HR is an invaluable resource for sales compensation design. HR’s perspective on company culture and strategy contributes to designing a plan that takes into account all aspects of the business. With its knowledge of performance management, compensation, and market trends, HR provides the added value that makes a good sales compensation plan great.
The key to leveraging HR expertise is making it a primary owner and key business partner. You have to do that throughout the compensation design process. According to a 2010 WorldatWork report, 83% of organizations changed compensation plans because of misalignment between incentive pay and business strategy. Companies can often avoid a lot of hassle by properly aligning pay and strategy in the first place. This is where HR can play a pivotal role.
How HR Adds Value to Sales Compensation
HR professionals are experts in all matters regarding compensation, including sales incentive compensation which is specific to sales organizations. HR’s sales compensation expertise is focused on providing valuable market insights, aligning the incentive structure with strategy, and designing a plan that will motivate the desired sales behaviors.
HR can collaborate with sales and finance to keep the compensation plan in line with the company’s culture, values, strategy, and policies. Having an overall view of the organization, HR makes sure that the plan remains aligned with the desired corporate objectives. This approach ensures that sales, finance and HR do not make plan design decisions in their functional siloes.
Also, HR is typically the owner of compensation market trends data. Before deciding on the sales compensation plan structure as part of the total compensation package to offer, organizations need to look at the competitive market and complete a thorough analysis. HR can offer insights into how competitors evaluate job content, plan structures, and price jobs accordingly. Understanding sales compensation trends and market pricing is essential because companies need to pay competitively and fairly in order to attract and retain top talent.
Finally, performance management and compensation methodologies are at the core of plan design and HR expertise. HR has the know-how and can offer strong insights into strategies for motivating salespeople. HR can often offer advice on what performance criteria to use and which should have more weight.
HR as an Active Business Partner in Plan Design
Executives must bridge the gap that often exists between functions, but it’s also up to HR to get its voice heard. Here are a few proven ways that ensure HR is a strong business partner:
- Identify compensation market trends and use data to help the organization offer competitive pay and build the best sales team.
- Spend time with key business partners to make sure there is a common understanding of the sales compensation plan, its benefits and challenges, and how it aligns with the overall business strategy.
- Highlight HR’s expertise in performance management and driving the right sales behaviors.
- Proactively work with sales leadership to ensure that their organization will execute the compensation plan correctly.
- Conduct interviews and round table discussions with company executives, sales managers, and sales reps to identify positive perceptions, areas for improvement, and overall expectations.
Sales compensation design aims, in the end, to keep sales reps motivated. It’s also the main vehicle for achieving company goals. HR has well-rounded expertise and often reaches out to business partners to ensure that the compensation plan is producing the right results. By leveraging HR’s unique skillset, companies can remain competitive for top sales talent and ensure alignment between plan and strategy.
Article initially published on the WorldatWork blog.