Sales compensation starting to shift under COVID-19 pressure

Dive Brief:

Sales compensation plans are undergoing significant revisions during the coronavirus outbreak, according to a report from WorldatWork sent to HR Dive. The report cites survey data which found that 36% of organizations are already addressing sales compensation or plan to, while another 49% are developing a plan to address it.
The report said that, on average, organizations are "considering 2-3 actions" on sales compensation models. The most common actions under consideration are adjusting quotas (46%), adjusting performance measures (44%) and lowering plan thresholds (36%). Those are also the three most common actions that organizations have already implemented.
In terms of final compensation, 43% of companies anticipate their "sales organization will perform lower to plan," adding they will do their best to "minimize the compensation impact" while 38% believe their sales teams will earn less in 2020.

Dive Insight:

Sales compensation entered a tenuous position as soon as the pandemic shut down offices and retail business locations across the United States. Companies and consumers both are spending less, and as a result just about any sales projection for 2020 is going to need an adjustment.

"It makes sense that sales compensation is a major focus right now as businesses have been hit hard in recent months," Scott Cawood, president and CEO of WorldatWork, said in a statement. "The impact has been sudden and extreme, and in every industry sector the scales have been tipped."

These results represent a shift in mindset from slightly over a month ago, when business leaders largely did not anticipate making changes to sales compensation. A March survey from Willis Towers Watson found that 75% of companies did not plan on making adjustments to sales compensation plans at that time.

It's not just salespeople that will be making less this year. Pay cuts have been a common cost-cutting measure, with 143 out of 151 public companies surveyed by Gallagher reporting pay reductions for at least their CEO. In the same survey, 16% of companies reported reductions for salaried employees as well.

Looking forward, the WorldatWork survey results found that 22% of organizations are likely to be re-thinking sales compensation models for 2021 while 35% believe their sales organization will "recover in the second half of the year" and regain potential losses from the first half.