SALES RESEARCH

HOW COMPENSATION IMPACTS SALES ORGANIZATION QUALITY AND PERFORMANCE 

 

THE SALES COMPENSATION CONUNDRUM STUDY

 

Sales Compensation Research - Steve W MartinThe study results substantiate that different sales force compensation strategies can greatly impact the performance and quality of sales organizations. Decisions about whether to cap compensation and whether to pay the sales force above market average, at market average, or below market average can have a substantial effect on revenue growth, company excellence, quality of sales leadership, morale, culture, and quota attainment.

 

Salespeople and sales leaders alike know that compensation can be a strong motivator, but it usually comes at a high budgetary cost. This leads many to ask what the real impact of compensation might be on overall sales professionals’ satisfaction and performance. This study explores the answer to that question.

Nearly 800 sales professionals participated in a sales organization performance study by completing an extensive 42-question survey. Participants were asked to share their opinions on their sales organization and personal details on their company’s compensation. In exchange for their candor, it was agreed their names and organizations would remain anonymous.

Twenty-two percent of survey participants were top-level sales leaders, such as vice president of sales; 14 percent front-line sales managers, who manage salespeople; 17 peaent were hybrid sales managers, who sell directly to customers and manage other salespeople; and 47 percent were salespeople, who carry their own quota.

 Sales Compensation Reprt by Role Steve W Martin

The industries represented in the survey in order by number of participant responses were financial services, high technology, business services, manufacturing/ distribution, education, retail/hospitality, media/ entertainment, healthcare, and energy/utilities.

Study participants were asked to describe their company’s market position. Twenty-one percent worked for an industry leader with significant market share in their field, 32 percent for a well-known company within their market space, 29 percent for a lesser known company who has to compete against well-known rivals, and 18 percent for a relatively young company trying to establish market presence.

Sales Compensation Report Market Position Steve W Martin

Top-level sales leaders and sales managers were asked to categorize their company’s compensation compared to other companies within their industry. Twenty-eight percent indicated their company’s compensation was higher than market average, 60 percent were at market average, and 12 percent were below average market average. Each category of compensation was then analyzed from a number of different perspectives to determine the impact of compensation on sales organization performance.

Sales Compensation Study Steve W Martin

 

Key Research Findings

1. Compensation Associated with Sales Organization Excellence

Forty percent of sales leaders at companies that compensate above average market average rated their sales organization as excellent compared to 16 percent at average compensation and 8 percent at below average market compensation companies. Conversely, 57 percent of sales leaders at companies that compensate below market rated their sales organization as average or below average compared to 34 percent at average compensation and only 16 percent at above average market compensation companies.

Sales Compensation Organization Study  - Steve W Martin

 

2. Revenue Growth Tied to Compensation 

Seventy-three percent of sales leaders at companies that compensate above market level reported increased annual revenue, compared to 60 percent of sales leaders that compensate below market level. Conversely, 40 percent of sales leaders at companies that compensate below market level reported flat or decreased revenue, compared to 27 percent of sales leaders that compensate above market level.

Revenue Growth - Steve W Martin

3. Companies Where Compensation Was Not Capped Reported Higher Quota Attainment Rates

Seventy-nine percent of sales managers reported achieving their annual quota last year at companies where compensation was not capped compared to 72 percent of sales leaders at companies where compensation was capped. Fifty-one percent of salespeople achieved their annual sales quota at companies where compensation was not capped compared to 48 percent at companies where compensation was capped.

Sales Compensation Study - Steve W Martin

4. Perceived Quality of Sales Leadership Is Directly Related to Compensation

Thirty-eight percent of salespeople who sell for above market compensation companies rated their sales leadership as excellent compared to only 2 percent of salespeople at below average market compensation companies. Conversely 22 percent of salespeople at below average market compensation companies rated their sales leadership as below average compared to only 4 percent of salespeople at above average market compensation companies.

Sales Compensation Research 1 Steve W Martin

 

5. Sales Organization Morale Is Directly Tied to Compensation

Sixty-six percent of sales leaders at above average market compensation companies rated the morale across their sales organization as excellent compared to only 21 percent at below average market compensation companies. Conversely, 27 percent of sales leaders at below average market compensation companies rated morale as below average compared to only 4 percent.

Sales Compensastion Research 2 Steve W Martin

 

6. Compensation Impacts Sales Organization Culture

Thirty-seven percent of sales leaders at above average market compensation companies described their sales organization as “a cohesive group of likeminded individuals” compared to only 23 percent at below average market compensation companies. Conversely, 42 percent of sales leaders at below average market compensation companies described their sales organization as “a loose collection of individuals” compared to 23 percent of sales leaders
at above average market compensation companies.

Sales Compensation Research 3 Steve W Martin

 

7. Companies Where Compensation Was Not Capped Reported Higher Quota Attainment Rates

Sales Compensation Research 4 Steve W Martin

Research Sponsored By Velocify: Selling at the Speed of Opportunity


Velocify_LogoVelocify is a market-leading provider of cloud-based intelligent sales software, designed for high-velocity sales environments. Velocify helps sales teams keep pace with the speed of opportunity and increase revenue by driving rapid lead response, increased selling discipline, improved productivity, and actionable selling insights. The company has helped more than 1,500 companies across a variety of industries improve customer acquisition practices and sales performance. Learn More About Velocify.

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