Implications of COVID-19 on Sales Compensation Plans

Here at Performio, we think about sales compensation a lot. In the hope that you can benefit from our 15-year history with sales comp, we would like to share our initial thinking on what the global COVID-19 pandemic means for your sales compensation plans in 2020.

Like you, we are still coming to grips with what the new reality looks like. But it is clear this pandemic is going to have a significant impact on 2020 revenue plans for most businesses. While some companies will see an uptick in sales, most organizations will miss their 2020 targets. This means the Sales Incentive Plans you worked so hard on may no longer make sense and will need revisiting. 

Below are five key points to guide your thinking over the next few weeks as you rework these plans with your team:

1. Check your plan T&Cs for blackbirds and bluebirds

Blackbirds are unforeseen events that kill sales. Conversely, bluebirds are unforeseen events that bump up sales. Check the terms and conditions of your plans to see if events like these are already included. If they are, assess the level of relief already baked into your plans. You will want to be armed with this understanding before adjusting your plans.

2. Impacts from COVID-19 will vary. Avoid one-size-fits-all snap judgments.

Obviously impacts will vary for different businesses. However, it’s worth reminding your colleagues that impacts can also vary significantly within different parts of your business - even across different sales territories

Avoid making blanket decisions and snap judgments that apply across your entire business. Consider a more tailored set of prescriptions before opting for a universal change to your program.

This is particularly true around quotas and targets. Quotas and targets are effective when they are based on sound forecasts derived from business fundamentals. In this volatile environment, it is impossible to accurately forecast upcoming sales. Therefore, you will likely be creating more problems for yourself if you apply quota adjustments over the coming weeks. If you can, hold off on making changes to your quota until you have more visibility into your revenue picture. You can always give relief in hindsight once things settle down.

3. Be direct with your sales force and communicate more frequently than ever

In uncertain times like this, there is a tendency to “go quiet” in how you communicate. Do the opposite. If you want to make one change quickly, increase the time you spend communicating with the sales force. They need to hear that you are thinking this through and they need to know that you are there to support them.

The core elements of your message should be:

  1. You will be applying some sort of relief in hindsight once it is more clear what the impact is for the business.
  2. In the meantime, work harder than ever to make your numbers.

This messaging is especially effective if your sales year ends on June 30 and your reps have limited time to make their number.

Remember, while your salespeople are deflated about their pipeline drying up, they are also happy to be receiving a base salary right now. You have time to get this right.

4. Consider SPIFFs as a short-term bridge

SPIFFs are bonuses tied to hitting specific goals or accomplishing certain tasks. They are a simple way to provide relief to your reps until you have more clarity into your 2020 forecast.

Consider what your sales reps can do during this slowdown to drive value for your business, and SPIFF them accordingly. Redirecting your sales force’s activities to customer renewals, upsells, content creation, training, etc. are all potential opportunities for SPIFFs. 

5. When you do change your plans, be careful about overly-generous accelerators

When you have more visibility into 2020 and are ready to change your plans, be thoughtful about incorporating accelerators. Doubling the accelerator rate will not double your sales peoples’ discretionary effort, but it will double your risk exposure to unintended consequences. Model your accelerators under different scenarios (best case, expected case, and worst case) to ensure you are not over-correcting for the problem.

Final Thoughts

Goals, quotas, and targets work best when there is an understanding for how the targets are set and broad agreement that they are achievable. Arbitrary forecasting is not a recipe for success with variable compensation. Wait until you have more data before overhauling your compensation plans and communicate this strategy to your reps.

Finally, it’s worth looking inward to your motivations for revisiting your comp plans. Why are you considering quota relief? Presumably, because you value your people, have empathy for their situation, and want to keep them as valuable employees. So while it’s important to get the comp plans right, it will take some time to do this properly. In the meantime, think about other ways that you can boost morale and foster a sense of camaraderie among your sales force. Money is important, but so is a shared sense of purpose and being a member of a high-quality team. Fortunately, that is one area that COVID-19 will not change.

If you have any questions or concerns about your comp plans, please contact Performio’s Customer Success team and we would be happy to talk through this with you.

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