organization needs sales performance management; what is currently not working in your sales measurement process and incentive compensation management process, and what is working? 


Selecting the right sales performance management vendor is as much about your people, your organization and your business goals as it is about identifying the best technology solution.

]]> Sales Performance Management Business Case Tue, 23 Mar 2010 13:09:19 -0700
CSO Insights' Sales Performance Management Survey In late 2009, CSO Insights surveyed 1,051 companies about sales performance management and sales compensation.  More than half of the survey respondents were from companies with revenue ranging from $250M to $1Billion in revenue. 


The results of the survey, combined with analysis from CSO Insights' Jim Dickie and Barry Trailer, identify some key findings in the sales performance management and sales compensation markets. 


My take away from these results is that many firms are able to manage the basics of their sales compensation plans (timely payouts, etc.,) but that most have not made the jump to sales performance management.  The key indicator in this is that most firms are missing the correlations between sales behaviors, sales plans and corporate goals.


Here are some findings that point to the larger need for sales performance management:


  • One in eight companies have no idea what impact their compensation plans have on the selling behaviors of their reps
  • Sales compensation plans seem to be reinforcing behaviors, rather than driving behaviors
  • A lack of transparency and real-time reporting limits the leverage of commission payments
  • Companies have an inability to forecast the impact of compensation design
  • Plan and market complexity make real-time adjustments difficult
  • Larger corporate and strategic goals are not tied to individual day-to-day activities


This report also covers key trends in sales compensation, such as the percentages of companies having reps make quote and other benchmarks.


If you would like a copy of this report, please contact Revelwood at  



]]> Sales Performance Management Stats, Surveys and More Tue, 09 Mar 2010 13:50:54 -0700
Growing Adoption of Sales Performance Management Sales performance management, and its predecessor/related discipline of incentive compensation management, are initiatives that have been around for several years.  But now it appears sales performance management is poised to be adopted by large number of companies.


Why are companies turning to sales performance management?

  • To respond to increased competition
  •  A need for sales accountability
  • A focus on more aggressive sales
  • To improve sales margins
  • To improve timeliness, accuracy and transparency of sales commissions
  • To gain better insight into sales trends and patterns
  •  To address reporting compliance issues


The adoption growth of sales performance management is reflected by the comments of many analyst firms and influencers.  For example:


Maybe it is time for you to investigate how sales performance management can improve your bottom line?  


]]> Sales Performance Management Market Tue, 02 Mar 2010 11:32:06 -0700
Rumblings of Change If you have your ear to the market then you have probably heard rumblings regarding incentive compensation regulation.  Did you know that there is discussion that the government might mandate how someone in the financial industry is incented and paid?  Yep, there is talk.


There is discussion on regulating variable compensation in the mortgage industry, and not allowing compensation to be tied to rates.  In the financial industry, there is talk of tying compensation to the life of the risk or liability.  This means that those that are in the 'high' risk sales will be compensated over a period of time of the risk, and possibly have a portion of the compensation held until the end of the risk period.  This is all new and very controversial.  One of the key questions is whether this will only influence those companies that took bail out money, or if this will be industry-wide.


The way we calculate compensation and what we calculate it on is changing.  I have to believe that those who have been studying the economy and the government bailout have been expecting this.  Evidently, they are considering regulations that would spread compensation out over the period of risk, if there is risk involved.  There are many organizations that currently do this, but the true impact cannot be gauged until the recommendations or mandates are released.  Companies that deal with high risk sales--where there is potential loss or liability associated with a sale (e.g. tied to rates or high risk activities)--will be the most vulnerable to the impact of these changes.


For those who work with compensation, you are well aware that these types of compensation changes tend to snowball and the effect can be felt for years.  Once these changes take root, it will not take long for other industries or organizations to take note and look at how these changes could be used to positively influence their own companies.  Some organizations will use these changes as a negotiating tool to hire top performers from organizations that change compensation, and some will use these changes as an opportunity to strengthen their bottom line growth.


One of the key functions of incentive compensation is to tie compensation to an income producing transaction (e.g., sale of a product or service).  Some companies already tie the compensation to the life of a contract or service, but based on the current economic market, there is the possibility that this will become more of a standard in incentive compensation.  Instead of the sales representatives or executives receiving an immediate compensation value, this may be pushed out to adjust for risk factors.  For example, if there is a window of 90 days for payment, the sales representative or executive may not get paid until payment is received versus when the invoice goes out.    


The winds of change are upon us.  There will be changes made to how companies compensate.  The question is whether you will be affected through mandated regulations or voluntary action.


]]> Tue, 01 Dec 2009 13:35:29 -0700
SPM and the Decision Making Process  

When you mention Sales Performance Management, it's not unusual for everyone in the room to cringe. Why? Often, no one really owns it--it belongs to Sales, no it belongs to Finance, no it belongs to...


