Top Five Trends Impacting Companies & Their Sales Compensation Programs

What Do the Trends Mean for the Next Planning Cycle?

Companies across the world continue to face a myriad of pressures. Sales compensation is no different. Top trends impacting businesses include digital transformation and artificial intelligence, market uncertainty, employee experience and flexible work, customer experience and sustainability, and corporate responsibility.

Sales Compensation Policies Maintain the Status Quo

Overall, the core elements of sales compensation programs remain mostly unchanged, with slight shifts towards profitability. Despite layoffs and hiring freezes in the first half of 2023, most sales budgets remain intact. Nearly one-fourth of companies surveyed in the Alexander Group 2023 Sales Compensation Hot Topics & Trends Survey report that sales budgets remain unchanged from last year. However, 57% of companies report small increases–between 1% and 9%–from last year’s budget. Driving factors for the reported increase from respondents include inflation and increased competition. For companies that report increases to their sales compensation budgets, 33% report that they plan to increase both headcount and compensation, while only 20% of companies do not plan to increase headcount or compensation.

Companies also have a strong outlook on sales quotas. Approximately 40% of companies anticipate that more than half of their sellers will meet quota this year, which aligns with how many sellers met quota in 2022. 79% of companies don’t plan to make mid-year changes to sales quotas. While there is some uncertainty, these numbers suggest stability in year-over-year practices regarding headcount and budgeting.

Flexible Work Arrangement Aims to Increase Employee Engagement

It’s no secret that engaged employees are more likely to be productive, motivated and committed to achieving their goals. Flexible work is more than just working remotely; it’s flexible work hours and generous leave of absence policies paired with a hybrid work environment. Companies have already begun to reevaluate how they work, with 74% planning to implement a permanent hybrid work model. This is good news for employees as 55% reported they preferred to work remotely at least three days per week and 59% are more likely to choose an employer that offers hybrid or remote work options.

At the same time, there is increased attention on employee leave of absence policies. 45% of companies report that their leave of absence policies are currently more employee-friendly than historical practices. This includes prorating quotes for employees on a leave of absence (64%), keeping employees on the same plan (64%) and offering a partial incentive guarantee while on leave (14%). Still, there are other considerations when designing leave of absence policies.

Before employees take their leave of absence, there needs to be a clear plan about how their responsibilities will be delegated. The combination of the multitude of new policies has a direct impact on the overall company, the client accounts, the individuals supporting and the client relationships. All of these need to be thoughtful priorities.

Building a Connected Team Drives Customer Engagement

Alexander Group’s research shows that companies with a connected commercial team (marketing, sales and service) are often more profitable. For better alignment between these roles, we’re seeing a general shift in eligibility for sales compensation. For example, 76% of companies now have a role serving as a customer success manager. Of these companies, 53% include the customer success manager on a sales incentive plan, predominantly tied to some kind of sales outcome. Additionally, more companies are including marketing and service roles on incentive compensation plans that align with the primary sellers.

Companies are Establishing Global Consistency Around Sales Compensation

For companies that operate with a global workforce, 74% delegate sales incentive plan design to a centralized global team, while 76% execute governance with a centralized global team. This ultimately enables companies to effectively manage and evaluate the sales compensation program. Additionally, company leadership should seek to provide guidance on centralized versus locally flexible plan design elements. This could include pay mix, measures and upside. While centralized elements provide a global framework, allowing for flexibility in the areas that are truly going to drive differentiated performance based on the local realities.

AI Business Applications are Expanding

Across a wide range of business functions, the role of artificial intelligence continues to grow as technology evolves. Sales is no different. A significant number (31%) of business leaders believe that AI will have a moderate to high impact on analytics, which includes cost modeling, ongoing analysis and reporting. However, an even greater number (37%) are unsure as to what the impact of AI on analytics will be. In contrast, many business leaders believe that AI will have no impact on plan design or implementation.