Update on Choosing the Best Performance
Measures for Sales Roles
By Jerry Colletti and Mary S. Fiss
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In our book, Compensating New Sales Roles: How to Design Rewards that Work in Today's Selling Enviornment,¹ we explained that different sales roles require different compensation plans. One of the fundamental differences in those compensation plans are the measures used and the weights assigned to them for purposes of the incentive pay opportunity. Information about the different measures used in the compensation plan by sales role is not always readily available. A recently completed survey by WorldatWork, reports the practices of 416 companies.² The purposes of this Short are to summarize those survey results and explain why they are noteworthy.
MEASUREMENT PRACTICES
Most B2B companies deploy a direct sales force as one of the channels used to do business with customers. Within the direct sales organization, measures for the three most common sales roles are and their immediate supervisor are listed in the table below:
| Performance Measure |
Sales Role % Companies Reporting Use N = 416 |
| New Acct Seller |
Existing Acct Seller |
Hybrid Seller |
First Line Sls Mgr |
| Total revenue |
26 |
34 |
55 |
55 |
| New revenue |
25 |
15 |
29 |
25 |
| Gross profit |
14 |
15 |
27 |
31 |
| New accounts |
16 |
-- |
25 |
-- |
| KSOs (Key sales objs |
20 |
22 |
35 |
38 |
¹ Jerome A. Colletti and Mary S. Fiss, Compensating New Sales Roles, New York, AMACOM, 2001
² WorldatWork, "Key Sales Incentive Plan Practices", April 2008.
Practices reported by survey respondents provide clear direction about the relative importance of measures by sales role, as follows:
- New Account Seller. While revenue is an important performance measure for this role, clearly, how revenue is achieved is important i.e., New Revenue (26%) and, New Accounts (16%). We do not find this result surprising because frequently New Account Reps' selling efforts are focused on winning new business which may require price concessions or special provisions in the contract.
- Existing Account Seller. In this role, sales people are asked to retain and grow business with their customers. In the past, the key measures were Total and Gross Profit. In this year's survey, Gross Profit fell to the third most frequent measure. The second most frequently reported measure was KSOs.
- Hybrid (Blended Accounts) Seller. This is perhaps the most challenging sales role for a seller to perform because it involves striking a balance between two competing selling activities - retaining/growing business with current customers while also winning new business. Total revenue is very important; however, both new revenue and Gross Profit are also widely used measures.
- Front Line Sales Managers. This job is new to the survey. We were surprised to see that the use of KSOs is the second more frequently measure used in survey participants plans.
SUMMARY
A significant percentage of companies report the use of KSOs in their sales compensation plans. While sales financial measures continue to be important metrics used to reward sales success, we believe that companies have come to rely on KSOs to focus attention and behavior on strategic sales activities that will ultimately contribute to sales results.
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