Even though this is one of the most critical areas for an organization, it is one of the least agreed upon. Sales drives revenue and impacts the financial bottom line of the company. While Sales executives focus mainly on the production of revenue, the Finance executives monitor how the revenue affects the financial statements of the organization. Often, the decision making process for these two constituencies are not in sync and that can negatively impact the health of the business. The truth is that key executives in both areas need to collaborate and determine how the decision making process should work for the organization.


Sales Performance Management and its components--incentive compensation, territory and quota management, and product management--are important in ensuring Sales and Finance are on the same page. The ability to make informed decisions not only impacts a company's viability, it helps guide Sales and Finance on where to focus their attention. If executives are monitoring by specific metrics, then they will know where the organization is strongest and where they can refocus resources. For example, if a company discovers that a particular mix of products sold as a package is more appealing to the client base, then they can refocus on selling the package versus the individual items to increase revenues.


Defining and agreeing upon metrics is critical in the decision making process. Metrics could include regions, territories, product groups or lines, sales force personnel, reporting lines, transactional liability and time periods. If you are wondering how to define these metrics, look to one-off or special request reports. Sit down with key decision makers in Finance and Sales individually and create a wish list from these two groups. Then combine that list. Then sit down with the entire group, and sort through and prioritize the list. These key metrics can aid in decision making and in defining your Sales Performance Management goals.


Sales Performance Management is the process by which you manage your sales, incentive compensation, territories, product and or services to drive revenue, and how you manage each of these components affects your bottom line. By aligning Sales and Finance and defining key metrics, you will aid executives in making decisions that will positively impact the financial bottom line of the company.


]]> Fri, 21 Aug 2009 12:12:26 -0700
SPM Projects Sometimes Have a Life of Their Own! When a project begins, there are expectations of it going according to plan.  Unfortunately, projects often take on a life of their own.  There are many points where it is best to stop, take a deep breath, determine where you are and where you want to be, and how best to get there.


A project plan, at best, is an estimate and a road map that you desire to follow.  If your mindset is that you cannot veer from it, then you'll likely be disappointed.  In the real world, this map does not take key factors into account that can and will affect your project.  Also keep in mind that scope changes, unexpected organizational changes and testing can influence your plan.


What are some of the key factors you ask?  Let's look at a few of them.


1)      Resources:  When dealing with resources, there are foreseeable and unforeseeable things that can happen.  A foreseeable thing is that your resource has a full time job and now you want them to focus on a project that may require 25% to 80% of their attention, depending on the phase of the project.  Realistically, something will have to give one way or another.  An unforeseeable item is if you have a key resource that you are counting on and they hand in their resignation to you halfway through the project.  In both these cases, you end up with resource constraints that could negatively impact your project plan.  Your budget should always reflect a reserve to add additional resources if needed.


2)      Data:  You find that your data has issues that you knew nothing about because somebody was manually manipulating it to make it work.  Data issues play a primary role in project success or failure, and you can run through your project budget very quickly dealing with them.  Unfortunately, most are not identified until the implementation is under way.  Anticipate their occurrence and work through your data issues as they are identified.


3)      Testing:  The testing phase determines if the system is functioning, and if it functions to the user's requirements.  Many times, the testing process will take longer than anticipated.  It is reasonable to expect user acceptance testing to take four to six weeks, but I have seen it run much longer.  Setting realistic expectations of what is involved in the testing process can aid in success.  Expecting actuals to match 100% to expected results is unrealistic.  Why you ask?  Because there is always some exception that must be processed that was not taken into consideration for your implementation.  It is not realistic to expect all exceptions to be programmable or implemented in the new system.  Be aware of resource constraints and ensure resources can be available to focus on the project or add additional resources to assist with the implementation.


Your project plan is, at best, an estimate of your road map.  Keep in mind that implementations are not set in stone, and as you proceed through your plan, you may find you need to make adjustments.  Don't be afraid to stop, take a breath and revisit what you are doing, where you are, and adjust to get where you want to be.  I believe it better to be proactive and determine that it's necessary to change the plan, than to proceed and have to explain later why it was not achievable.


]]> Wed, 17 Jun 2009 07:22:46 -0700
What to Expect When Changing Compensation Plans... When an organization makes the decision to change the way they compensate their sales force, incentivize their management team or change other variable compensation plans, they are usually surprised by the headache it becomes.  


Most people become used to something and don't like when it changes. The same can be said about compensation plans.  People get used to a way of doing things, so they may resist a change to the way their compensation is calculated.  Especially if they perceive that they will get paid less or they will have less control over it.


