2021 Sales Compensation Trends Survey

© 2020 THE ALEXANDER GROUP, INC.®

2021 Sales CompensationTrends SurveyExecutive Summary

JANUARY 2021

SURVEY EDITORDAVID J. CICHELLITHE ALEXANDER [email protected]

Survey Highlights

© 2021 The Alexander Group, Inc.® 3

2021 Sales Compensation Trends Survey© Executive Summary

Overview

2020 was a COVID-19 upheaval year with some sectors sufferingsignificantly, others meeting goals and some even prospering.Sales departments increased sales volume only 2% in 2020. Thiswas less than the growth estimate of 6% projected at the end ofDecember 2019 for 2020 performance. Meanwhile, sales leadersexpect sales revenue to grow a remarkable 8% in 2021.

For those planning base pay increases in 2021, 3% is theprojected increase in budget. -1.5% was the median decrease inincentive costs in 2020. 2% is the projected increase in incentivepayments for 2021.

Introduction

109 sales departments participated in this year’s 19th annual 2021Sales Compensation Trends Survey©. Participants provideddata in November and December 2020 on what occurred in 2020and what they plan for 2021. Results published in January 2021.

10th Perc 25th Perc 50th Perc 75th Perc 90th Perc Average-12 -5 2 8 19.8 3

Actual Revenue Growth in 2020

10th Perc 25th Perc 50th Perc 75th Perc 90th Perc Average0 4 8 15 24.8 10.9

Expected Revenue Growth in 2021

10th Perc 25th Perc 50th Perc 75th Perc 90th Perc Average-20 -10 -1.5 1.5 10 -3.5

2020 Change in Sales Incentive Costs

10th Perc 25th Perc 50th Perc 75th Perc 90th Perc Average0 2 3 3.5 8.1 3.1

2021 Planned Base Pay Increases

10th Perc 25th Perc 50th Perc 75th Perc 90th Perc Average0 0 2 5 10 3.8

2021 Planned Incentive Plan Budget Increase


Notable Findings

Introduction: The Sales Compensation Trends Survey, conducted each year, provides important fiscal year planning information for revenue leaders. Thisyear’s survey reveals several notable findings.

COVID-19 Impact: COVID-19 had a disparate impact on revenue performance with some industry sectors suffering significant revenue declines, while othersmet their sales forecast, and a surprising few accelerated revenue performance. Having conducted three separate surveys on the impact of COVID-19 on salesplans in 2020, plus these survey findings, confirms many revenue leaders made adjustments to the sales pay programs. 63% made pay plan adjustments tostabilize sellers’ earnings, including various pay protection methods such as guarantees, formula changes and quota adjustments. The most common practiceswas to make select changes to the highest impacted sellers. Others did across-the-board changes. A very few had to modify their pay plans as a result ofCOVID-19 surges in purchases. For the first time in the survey’s 19-year history, 100% of the survey participants plan to make changes to their next fiscal yearincentive program.

Pay Budgeting: Incentive costs declined -1.5% in 2020. 2021 will see modest budget increases in base pay (3%) and incentive costs (2%).

Revenue: Revenue leaders had anticipated a 6% revenue growth in 2020; yet, the actual revenue growth was only 2%. Revenue performance was 90% ofanticipated budget. However, companies are planning for a robust revenue increase of 8% for 2021.

Staffing and Turnover: Turnover dropped in half for 2020 from the traditional 10% turnover rate for sellers to 5% in 2020. Management expects low turnover for2021, anticipating a 5% turnover. The number of companies planning to trim headcount in 2021 more than doubled from 8.5% planned in 2020 to 17.5% for2021.


Notable Findings

Maternity and Paternity Leave: Participants provide 12 weeks of maternity leave and 6 weeks of paternity leave. Incentive pay protection varies widely fromfull, to partial to no pay projection during leave. 62.5% make pay and/or quota adjustments for maternity leave. 57.3% make pay and/or quota adjustments forpaternity leave.

Gender Equity Review: 62.4% have or plan to examine pay equity (gender) among sellers.

Automation Software: Internal automation solutions are the top two applications. Participants continue to use desktop solutions and in-house/customapplications to administer their pay programs. The top five vendors in popularity are Xactly, SAP, Anaplan, Varicent and Oracle.


