A fresh outlook on the challenges in the Sales Compensation Management space by Elliot Scott Amit Jain October 8, 2020


2020 has really been a difficult year due to the corona pandemic and several other natural disasters. This has brought never seen challenges to the fore. With COVID-19, the sales environment has shifted because of social distancing and isolation norms resulting in a lack of in-person access. New modes of stakeholder engagement are leading to an impact on all aspects of sales operations. Managing, motivating, and ensuring remote sales forces are effective and engaged during such a period is a challenging proposition. Additional complexity is arising from the fact that different parts of the countries are following significantly different infection and recovery trajectories resulting in the further need for local adjustments. Sales operations teams are constantly striving to keep up with this challenge by adjusting their sales incentive plans to manage the impact on sales personnel. Therefore, I have invited Elliot Scott for this interview to share his perspective on trends and challenges related to sales compensation management in different industries.

Elliot Scott is a sales compensation and sales effectiveness consultant and the owner of Elliot Scott Consulting LLC. He has over 20 years of sales and marketing consulting experience, focusing on sales compensation plan assessment, design, communication, and modelling (for both domestic and international clients), sales organization and job design, quota setting, sales force sizing and deployment, benchmarking, and sales productivity analysis. He has worked with well over 100 clients in 40+ industries in the U.S. and globally. Prior to starting his own business, Elliot held senior sales effectiveness and compensation positions at Towers Watson, The Alexander Group, Korn Ferry Advisory, and ZS Associates. Elliot has also authored articles for Workspan, Synygy Magazine, and other publications and conducted seminars and workshops on sales compensation and related topics at professional conferences in the U.S., Asia, and the Middle East. He has an MBA with honours from the University of Chicago and a BA from Dartmouth College. He can be reached at escott@escottco.com.

Amit: If we keep the current pandemic situation aside, at a broader level, how has the sales compensation landscape changed for several industries, such as insurance, high tech, manufacturing etc., in North America?

Elliot: Over the past several years, business circumstances, the sales process, and sales roles have evolved in important ways, and sales compensation has been challenged to keep up with the changes. For example:

  • Shift to Subscription Revenue Models: Almost all industries, along with the software industry, are experiencing a dramatic shift to selling many products as a service (XaaS). The value of a sale may be uncertain at the time of sale, and the revenues come in over time. This makes it extremely challenging to find the right metrics to use for measuring & rewarding sales performance. The role of the salesperson is to find and close new businesses and quickly move on. Ensuring that the product is fully utilized, ultimately resulting in maximizing the revenue, often does not fall under their responsibilities. So, there are two ways a sales compensation plan can be designed:
  • Paying based on the estimated value of the contract, OR
  • Paying based on the revenues over time
  • The first plan is motivational and encourages the salesperson to move quickly on to the next sale, but the second plan ensures that the salesperson will be accurately compensated for the full value of the sale. The challenge with the second plan is that it is less motivational and keeps the salesperson hooked on the account for a longer time which detracts from new business selling. In striking the right balance between the two plans, companies use a variety of schemes, including true-up calculations to previously estimated sale value and commission rates that decline over the length of the deal.
  • Greater Access to Information: There are many dimensions to this change. One is that buyers can move much further along in the sales process before engaging with a salesperson. Detailed specifications, demos, reviews, and up-to-the-minute pricing can be accessed online, all at the click of a button. This puts a premium on marketing agility from the solution provider’s standpoint. Having said that, it moves some of the responsibility for prospecting, qualifying, and performing needs assessment away from the sales organization. Furthermore, younger buyers increasingly prefer to buy using apps and online tools rather than by engaging directly with salespeople. Being adept at using online tools, greater use of inside sales & account management & hybrid sales/marketing roles are some of the implications towards crediting the sale. As a result, non-revenue measures, e.g., qualified leads, and team measures, are proliferating, leading to downward pressure on the pay mix, as it becomes difficult to objectively track individual performance.
Amit: What would be the key challenges faced by different industries in the future? With COVID-19, the sales environment has shifted because of social distancing and isolation norms resulting in a lack of in-person access. What are your thoughts on this?

