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Sales incentive compensation shifting to include team and corporate performance, study finds

November 28, 2016

US companies are putting less emphasis on individual performance and increasing the emphasis on organizational success when determining incentive compensation packages for sales roles, according to a study by the Hay Group division of Korn Ferry (NYSE: KFY).

The study analyzed individual contributor sales compensation data from 2010 through 2016. It found that in 2016, one-third of the companies included the company’s business unit or division performance when putting together sales force incentive compensation packages, more than double the 16% of companies that did so in 2010.

The study also found 26% of companies included a corporatewide or team performance measure when determining compensation in 2016, up from 15% and 12% respectively in 2010. And while 83% of analyzed companies still measure individual performance for compensation purposes for sales roles, that’s down nearly 10% from recent years.

“What we are seeing today is a better balance between measuring the success of the organization and the success of the individual,” said Tom Hill, practice leader of Korn Ferry Hay Group’s US sales effectiveness practice. “Companies today realize sales is a team effort, from lead generation through proposal writing and technical sales support to account management. Rewarding groups accordingly creates the right behaviors among sales team members, who are working together toward one common goal.”

Hill also noted that there is a growing trend in sales and other functions to offer historically low merit increases, so an incentive pay mix and upside opportunity is critical to rewarding top talent. “Base salary usually will increase to keep pace with inflation, but in today’s low-inflation environment, the base salary increases are not as common,” he said.

“Increasingly, companies are ensuring sales employees are being incented with plans designed to reflect company culture, align to company results and add value to the customer experiences during every point of the value chain,” Hill said.

Researchers analyzed data from Korn Ferry Hay Group’s US sales effectiveness plan design database, which includes more than 800 companies and 10,000 plan records. The analysis focuses on individual contributor sales professionals across several industries, including financial services, industrial, technology and consumer packaged goods.