April 01, 2019
April 01, 2019
Contributor: Jordan Bryan
Sales leaders who implement effective compensation plans motivate account managers to grow and retain accounts.
As the chief sales operations officer at a professional services organization, Victor routinely reports to management that account growth is a top priority. And yet, account managers focus almost entirely on retaining business, with growing existing accounts as a last resort. After reviewing the compensation structure, Victor spots the problem: A lack of incentive.
“Unfortunately, today’s sales compensation plans are not designed to deliver the account growth that sales operations leaders want,” says Craig Riley, senior principal analyst at Gartner. “They are either not measuring growth, diluting growth’s importance or just leaving sales teams confused.”
To identify and implement appropriate compensation plan changes, leaders must understand where and how sales efforts fall short, create a pay structure that rewards account growth, and ensure plans are clear and detailed enough for sales people to easily understand.
Are sellers devoting resources to the right activities? Diagnose whether sales behavior is aligned with strategic goals by evaluating current sales performance on renewals, cross-sells/upsells and new revenue against projections and growth targets. In the areas where sales strategy and seller performance diverge, illustrate areas for leaders to better address and motivate sellers to tap revenue channels where they have the largest chance to drive growth.
Read more: Position Sales Teams to Grow Accounts, Not Just Retain Them
Current account managers’ compensation plans rarely force them to focus on the hard work required to grow their accounts. The Gartner Driving Growth Through Smarter Account Management report shows that 49% of account managers have a single revenue goal that makes no distinction between retention and growth.
Even when an account manager’s quota does have a growth component, the median proportion of their overall goal assigned to growth only accounts for 9% of their variable pay. This small portion of variable pay is not reflective of the time and effort required to drive account growth.
Companies currently using single-metric plans should consider whether implementing thresholds and accelerators will provide enough motivation to their sellers before undertaking the effort necessary to move to a multimetric plan.
If using a single-metric plan, sales leaders should consider implementing thresholds and pay accelerators to limit sellers’ ability to earn incentive pay via renewals as a motivator to drive account growth. For those teams already using multimetric plans, consider whether reweighing or updating incentive metrics would be sufficient to drive the desired behaviors as opposed to making larger and more disruptive changes.
Learn more: Drive account growth
Compensation changes need to be understood by sellers to drive account growth. Of surveyed account managers, only 24% of sellers can easily calculate their total variable compensation. “Any changes to compensation should be as simple as possible to prevent unease or disruption among the sales force,” says Riley. If sellers don’t understand how they will be paid, then it is very hard to use compensation to motivate them to perform in a specific way.
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Recommended resources for Gartner clients*:
Gartner for Sales Leaders clients can read more in Driving Growth Through Smarter Account Management
*Note that some documents may not be available to all Gartner clients.