Elliot: While COVID-19 has significantly lessened the emphasis on in-person selling, two things remain true:

  1. In many industries, particularly those selling to small and medium businesses, customers still value their relationships with salespeople. And salespeople know that if they do not pay attention to their customers, they will buy elsewhere. Customer access will remain important, so the challenge is to find new ways to maintain it. Free calendars and pens are declining in importance, but value-added services like free software and training or sponsorship of events or popular causes, may be of increasing importance. Although building relationships with customers is “old school,” salespeople who can leverage technology to add value will have more chances to exercise their charm.
  2. As a sales effectiveness consultant for over 20 years, but not a salesman myself, I have long seen that there is such a thing as sales talent. There are some people who, as they say, can sell ice cubes to Eskimos, and sales organizations that can attract and motivate them will continue to do well. I once did a project for a new sales organization selling telecommunications services, over the phone, to small businesses. A full 6 months after launch there was one salesperson (out of 20) who was responsible for 50% of the sales! So, regardless of the sales process and the difficulty of designing a fair and objective incentive plan, companies will continue to need sales compensation plans that can attract and reward talented sellers.
Amit: How are different organizations coping with the pandemic, and what are the measures taken by them on the sales compensation side to ensure that plans continue to be motivating, fair, and fiscally responsible?

Elliot: The pandemic has wreaked havoc with sales organizations. In-person access to customers has declined severely, and demand has departed markedly from the historical trend. A recent CPG client that sells coffee to both restaurants and supermarkets, with two equally sized sales forces, suddenly found business crashing in one segment but soaring in the other. In the restaurant segment, revenue goal attainment became impossible and in the supermarket segment, everyone was going to earn well above target. While managing this under and over-payment situation was a problem, the larger problem was resource allocation. Even with all the valuable pre-sales activities the restaurant sellers might do, much of their time was better used serving an entirely different segment. Perfectly calibrating goals and plans to accommodate this dramatic change and uncertainty is impossible. So financial motivation in the form of individual pay for performance had to take a back seat to fairness and fiscal responsibility. Fortunately, the incentive plans for the company were already capped (something generally to be avoided but sometimes necessary) and had at best, a moderate level of incentive opportunity. While this had likely hurt them in the past, it made it less of an impediment to resource allocation.

In this pandemic, many companies believe they have additional leverage over their salespeople, knowing that it is hard to switch sales jobs when industry revenues are declining, and some have responded by cutting payout rates dramatically. At the same time, businesses do not want to drive their highest performers away when business picks up. This has led to a proliferation of individualized compensation arrangements.

Amit: What has been the most frequently used approach/measure by organizations to deal with this situation? Are organizations moving towards paying at target, adjusting goals, moving to longer performance periods, or something else altogether?

Elliot: Most sales organizations recognize that paying everyone at target will undermine motivation and performance. This is less the case with inside or online sales organizations, where activity is more easily monitored and taking the day off cannot be kept secret. Most companies have taken more sophisticated approaches that touch multiple dimensions of plan design: lower mix with partial guarantees, changing performance measures to increase the weight of MBOs and non-revenue measures, lowering thresholds and flattening payout curves, and, yes, adjusting goals. Adjusting goals is tricky, particularly when the impact of the pandemic on the overall forecast remains unknown. The objective of the exercise should be to preserve the distribution of performance and pay so that higher performers earn more than lower performers, regardless of absolute levels of goal attainment. Think of it as grading on a curve, driven by input from sales, finance, and human resources, and communicated as openly as possible._

Amit: How do you see sales compensation solutions evolve going ahead? How will the sales compensation need of organizations change in the future?

Elliot: The increase in the amount of available data, the decrease in the ability to effectively measure individual sales revenue at the time of sale, and the proliferation of hybrid sales/marketing roles will continue to drive underlying complexity in sales compensation programs. Performance measures like product usage, or even time spent on multiple pre-sales platforms, are increasingly available and may be better aligned with salesperson effectiveness than more traditional measures. So, the data used to measure and pay on sales performance will become more diverse, as has happened in more technically sophisticated organizations. But complexity undermines line of sight and sales motivation, so the challenge will be to harness this data and use it in plans that remain simple, easy to understand, and objectively and reliably measured.

Amit: What would be your recommendations to organizations using old-world legacy systems or are still working off Excel workbooks?

Elliot: While SPM vendors are unable to pronounce “spreadsheets” without sneering, most sales organizations, particularly smaller ones, use them exclusively to administer their sales compensation plans. And for some, they work well. But as businesses grow, complexity can quickly overtake the ability of spreadsheets to manage changes efficiently. Spreadsheets can generally calculate payouts for any plan, but they are not at all optimal for managing changes to underlying data. When changes in reporting relationships, titles, targets, pricing, products, and distribution become more frequent, spreadsheets become unworkable without a large team of administrators. On top of it, when manual data entry is involved, they are more prone to human error, which also increases with complexity. It’s a truism that your salespeople will catch these errors…but only those that are not in their favour!

An under-appreciated advantage of SPM over spreadsheets is its ability to provide impactful, accurate, and timely reporting to both the salesforce and management. I know of no situation where spreadsheets can match SPM in this regard. Knowing how you are performing can be almost as motivational as the incentive earnings you receive at the end of the performance period.