2021 Sales Compensation Trends Survey Findings—Highlights (1 of 2)

Sales Department Trends 2020 and 2021• 2% growth was the revenue performance for 2020• 90% to budget was the revenue performance for 2020• 8% is the projected revenue growth for 2021• 49.5% expect minor improvement in 2021 for their industry sector• 63.5% will maintain or increase spending for 2021• 67% will focus on growing existing business in 2021• 76% have average or above average sales confidence for 2021• 36.6% lost headcount in 2020; 28.7% gained headcount• 50.5% will increase headcount in 2021; 17.5% will reduce headcount• 55.4% had 1% to 5% of sales positions open during 2020• 5% was the 2020 turnover rate• 5% is the expected 2021 turnover rate• 68% say growing revenue/bookings/units is the top focus for 2021• 39% want to improve sales productivity in 2021; objectives vary

Sales Compensation—What Happened in 2020?• 84% report the 2020 sales compensation program acceptable or better• 64.1% made mid-year sales compensation plan changes in 2020• 74.3% found the 2020 plan mostly or completely aligned with strategy• 82.1% said most or all of their sellers understood their 2020 pay plan• 67.6% said the 2020 plan payouts mostly or fully matched sales results• -1.5% was the median drop in 2020 incentive payment costs• 90.5% was the incentive payout as compared to budget• 50% of sellers will reach target payout for 2020• 100% of target incentive would be paid for 100% quota performance

Sales Compensation Program—What Will Happen in 2021?• 66% will grant a base pay increase in 2021• 3% increase in base pay planned for 2021• 72.4% use a 12-month base pay increase cycle• 62.6% say correct goal/quota setting is the top challenge for 2021• 100% will make changes to the 2021 sales compensation program• 41% will make changes to the 2021 plan to improve strategy alignment

Sales Comp Changes Planned for the Primary Sales Job in 2021• 2% is the target total earnings planned increase for 2021• 41.1% will change the performance measures for the primary sales job• 85.7% report sales revenue as the key measure in the pay plan• 29.7% use annual objectives with monthly payouts but practices vary• 80.3% use three or fewer measures in the 2021 pay plan• 82.3% will tie payout to individual performance• 79.8% do not use an MBO component in the sales compensation plan• 20% is the weighting of the MBO component for the 12.1% using MBOs• 42% use a bonus formula paid against quota achievement• 33% use a 50/50 pay mix (base/target); practices vary• 67.3% have no pay caps for sellers in the primary sales job• 27.6% provide 2x the target incentive as upside earnings potential;

practices vary• 58.1% use a performance threshold for the primary sales job • 67.3% use clawbacks if orders do not fully transact• 35.6% place new hires on a fixed guarantee


2021 Sales Compensation Trends Survey Findings—Highlights (2 of 2)

Quotas• 45.5% of sellers will reach quota in 2020• 49% made mid-year 2020 quotas changes• 100% of full sales credit matched actual revenue in 2020• 85% was the median quota performance in 2020• 43.7% of companies over assigned 2021 quotas• 41.9% use a combination of top-down and bottom-up to set 2021

quotas

COVID-19: Sales Compensation—What Did You Do?• 63% made a change to their incentive plans due to COVID-19• 64.5% have no plans for sales restart incentives• 2.8% made base pay adjustments for relocated sellers; most did not

have relocated sellers

Trending Topics• 31.1% identified sales managers/sales operations responsible for plan

design• 12 weeks is typical maternity leave• 62.5% make pay and/or quota adjustments for maternity leave• 6 weeks is the median paternity leave• 57.3% make pay and/or quota adjustments for paternity leave• 89.4% do not plan to examine sales job FLSA exemption status due to

virtual selling• 43.3% provide incentives to lead generation representatives• 46.2% reward revenue from new customers/accounts differently;

practices vary• 3 FTEs assigned to administer plan; 91 payees• 33% use desktop solutions to administer pay plan; 25.5% use SaaS

provider• 48.6% will make changes/investments to the automation system• Internal automation solutions are the top two applications• 47.1% provide mobile access to incentive reporting• 62.4% have or plan to examine pay equity (gender) among sellers

