The 7 Factors that Market-Price Sales Compensation

DiMisa, who is Senior Vice President, Sales Force Effectiveness at Sibson Consulting, suggests that managers start with the basic compensation analytic, CCOS. His remarks came during a recent webinar sponsored by BLR and HR Hero.

CCOS or Compensation Cost of Sales is typically calculated by taking all compensation paid to people involved in the sales process (base and all incentives) and dividing that figure by total revenue. However, many organizations use “sales credited revenue” rather than total revenue, particularly where a large amount of revenue automatically recurs without sales involvement.

CCOS can be particularly helpful when broken out by individual job roles, geographic region, performance quartile, channel, etc., DiMisa says.

How Do Organizations Set Compensation Targets?

DiMisa offers seven factors that can be considered along with compensation philosophy to set compensation. In the table below, the market match point (percent of market that you pay) is shown compared to each factor.

For example, when the company’s degree of stability (Factor 1) is “Rock solid,” there’s a value to that so you can pay at the lower percentile, however; a startup with low stability would have to pay more because of the risk.

DiMisa says that companies break out as follows as to what percentile of market they pay:

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DiMisa notes that companies doing a lot of recruiting often set pay higher, but then they set their sales objectives higher as well. Companies with legacy sales may set pay targets lower, but quotas are often lower as well.

Getting sales comp and incentives just right is always a challenges, but then there’s no shortage of compensation challenges, is there? “Maintain internal equity and external competitiveness and control turnover, but still meet management’s demands for lowered costs.” Heard that one before?  Many of the professionals we serve find helpful answers to all their compensation questions at Compensation.BLR.com, BLR’s comprehensive compensation website.

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