Competing Compensation Goals? Matrix Them

Matrices for Sales Comp

Use a matrix when sales people have concurrent accountability for two competing measures, says Cichelli, who is senior vice president at the Alexander Group. His remarks came at the WorldatWork Total Rewards 3013 Conference and Exhibition held recently in Philadelphia.

The payout matrix provides improved payout as performance on both measures improves. There is a double threshold and a double cap. A typical example of this is the competing nature of sales volume and price realization. Clearly, if the only measure is volume, salespeople will be incented to make sales at any price, leaving the company with lots of unprofitable sales.

And, conversely, if the only measure is price realization, the company will get a small volume of sales at full price—not a good situation either. So the matrix is a solution that helps balance the two factors. Only by doing well on both scales can the salesperson maximize his or her payout.

Example: Commission Matrix

Here, Excellence on either scale is nowhere near as remunerative as Target on both.

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Example: Bonus Matrix

Here’s another of Cichelli’s matrices, this one for a bonus based on the same two factors used above.

Hurdles, modifiers, and matrices—These are three more things to add to the list of comp and benefits’ daily challenges. “Maintain internal equity and external competitiveness and control turnover, but still meet management’s demands for lowered costs.” Heard that one before?  

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