So you should expect push back from the participants to their management team, and from their management team to you.  Unless you are dealing with a legal or compliance issue, you will find yourself compromising on the change to the plans.  It may be best to take a phased approach to changing the plan.  


A key to successful plan changes are transparency of data and calculated results to your participants.  Another key is clearly defining processes for dispute and exception handling.  If exceptions are not defined and agreed to, then any changes to compensation plans will be that much more likely to be challenged.  


If your plan participants do a lot of shadow accounting and challenging of the current plans and system, then expect when you attempt to change plans that there will be greater push back.


Some important tips that can aid you in implementing changes to compensation plans:

1.      Clearly define why the change is being made.

2.      Ensure that the purpose of the plan is clearly articulated and understood.

3.      Communicate how it benefits the company e.g., protect the company viability and assets (people).

4.      Communicate how it benefits the participant e.g., if the company is healthier then the participant has greater job security and potential for continued income.

5.      Ensure that there is a clearly defined process to address personnel concerns regarding the change to their pay.

6.      Communicate a timeline on the transition to the new plan.  Do not announce it on one day to implement on the next day.

7.      Get commitment from the management teams to work with their people to resolve concerns without making concessions that compromise the purpose of the plan or the goal of the plan.  


Many companies are reviewing their compensation plans in light of this volatile economy.  There is a need to review how to react to the changing markets and public reactions.  Preparation of the participants of the changing plans and clear communication of the purpose of the plan and any changes will aid the organization is gaining acceptance of the plan changes.  Stressing the security of the participants in light of the security of the company's viability will aid in lowering resistance to change.


I cannot promise that you will not hit a few bumps in the road through this process or that it will not be a stressful process. I can say that if your participants understand the need and the driving force behind the change they will be less resistant especially if they feel secure in their future and the organization's future.


]]> Tue, 05 May 2009 08:37:10 -0700
What to Incent On, That is the Question Many companies are reviewing how they incentivize their sales force.  In an economy strife with decreased expenditures, looming lay offs, and questionable economic stability, companies are asking, 'How do I incent my sales people and what is my basis for incenting them in this economy?'


Have you asked yourself that question?  Have you wondered whether your current incentive compensation plans work?  Do you wonder if there is a better way?  You are not alone.


With decreased sales, many companies are downsizing the sales force, and changing compensation plans to allow for decreased sales.  This may include changing the targets or quotas assigned to the sales force.  The expectation of a smaller sales force managing a larger territory.  The flexibility to model these changes prior to making them, may be the key to making educated decision versus 'knee jerk' reactions to the market.  


Many companies have been moving away from incenting on sales to margin or net sales.  Some even going further to incent on collected versus billed or invoiced amounts.  Organizations are looking harder to not only incentivize their sales force but to also protect and maximize their profit margins. This means reviewing metrics that include net to gross sales, margin to income, and incentive expense to net income. Do you know the impact of your incentive compensation to your bottom line financial statements, and is it what you expect?


If you and your company are in the process of reacting to the market, share your thoughts with me and our fellow readers.  I'd like to hear what you have to say.  Your questions are welcome, too.  We can put our heads together and discuss options, ideas, and strategies.


This is a troublesome time, but it is also a time of incredible opportunity.


]]> Mon, 20 Apr 2009 09:36:03 -0700
'Incentive' - The New Bad Word in the Compensation World Has incentive become the new "bad" word in the world of Compensation?  It may have thanks to the current response to anything related to extra compensation for highly paid individuals.  Between Wall Street, the automotive industry, and the economic stimulus package there has been a 'huge' outcry across the globe.  Riots in Europe have raised the tension (Paul Lewis, The Guardian, Monday 23 February 2009,  So this is not just a US issue, this is a global issue.


The TARP plan outlines specific criteria for those companies receiving funds and the ability to accrue and pay any kind of incentive or bonus to the top 25 highest paid employees (SEC. 102. EXECUTIVE COMPENSATION AND CORPORATE GOVERNANCE).  This may bring us into a whole new world of incentivizing executives, highly paid sales personnel, and maybe the entire sales force.


Are we prepared for the 'microscope' that is coming our way?  There is no doubt in my mind that there will be additional SEC reporting requirements around compensation for highly paid personnel of publicly traded organizations.  Will there be a new definition of 'viability' that will be a criteria for incentive compensation and bonus' for highly paid personnel?  What will this 'viability' standard be defined as?


There is the very real possibility that there will become two separate standards across industries: one for those companies that except bail out money, and one for those that do not accept bail out money.  Talk about complicating our economic environment. 


The one thing I can ensure us of is that there will be changes coming over the next few years as companies adjust to the current economic environment, and I believe incentive compensation will be one of the key areas of change. 


]]> Tue, 31 Mar 2009 12:37:28 -0700