Like your non-sales colleagues, your success depends on your performance, but unlike them, so does your compensation. That's why it's so important to understand compensation across the sales profession in Canada, and within various industries.
The annual CPSA Sales Compensation Reports were released today, so we invited David Johnston back to the SalesProChat podcast to share his thoughts on the major findings and the implications for sales across Canada.
Produced in partnership with Mercer Canada and presented by Brokerlink, the CPSA Sales Compensation Planning Guide for Sales Management and Sales Compensation Report for Sales Professionals include 25 job titles in sales. Gathered from over 670 surveyed Canadian organizations, the reports offer the exclusive insight you need to make informed decisions.
Dave is a sales compensation expert, speaker, and president of the Sales Resource Group Inc. He has three decades of experience consulting for organizations in various fields such as broadcast, print media, telecommunications, retail, manufacturing, and finical services. Sales Resource Group Inc combines sales compensation services with training and market analysis providing clients with sales compensation, end to end strategies.
Listen to the interview and read the edited transcription below.
Bill Banham: Dave, welcome back to the SalesProChat podcast.
David Johnston: Thanks very much Bill. It's always good to get together with you and I love talking sales compensation, so thanks again.
Bill Banham: Firstly, how often should businesses evaluate and/or change their compensation plan design?
David Johnston: Well in years gone by, a lot of organizations maintained the same sales compensation plan for years and years, and the difficulty with that today is that the marketplace is changing so much that a comp plan that worked three to five years ago may not fit the paradigm that you're selling into currently. We always recommend that sales compensation should be looked at annually as part of your business planning approach. If you're making changes to your strategy or new products are being introduced, or people are looking for differences in sales behavior, then you may need to look at your sales compensation plan. At the very least, every organization should be doing a review of their plan every three years to make sure that the sales compensation is still aligned with their business goals and strategies, and that it initiates and reinforces the desired sales behavior.
Bill Banham: Okay, thank you very much. Now, can you tell our listeners what is the best way to use compensation plans as an edge in attracting and recruiting top sales talent?
David Johnston: Well, it's going to become a much bigger issue Bill. If you look at the sales compensation report, the research shows that 3/4 of Canadian businesses are saying that it's hard to fill vacant sales positions with qualified candidates. When you're looking at attracting and retaining top talent, it's very important to make sure that people understand the compensation program that they're coming into for a couple of reasons.
One, you don't want to attract somebody with an oversell a job, and the compensation for a job, and then have someone join the organization and find out that what they thought they were going to be able to earn is not achievable. Making sure that when you are making it clear to individuals, what their comp plan is going to be, and what the expectations will be in order to earn that, and the comp plan should really do two things well. It should tell sales people what you value and want to pay them for, and secondly where to focus their time and efforts. I think that it's very important that when you're try to attract and recruit people, that you set those expectations right up front.
A very good example is a lot of organizations will say, “This position pays $50,000 in base, and you can earn 25% of your base salary as an incentive.” Well, when we look at the total compensation, for example, in the survey, the sales compensation report, an entry level account manager is earning $63,000 in total direct compensation, and about 33% is what is based, it's a variable component. Well, if I only say that this job is worth $40,000 base, plus 30% of your base salary, then what's going to happen is the individual hears $40,000 and it's not competitive.
When you're recruiting, focus on total target compensation because that's the expectation that you have as a role, and then make sure that people understand what they have to do in order to earn that.
Bill Banham: What are the implications of sales processes for compensation design?
David Johnston: A lot depends on the industry, Bill. We are seeing different sales processes being used, in particular solution selling. In industries like banking and finical services, chemicals, life sciences, and transportation, a larger increase is being seen in those particular areas relative to their peers in other industries. In looking at that, if you're a solution selling in those industries, then you want to make sure that your sales processes and the way in which you're selling, are aligned to your compensation design.
That may be introducing some sort of strategic initiative to reward sales people who follow not only achieve the financial result, but also follow your methodology you're looking for in terms of developing and presenting your solution, but it's one of the way in which you want to ensure that sales compensation is aligned to the behaviors and the process that you want your sales people delivering on a consistent basis.
Bill Banham: What are the most interesting results from the new sales compensation reports? What are some of the implications for 2019?
David Johnston: Well, there are a couple of elements that jumped out at me when I read the report. One is that there are 60,000 Canadian sales and market openings posted on job boards today and in looking at the responses, it appears that right now, there's going to be explosive growth in terms of sales positions that will be opening up as the baby boomers start to retire and as new younger sales people have entered the workforce. These findings are consistent with things that I've been finding with our research and with the clients that we work with and that is that the game is changing. There are greater expectations from the role in terms of increased use of different technologies and software such as CRM, presentation platforms, etc.
It's not just being able to sell anymore, it's also being able to understand and analyze your customer's business, and I think the demographics are saying there are fewer and fewer sales people going into the sales role, and we haven't really, at this point, got enough people being generated to fill those roles. What that means, if you think of the increases in compensation in some of the industries that I mentioned earlier on, it's largely driven by supply and demand. If you have fewer people with the skills and abilities to work in those industries, when you increase demand and you decrease supply, price goes up. Which means we are going to be paying more for sales people than we have in the past, in those industries. Hopefully, that will help to attract people into the sales roles and as you increase supply, it will bring compensation levels back into line with what we were expecting. However, one of the things that is key is over the next few years, we may see certain industries where sales compensation is going to be significantly higher.
