Sales Performance Management Best Practices Blog

Sales Compensation Practices Survey involving several large high tech companies

Posted by Jerry Hegarty on Thu, Nov 15, 2012 @ 11:11 AM

The following is a 'Readers Digest' summary of a 2012 survey conducted by World@Work & ZS Associates on Sales Practices within the High Technology Industry. In the survey, 17 US based high tech companies (Computer hardware, software, networking gear, etc) with over 59,531 sales reps broken out across the following roles were surveyed;

  • Client Relationship Manager (Farmer) – 20,005; average of 1539 per company
  • Lead Sales Roles (Hunter) – 9,230; average of 650 per company
  • Pre & Post Sales Technical Specialists – 23,652; average of 1391 per company
  • Partner & Channel Account Managers – 6,644; average of 511 per company
There is some interesting insights to be gleaned. How does your sales force compare with those surveyed in each of the area’s this survey focused on? These are not necessarily 'Best Practices', but rather reflect what's happening within the walls of these very large high tech sales teams.
  • More than 3 out of 4 surveyed companies use some incentive method to encourage higher price points for their products; specific methods vary widely. Methods referenced include:
    • Vary the payout rate based on product/deal gross margin
    • Pay on Gross Profit dollars
    • Pay on Gross margin percent
    • Pay on Average Selling Price (ASP) achievement
  • Capping incentive earnings is more common than I would have predicted. When one looks at the data, the use of caps and/or decelerators (slows earnings above a defined performance level) are fairly common.  
    • For roles described as Client Relationship Manager – 77% of respondents use either caps or decelerators in their plans. 46% use an absolute cap on earnings.
    • For Lead Sales Roles, 64% of respondents use either caps or decelerators in their plans. 29% use an absolute cap on earnings.
    • For Pre & Post Sales Technical Specialists – 65% of respondents use either caps or decelerators in their plans. 41% use an absolute cap on earnings
    • For Partner & Channel Account Managers - 85% of respondents use either caps or decelerators in their plans. 46% use an absolute cap on earnings.
  • The top performing sales representatives (top 10% of achievement) typically earn more than 2x the target incentive for all roles.
    • Client Relationship Manager = 2.6X; Lead Sales Roles = 2.6X; Pre & Post Sales Technical Specialists = 2.1X; Partner & Channel Account Managers = 2.5X
  • The majority of respondents do not use any type of special incentives to encourage selling early in the performance period.
    • For those that do, Fast Start Bonuses and.MBO’s are the preferred method.
    • Two-thirds of companies complement the sales incentive plan with a recognition program to recognize and reward top performers; most utilize contests/SPIFFs to spur short-term focused sales efforts
    • Turnover rate (voluntary and involuntary combined) is less than 20% for most of the companies surveyed, with a mean of 14%Sales Compensation team at work
  • What percent of earnings are received at each of these points in the order process? (Responses must sum to 100%); When is commission officially earned?
    • Booking – 21%
    • Invoicing – 25%
    • Shipped – 23%
    • Paid – 12%
    • Revenue is recognized – 19%
  • Most of the companies standardize compensation plans and roles across multiple countries. In addition, there appears to be an effort amongst this multi-national group to standardize along several other dimensions as well:
    • Standardize Plans  - 82%
    • Standardize Roles -  71%
    • Standardize Pay Mix – 47%
    • Standardize Leverage Targets (ratio of top performers incentive pay to average performers incentive pay) – 47%
  • Most companies do not spend more than 5% of revenues on sales compensation
    • Mean = 3.9%
  • Accurate quota setting, forecast accuracy & complex plans are the biggest sales comp issues facing by surveyed companies.
    • Quota Setting Fairness – 76%
    • Sales Forecast Accuracy – 59%
    • Plan Complexity – 47%
    • Data availability to effectively assess performance – 47%
    • Effective communication of the plan – 35%
    • Rewards not aligned with corporate performance – 29%
    • Efficient incentive compensation administration – 29%

NetCommissions Sales Performance Management


Topics: Channel Commissions, EVP/Sales Leader, CTO, CFO/Finance Leader, Sales Compensation Professional, CEO, Human Resources, Sales Professional