But there are two things that have consistently made SPM implementations less successful than their vendors would have you believe. The first is that they are often very costly. Not only can the cost of the software be significant, but there can also be an enormous implementation cost, not to mention the cost of professional services to manage plan changes, which vary from application to application. The second is that once implemented, the software does not seem to work properly, not because of bugs but because important details fell through the cracks in the implementation process. My advice to companies contemplating SPM implementation is first to look carefully at all the costs, current and projected, and expect that they may be higher than projected. Second, do not underestimate the challenge of successful implementation. Setting up and testing all the data feeds properly, with internal subject matter experts who understand not only the data but what can go wrong, is critical and may take longer than you plan. If you pay a lot of money for a large SPM implementation, find it doesn’t work, try to fix it and fail, and ultimately write off the investment, you will not be the first company to do so.

Amit: Do you think the SPM solution industry is well placed to explore the market potential, or are there areas that they need to work upon? If Yes, what would those areas be?

Elliot: The SPM industry has been successful and continues to grow. It certainly is not going away, and as with Salesforce.com, the capabilities of SPM solutions have increased a great deal over time, driving adoption and reach within customer organizations.

A recent trend has been for SPM providers and integrators to tailor their solutions more closely to individual industries. It may not be that the software needs to differ significantly between industries, but the data feed and its relative importance of them can differ from industry to industry. Likewise, user interfaces need to be intuitive and industry-specific. SPM providers and implementers have done a good job tailoring their marketing by industry, but the tailoring of the products and implementations needs to catch up.

As a consultant who specializes in helping companies assess and design their sales compensation plans, it has long been puzzling that SPM providers and implementers have not yet driven me out of business. If they want to be full-service providers, they cannot ignore the critical importance of plan design. Traditionally, plan assessment and design work has been seen by the SPM industry as a delay or roadblock to sales. They may tell customers that they can help them with that work, but most have not built the capability. For one thing, a high percentage of service revenue may undermine the market value of software companies, and it is true that design + implementation take more time than implementation alone. But without well-designed plans, SPM customers will not get full value from their systems. I am fine with that because then those customers will call me. But in the long run, it may be a missed opportunity for the industry.

Amit: In conclusion, we can say that this unprecedented period has forced organizations to do some rethinking on their overall sales compensation management philosophy, but their choices have been constrained due to the limitations of their legacy systems. The new selling structures and additional behavioural changes may require the introduction of a new thought process that can be combined with the new-age technology ecosystem. This may allow companies to innovate in their sales compensation philosophy while significantly improving their operational efficiency, payout quality and timeliness, adherence to process compliance and overall motivation of their salesforce.

Thank you, Elliot, for taking time out and talking to us on such a strategic and complex subject. I am confident that your ideas will help readers deep-dive into their sales compensation plans while also re-evaluating their sales compensation solution ecosystem to use that as a competitive advantage.

What has been your experience with challenges related to Sales Compensation Management? How are you dealing with your sales incentive plans during a pandemic? Feel free to reach out to us at amit.jain@aurochssoftware.com / Incentius in case you have any questions or to talk about your current challenges and bounce off any ideas with no strings attached.


13 ways to reshape sales compensation plans during a pandemic Amit Jain September 23, 2020


2020 is turning out to be one of the worst years in recent history, with a significant impact on global economic health. The primary reason for this has been restrictions imposed to contain the spread of Corona pandemic while there have also been several localized natural disasters in different geographical areas that have further worsened the situation.

With COVID-19, the sales environment across industries has shifted to virtual selling resulting in a lack of in-person access and physical time. Organizations have tried to take this problem head-on and have implemented several digital platforms and channels to continue to engage stakeholders despite physical restrictions. Managing, motivating, and ensuring remote sales forces are effectively engaged during such a period has become challenging.

Organizations are actively working towards assessing the level of impact on their business while working towards short-term and long-term measures to adapt to the “new normal”. Incentives make up a significant portion of total compensation, and reduced sales due to unforeseen circumstances may see a huge drop in total payout leading to a risk of lack of engagement and attrition of high performers. This has forced sales operations teams to refine their sales performance management approaches, adding a new dimension to the overall complexity of variable/sales compensation management. The balance between fairness to sales reps, budgetary constraints, and revenue performance is constantly sought. Moreover, another level of complexity arises from the fact that different parts of the countries follow significantly different infection and recovery trajectories, resulting in the further need for local adjustments.

