Is Your Sales Compensation Governance Team FEARLESS?
To unlock the full potential of a sales organization, it requires more than just investing in cutting-edge technology and creating an effective incentive plan. It demands a fearless approach to sales compensation governance, ensuring that every dollar spent on compensation aligns seamlessly with the company’s objectives and culture. But what truly characterizes a team as fearless?
In this blog, we explore the essential attributes that embody a fearless sales compensation governance team. Additionally, we delve into a real-world example where a team successfully identified and resolved a sales plan challenge, highlighting the significance of their role in shaping a successful sales organization.
Creating a FEARLESS Sales Compensation Governance Team
Sales compensation plays a pivotal role in sales organizations, with significant investments made annually to develop effective incentive plans and drive sales team performance. However, without fairness, equity, and efficacy, it can result in challenges. This is where a sales comp governance team becomes essential.
The governance team’s responsibility is to oversee the entire sales compensation process, ensuring its seamless execution and alignment with the organization’s objectives and culture. Their role is critical in maintaining a well-functioning and impactful sales compensation program.
However, to achieve this, the governance team must embody the characteristics of FEARLESS: fairness, equity, auditability, responsibility, legality, effectiveness, supportiveness, and synchronization.
To be FEARLESS, a sales compensation governance team must be:
- Fair: Sales compensation must be fair, taking into account factors like behavior, performance, experience, and expertise.
- Equitable: Sales compensation must be equitable, ensuring equal treatment for all employees, regardless of demographic factors.
- Auditable: Sales compensation must be subject to auditing to ensure its fairness, equity, and financial viability.
- Responsible: Sales compensation must be responsible, avoiding incentives for unethical or illegal behavior and maintaining financial responsibility.
- Legal: Sales compensation must comply with all applicable laws and regulations to ensure its legality.
- Effective: Sales compensation must be effective, motivating employees to obtain sales objectives.
- Supportive: Sales compensation must align and support the company’s overall business goals.
- Synchronized: Sales compensation goals and objectives must be synchronized across all relevant functions, such as Finance, HR, Sales Ops, and Sales.
By embodying the fundamental characteristics of FEARLESS, the governance team can establish an efficient and impactful sales compensation system. This holistic approach sets the groundwork for the next section, which explores a real-world example of a fearless sales comp governance team.
FEARLESS Sales Compensation Governance in Practice
How does a fearless sales compensation governance team recognize and address issues related to sales plans? Let’s explore a real-world scenario as an example:
Example: The sales compensation governance team at a global SaaS company discovered that their customer success team was receiving excessively high compensation (around 150% of the target) for achieving quota targets of approximately 105%. This unexpected scenario arose from a combination of reward accelerators and bonus kickers. Although achieving 105% customer retention is impressive, the compensation team had not anticipated a 1.5x incentive, which resulted in an imbalance in the compensation structure.
Let’s examine how this governance team exemplified the FEARLESS model:
By recognizing and addressing these issues, the governance team could re-balance the compensation structure and re-establish a functional and impactful sales plan.
Applying FEARLESS Governance in Your Organization
A fearless sales compensation governance team is instrumental in driving a high-performing sales organization. By striving to be fair, equitable, auditable, responsible, legal, effective, supportive, and synchronized, companies can unlock the full potential of their sales force.
As a best practice, we advise our enterprise clients to establish a sales governance team with the requisite expertise, autonomy, authority, and empathy for their organizational goals. This ensures that every dollar invested in compensation drives the right behavior among the sales organization.
Talk to one of our experts to learn more about how Forma.ai allows organizations to design, execute, and optimize their sales compensation strategy within a single platform.