Global Sales Compensation Practices

Global corporate entities deploy numerous and diverse sales resources to serve local markets. Whether the business model features country, world region or line-of-business configuration, sales teams are usually a “local” solution with local management and local sales practices – including local sales compensation programs. When corporate sales compensation designers seek to create uniform sales compensation plans, some local sales leaders will question this approach.

“Worldwide” sales compensation solutions seems implausible to most local sales leaders. They struggle to understand how uniform sales compensation could apply to their unique situation. A natural reaction from local sales leaders is to ask, “Why?”

• Why does the company need a uniform sales compensation design?
• Why should local sales leaders consider design solutions not “tuned” to their local market?
• Why should a sales team accept the sales management philosophy from a “foreign” location?

Frankly, pro-global/uniform sales compensation advocates struggle to adequately answer these questions. The following advertised reasons seem weak at-best:

• Simplicity: The “simplicity” argument suggests that numerous local sales compensation plans are too confusing. Actually, the test of “simplicity” should not be from the perspective of a corporate over-seer, but instead from the participant’s perspective. If the salesperson understands his or her sales compensation plan, then the test of simplicity is met.
• Too Many Plans: Again, this is another false objective. The number of plans should equal the number of sales jobs. Local sales leaders correctly craft sales compensation plans to serve local conditions. Experience teaches companies that artificially trying to reduce the number of designs often produces unsatisfactory pay plans for most jobs.
• Audit and Administration: A final argument suggests numerous incentive plans produce an audit and administration conundrum. In some cases, this is true. However, because pay programs sit within local sales entities, normal accounting and financial oversight provide satisfactory frameworks for plan management.

The ambitions of central corporate sales compensation planners often find a natural conflict with local sales leaders who seldom see the need for help or direction when designing sales reward programs for their local sales teams.

Visit Alexander Group’s Sales Compensation practice to learn more.