How Much Do We Spend on Sales Compensation?

How much do you think sales leaders spend compensating the 14 million salespeople currently working in the United States? According to Sales 2.0 Conference speaker and Xactly chief marketing officer Scott Broomfield, Harvard Business Review puts the figure at $800 billion.

“That’s four to five times the amount of money we spend on advertising in the United States,” Broomfield said during his Sales 2.0 Conference keynote presentation in Philadelphia on March 10, 2014. “The amount of money you pay to your reps far surpasses any that you spend on any other of your marketing programs. It is a huge area to pay attention to.”

 An Issue of Trust
Broomfield challenged audience members to think about the level of trust their salespeople have in their compensation plan. Reps often engage in “shadow accounting,” keeping track of their compensation-plan payouts in their own spreadsheet. When their numbers don’t add up to what they’re paid, they go straight to the CIO and ask why that is. Broomfield says this is a telltale sign that reps don’t trust the company. “If they don’t trust the company, you’re not going to get the behaviors you want that align with the overall company goals,” he said.

Generational Differences 
Broomfield implied that some sales leaders aren’t acknowledging the massive changes that are affecting the way sales teams are run. He shared a story about recent changes to Xactly’s letterhead; he noticed that the social-media icons hadn’t been incorporated. “Also,” he explained, “I mentioned to our employee, who happens to be 24 years old, that we had left off our fax number. Guess what she asked me? ‘What’s a fax?’”

Broomfield encouraged the hundreds of sales leaders in attendance at the conference to pay attention to current U.S. workplace demographics:

Xactly sales compensation Sales 2.0

Image courtesy of Xactly

Fax machines, when they first came out, were transformational. The same can be said about email and social media. As Broomfield asserted, these major shifts can be scary, but with the right mind-set, tools, and skill set, it’s possible to manage change effectively among different generations.

“You have to motivate salespeople and incentivize them where they are, no matter what demographic they’re in,” Broomfield said. Xactly data has shown that incenting right yields a 19 percent reduction in sales turnover, 88 percent fewer disputes, and 37 percent quicker sales cycles.

Bottom line: when you incent right, you get the behavior you need and can inspire performance to higher levels.

Do you know how much you spend each year on compensation? Are the demographics of your sales team informing the way you incent? Share your thoughts in the comments section.

About Lisa

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