Sales compensation plan design is already a complex process because of a need to consider several parameters such as geographically diverse business environments, company culture, labour regulations, market constraints and innovation, customer engagement and selling process, level of impact and control on sales, data availability etc. The desired plan adjustments further force organizations to rethink their IC philosophy without compromising on key plan design principles.

Following are some key sales compensation plan design strategies and adjustment ideas organizations can deploy in case of such unforeseen situations to ensure that representatives continue to be motivated and engaged while preparing themselves for future growth. These options can be bundled based on specific needs and can be implemented for results in the short-term as well as long-term basis:

1- Pay Target or Better

Pay target sales compensation to affected sales, service, and support representatives for the most impacted period where-in they are not able to achieve their targets. Organizations can also choose to go beyond and allow high-performing reps to earn more if they manage to beat their targets despite prevalent economic turmoil. This reinforces organizations’ commitment towards outcomes without compromising on their employees’ well-being and keeps them motivated and away from any distractions

2- Guarantee / Draws

Pay a fixed % of target sales incentive, guarantee amount or a non-recoverable draw for the impacted period to strike a balance between field motivation and fiscal responsibility. Organizations can also choose to go for recoverable draws, where-in incentives are paid upfront and adjusted once sales have picked up. Like “Pay Target”, guarantees and draws instil a sense of security and keep the salesforce motivated and away from any distractions

3- Performance Period Adjustment

Increase the performance period timeframe to ensure that the sales representatives get an opportunity to make up for the lost opportunities by putting in additional efforts in the latter part of the performance period. In certain cases, organizations may decide to reduce the performance period to contain the impact within a shorter period

4- Revising Commission Rates & Introduction of Payment Accelerators & Kickers

Organizations can choose to temporarily increase commission rates or positively revise kickers and accelerators (telecom and insurance) to boost sales representatives’ earnings. On the lower side of the spectrum, they can choose to remove or ease decelerators to ensure performance earnings are positively reinforced for sales and deals closed during the impacted period

5- Re-balancing KPI metrics & weights

Reviewing KPI weights and balancing them out to align with emerging business needs, like an increased focus on customer centricity. Customer centricity and customer success help organizations and particularly sales representatives, to temporarily move away from the product mindset and focus more on customer well-being which in the process helps in developing long-term relationships

6- Goal Adjustments

Provide relief by adjusting quotas to account for activity and market challenges. These adjustments also need to be tracked for future goal setting to ensure that appropriate baseline adjustments are made once the business gets back to normal. Organizations can also choose for goal adjustments specifically over guarantees and other direct pay adjustments as these are pro-rated and aligned with actual performance impact at the individual level. This also helps from an annual computation standpoint as organizations are saved of any true-ups, retro calculations, and plan updates to account for the impacted period

7- MBO type plan

Pay incentives based on specific activities instead of outcomes to keep the engagement high while ensuring that existing relationships are being maintained remotely and sales pipelines are being created for the future

8- Team Performance

Explore options of teaming up sales forces across product/business portfolios to encourage and explore cross-selling and up-selling opportunities

9- Relative Performance

Index territory or individual performance within a broader impacted area or complete market to factor in local variations as a part of rationalization of performance

10- Payout Curve Modifications

Lower performance threshold or ease out qualifier metrics like past dues, retro collections (manufacturing), and removal of penalties (channel distribution) to allow reps to be “in the money” at lower performance levels (know more about payout curve designs)

11- Pay Mix Change

Change the pay mix to reduce the proportion of incentives in the total compensation. While this is a complex and long-term solution, organizations can leverage the opportunity of looking at the overall compensation structure and modifying it to align with changing selling environment in the longer term

12- SPIFFs

Give higher leverage to spiffs & seasonal contests. Avoid including peak COVID-impacted performance during calculations. This allows reps to make up the lost opportunity cost by cashing in more during festive seasons or seasonal sale spikes

13- Annual Trip/President’s Club

Provide a cash-out option for an annual trip or at least postpone it indefinitely unless the situation is more conducive to travel.

To summarize, organizations are evaluating the situation based on their product portfolio, selling environment, sales process complexity, and level of impact and are deploying different adjustment strategies. Organizations are trying to leverage and analyze data across periods to better understand the overall impact and utilise this information to take fair decisions. We do believe that sales incentive plans can be designed to be reasonably stable, motivating and fiscally responsible. There are inherent counteracting pressures between these design principles, with significant complexities being added due to such unforeseen situations but with the help of comprehensive data analysis and leveraging market intelligence, appropriate steps can be taken, which ensures that sales incentive plans continue to be motivating and engaging.
Please feel free to reach out directly to us at Incentius to know more about how you can leverage our advanced analytical expertise to take data-driven decisions and stay ahead of the curve.