Bill Banham: What trends do you see in the market data and how should companies respond to those trends?
David Johnston: I think one of things I've noticed is that in the past, there hasn't been a lot of infrastructure in the organizations around sales. In some organizations, you will see the sales group, in fact, managing and administering their own sales compensations, but what we are seeing is more rigor being put around that. In fact, when you look at how HR has taken a greater role in sales compensation, that's reinforced by the fact that 38% of Canadian employers are now maintaining a salary structure specific to sales professionals, so recognizing that there are differences between sales and non-sales and having a framework in place to manage that. I think a little over 8% of Canadian sales professionals are going to be promoted by the end of 2018 and that will come with an average increase of 7.5 to 7.7 in terms of promotional increase in salary.
We are seeing increases in the administration and more rigor being put around that. I think it's important to look at variable pay. In the compensation report, variable pay for sales professionals is about 33% of their total compensation as compared to 13% for all other employees.
I think in looking at some of the trends, we are seeing sales being treated more effectively in terms of managing sales compensation, making sure that it's fair, equitable, and I think it's important to note that, in order to get sustainable long term business success, you've got to have sales that are generating growth, as well as retention.
Bill Banham: If there's one big thing that will impact sales compensation in the future, Dave, what will that be?
David Johnston: The thing that, for me, is probably the greatest change over the last little while, there's sort of an ebb and flow that occurs with sales. I see it sort of as a centralization and decentralization of accountability. I think what's happened over the last eight to nine years is a lot of sales organizations have developed more complexity around their sales forces and the measurements that they've put into try and track and measure performance and productivity. We've tried very hard to wring out as much productivity as we can from the sales role. I think there is a movement now towards more simplicity. Reducing complexity in the sales compensation plans, particularity around field sales people, and it's really looking at trying to restructure sales and ensure that we have the right structure for sales execution.
In the sales compensation programs, we're starting to see a lot of integration between inside sales, field sales, and then large account sales, so making sure that there is the coverage that needs to take place, is there, and that the sales compensation plan supports each of those different levels of customer size and complexity.
Bill Banham: In December, you'll be presenting a CPSA webinar called Top Tips for Building a Successful Sales Compensation Plan for 2019. Can you take a few moments now and tell our listeners about that webinar, and if they join, what they will learn?
David Johnston: Well, as we approach the end of the year, and most people are on a fiscal year are looking to plan for 2019, I think it's important to identify the kinds of things that organizations need to look at as they plan this year.
The webinar is going to take place on Wednesday December 5th, at 3:00 PM. It will investigate some of the actions that sales leaders can take during their planning and it's important that we focus on some of the critical design issues such as, how to reduce complexity as I've already talked about. Looking at performance, how we want to measure performance, and the number of measures and metrics in your plans. Are there qualifiers that need to be in for planning, when you're planning for next year, to make sure that you're paying out with the right frequency, that if there are thresholds that are required in order to ensure that you're paying out closer to target. Finally, how to handle some of the changes that occur during the planned year. What happens if the markets start to change or sales performance isn't up to what you're looking for? I think it's important that you have strategies for how you'll deal with those things.
I know along with that, there are a lot of mergers and acquisitions, and consolidation, that has been going on recently and that's leading to sales organizations being, the structure being changed. When you get into that side of change you need to look at whether it's what we call evolution or revolution. If the changes are requiring major change, how do we make those changes, how do we ensure that we get them implemented and in a very efficient and a quick manner to address the significant change.
Alternatively, there are a lot of organizations that are taking the evolution approach where their markets are good. They want to ensure that they are staying on top of sales compensation, so they're looking at what kinds of evolution needs to take place in terms of their plan to sustain sales performance and business success.
I think another question that'll be answered in that seminar will be, how do we get the qualitative as well as the quantitative results that we need, and where are the opportunities for sales compensation to influence sales results?
Hopefully Bill, a lot of your listeners will attend that session and I think it's going to be very important to plan well for 2019 because I think we're in for a pretty interesting ride as the economic factors are showing a lot of growth.
Bill Banham: 3:00 PM, Wednesday, 5th of December and if, for any reason, you cannot attend that live, or are listening to this show far off in the future, you can also access the archived version of that webinar through CPSA.com.
Dave, for today, just one last question for you, and that is how can our listeners learn more about you, how can they connect with you too?
David Johnston: Well, Sales Resource Group is an organization that's fairly accessible. You can reach me at my phone number 416-805-0208, by or go to the Sales Resource Group website.
Bill Banham: As always, Mr. Johnston has been an absolute pleasure. Thank you very much for being a guest on the SalesProChat podcast.
David Johnston: Oh, you're quite welcome, Bill. Always a good time.
Check out Dave's other appearance on the SalesProChat podcast, back in April 2017, when we tackled the topic of What is Sales Compensation and How Does it Motivate Sales Pros?
The CPSA Sales Compensation Planning Guide for Sales Management and Sales Compensation Report for Sales Professionals are produced in partnership with Mercer Canada and presented by Brokerlink. CPSA members qualify for exclusive discounted insurance rates on home, car and business insurance with Cornerstone-BrokerLink. Learn more.