May 2020

Three sales force compensation practices to uphold in times of crisis

All organizations have been affected by the current pandemic. Some are struggling to survive while others must deal with an extraordinary demand for their products and services. Regardless of the situation, all must adapt to cope with this new reality.

Sales force compensation is no exception. Here are three good practices to keep in mind

1. Maintain relationships

As economic forecasts have been upended, targets and quotas set early in the year to establish variable compensation are slowly becoming obsolete. Don’t be afraid to send a clear message to your troops: “We are aware of the impact of the situation on your compensation program and we are analyzing different scenarios.”

It is difficult to predict what the job market and the economic situation will look like once we emerge from this crisis. However, labour shortages many companies were grappling with prior to the pandemic will surely be waiting. Take care of your people. This is especially true if you are an organization that shares a portion of the risk with employees in how they are compensated. Are your commission advances adequate? Do you allow for non-repayments in specific situations? By making employees feel acknowledged during these unusual circumstances, you will have taken great strides in strengthening their sense of loyalty.

2. Show empathy

Sales representatives are usually encouraged to be proactive and energetic to do their job. But the current context is different. Clients may not be as receptive as before. Given these circumstances, an aggressive approach to generate income may harm your brand and the loyalty of long-term clients. The best approach is to be of service and to listen, regardless of whether it pays off in the short term. The greatest opportunity in this situation is to develop sustainable partnerships rooted in compassion. Encourage your representatives to work their networks for reasons other than commercial. Many are excellent “people persons” and now is the perfect time to put that strength to good use.

3. Adopt transitional measures ahead of business recovery
Negative scenarios

COVID-19’s negative impact on the organization’s financial health may call into question the role of sales representatives compared to other distribution channels (e.g., online business, distributors, agents). It may also raise issues on the parameters of your compensation programs, such as the proportion of variable compensation to total compensation, commissions vs. bonuses, or performance thresholds. Some transition measures should be considered, such as:

  • From adapting targets/quotas to a total formula redesign (e.g., temporary bonuses in lieu of commissions).
  • Granting lump sum amounts (or guaranteed payments).
  • Implementing additional compensation vehicles (e.g., contests and spiffs): these vehicles will allow you to align your sales force to very short-term goals, characteristic of an unpredictable situation.
Positive scenarios

The crisis may also have a positive impact on your organization. A minority of sales representatives have seen their compensation soar to unthinkable levels due to the scarcity of the products or services sold, and not due to the representative’s performance. This is another situation where transitional measures, such as reviewing performance targets or capping maximum payments, could be helpful.

Coherence and scope of transitional measures

While sales force employees have historically been treated differently than other employees, these transitional measures should be coherent with the decisions you will make for the entire organization.

Don’t lose sight of your long-term goals. Transitional measures should remain transitional. Focus on short-term goals (monthly or quarterly), as you may eventually need to reassess the program’s parameters:

  • To make it more resilient to these types of disruptions. For example, set limits for variable compensation and/or increase fixed compensation for some jobs.
  • To ensure it can support your post-crisis sales strategy. For instance, in areas that have been badly affected, market share gains can be achieved by acquiring new clients in new markets. It would then be necessary to assess whether compensation plans are aligned with that goal. The same issue applies if the goal is to maintain the current client base. In that case, a compensation plan focused on new client acquisition could harm business recovery.

While the current context is difficult, it should be leveraged as an opportunity to review some more sensitive programs, such as the compensation of “sales reps,” which is a key driver of economic growth.

Regardless of the situation, alternatives or scenarios, some pillars of success will never change, such as empathy, fairness, and transparency.

Normandin Beaudry’s consultants will continue to closely monitor the compensation sector and will keep you informed of future developments. Feel free to contact us if you have any questions.