Sales contests definition – Design & Analysis Amit Jain November 21, 2014

Sales Contests and SPIFs are a medium to accomplish specific short-term sales goals. They can be quite effective motivationally if used well because of the additional cash/non-cash-based incentives over and above the normal IC plan. Team-based sales contests can also bolster salesperson teamwork by exploiting healthy competition. However, sales contests should not be used as a method to account for gaps in the base IC plan. Also, ensure that there aren’t too many contests running for a particular salesforce within a year, as they may start to act as a distraction to the base IC plan. Some scenarios where contests are a good tool are:
  1. To temporarily motivate salespeople to react appropriately to external market events. E.g., In the case of the launch of a new competitor, the focus should be on maintaining market share.
  2. Give sales performance a shot in the arm. E.g., Several companies run contests mid-year when performance to budget needs to catch up.
  3. Provide temporary focus to a lagging product line.
  4. Sometimes sales SPIFs can be used as a base IC plan for a new product that went to market very quickly, and the base IC plan is still playing catch up.

At a high level, the process below should be followed to ensure that content is effective:

Define a clear contest Objective

Define the contest objective clearly, along with the desired business goal. As far as possible, try to define the business objective in numeric terms as well. This helps judge the success of the contest more objectively. For e.g. Improve air conditioning sales by 25% YOY during the summer months.

Budget, Budget, Budget!

Next, decide on the budget for this contest. What investment are you willing to make to achieve this desired business goal? The success of a contest is defined as achieving the desired business objective while remaining within budget.

What are the details?

Once the problem statement is defined, the next step is to design various aspects of the contest:

  1. Design methodology – As far as possible, the SPIF/contest should complement the base IC plan and should not send out a conflicting message
  2. Performance Metric – Pick a performance metric that is clearly aligned with the business objective, along with a definition of data sources being used for calculations
  3. Period – Communicate the effective start and end date of the contest and the payout timelines for the contest/SPIF
  4. Applicable Rules – Define the rules in as detailed a manner as possible. Specify at least:
    1. Eligibility – Who is eligible to win the contest and who is not
    2. Competing for pool – In case of competitive contests, clearly define the pool within which your performance will be compared
    3. Number of winners – Define the number or percentage of winners from each pool.
    4. Reward – Cash, Non-Cash, Recognition, Commission per unit

How much is this going to cost us?

Perform cost sensitivity analysis based on various sales performance scenarios to understand cash outflow better and avoid the risk of facing cost overruns. Use this model to tweak the contest parameters to achieve acceptable spending. This model can also help you build a business case for contest implementation.
This model should also be used to ensure that the performance metric is unbiased to any specific geography/group and that the contest will not create any undesirable behaviour from the participating salesforce.


The most critical step for the success of a sales contest is communication. There should be clear messaging about the underlying business objective, eligibility, associated business rules, the competing pool and the reward associated with the contest. The participating sales team should clearly understand the performance metric (sales performance or activity based) and perceive the metric as fair. Be open to offering additional training to engage the broader salesforce, especially for new launch products.

Your contests will be more effective if they are exciting!

Ensure that you inculcate excitement in your contest communications as well. Using sports or entertainment analogies in contest communications can help here. The aim should be to get your salesforce excited about your contest.
Create a buzz around the program by utilizing multiple communication channels:

  1. Second-line manager – direct communication
  2. Company Intranet
  3. IC Scorecards (via notes/comments)
  4. Email blasts
  5. Social Media

How are we doing?

Along with the contest detail communication, the focus should be on creating effective reports and dashboards to communicate feedback:

  1. Dashboard with performance measurement and clear contest standing
  2. Ranking Report
  3. Additional section in existing IC Scorecards or sales performance reporting

Let’s build and run this thing!

Ideally, you should use your existing ICM system to implement your sales contests. This will ensure that data sources and rules applied for your contest are consistent with the base IC Plan definition of those rules. Timely progress reports to management and participating employees on the contest standings and projections will help maintain salesforce focus on the contest.

Ok! Was it worth it?

Once the contest period is over, go back to the contest objective and desired outcome identified in the first step. Measure success in comparison to the assigned business objective. Analyze improved sales performance and success metrics and the cost of the contest as compared to the budget allocated. Slice your contest winner’s performance in many ways to analyze the overall impact of the contest. As part of this step, it’s also important to seek feedback from the participating team on their experience so that contests can be made more effective in future.
This blog post discussed how to make the contest design and management process more streamlined and effective.
Below is a visual framework of how Incentius can help design and manage sales contests for your organization. Get in touch with us at info@incentius.com