Five-Year Trends—Key Elements


Five-Year Trends Summary*

8% revenue increase for 2021 suggests optimistic revenue growth

17.5% will reduce headcount in 2021; a jump from previous years

-1.5% was the incentive decline in 2020; the most recent decline was in 2009

46.3% rated pay plans effective; a major drop from previous years

62.6% cite correct goal/quota setting as the major challenge for 2021

40.2% will make changes to performance measures

100% plan to make changes to 2021 sales compensation plan

85.7% selected sales revenue as the primary pay plan measure for 2021

* Highest Response or Median for the Question


8% Revenue Increase For 2021 Suggests Optimistic Revenue Growth

9.0%

5.0%6.0% 6.0% 6.0%

8.0%

3.5%

5.0%6.0%

5.0%

2.0%

2016 2017 2018 2019 2020 2021

Year-to-Year Revenue: Projected and Actual

ProjectedActual


17.5% Will Reduce Headcount In 2021; A Jump From Previous Years

15.4% 11.0% 10.3% 8.5%17.5%

36.6% 39.4%30.8% 35.0%

32.0%

48.0% 49.6%59.0% 56.5% 50.5%

2017 2018 2019 2020 2021

Projected Staffing Changes By Year

IncreaseFlatDecrease


-1.5% Was The Incentive Decline In 2020; Most Recent Decline Was In 2009

3.0%

2.0% 2.0%

3.0% 3.0%

2.0%

1.0%

2.0%

3.0%

2.0%

-1.5%2016 2017 2018 2019 2020 2021

Year-Over-Year Compensation Payout Changes

ProjectedActual


46.3% Rated Pay Plans Effective; A Major Drop From Previous Years

8.9% 8.7% 9.0% 11.6% 16.0%

38.7% 32.6%23.1% 25.0%

37.7%

52.4% 58.7%67.9% 63.4%

46.3%

2016 2017 2018 2019 2020

Sales Compensation Plan Effectiveness

EffectiveAcceptableNot Effective


62.6% Cite Correct Goal/Quota Setting As The Major Challenge For 2021

62.6%

27.1%24.3%

20.6% 19.6%

Correct goal/quotasetting

Sales strategyclarity

Managing costs Using the rightmeasures

Sales creditingchallenges

Next Year's Sales Compensation Challenges

20172018201920202021

New challenges added in 2021 Survey:

34.6% Uncontrollable External Factors

27.1% COVID-19 Pay Mitigation Practices


40.2% Will Make Changes To Performance Measures

40.2%

27.1%23.4% 21.5%

16.8%

Performancemeasures

Ramps, accelerators Thresholds, Caps Upside potential Pay mix

Most Common Plan Changes

20172018201920202021

18.7% will make sales crediting practice

changes, too


100% Plan To Make Changes To 2021 Sales Compensation Plan

13.2%

29.2%

57.5%

0%

Major changes affectingmost plans

Significant changesaffecting some of the plans

Minor changes to some ofthe plans

No changes will be made

Plan Changes for the Next Year

2017

2018

2019

2020

2021

First time in 19 years of the Survey, all

participants plan to make changes to next year’s

sales compensation plan


85.7% Use Sales Revenue As The Primary Pay Plan Measure For 2021

85.7%

30.5% 25.7%22.9%

13.3%

Sales Revenue Profit New Accounts Units/Orders More Sales to ExistingAccounts

Sales Compensation Performance Measures

2017

2018

2019

2020

2021

Other important measures include:

22.9% Renewals

18.1% New Contracts


Data Collection/Methodology

The 2021 Sales Compensation Trends Survey© represents responses from 109 participants. Multiple sales departments from the same company participate.Participants must have at least 20 full-time sales personnel. Participants provided data during November and December 2020. The Alexander Group gatheredresponses via a web-based survey. Results were published in January 2021.

Data Edits and Trimming. All data entries were reviewed for applicability. Some responses were deleted as non-applicable. For the distribution/frequency charts,some skewed data responses, while retained in the percentile and average calculations, were dropped from the charts to provide a coherent display.

Median versus Average. The survey reports both the median and average response for numerical response questions. The median is the “middle” number ofthe data array, also known as the 50th percentile. For planning purposes, we advise policy makers to use the median as a comparator number, but toacknowledge the “average” response as directional when compared to the median for the same data array.

Editor’s Note: Responses to survey questions often exhibit a wide range of responses. Sales management should exercise judgment when interpreting andapplying median and average survey responses.

Would You Like to Participate in Future Surveys Like This One?Please send an email to [email protected] to join our Sales Effectiveness Survey Panel. Put “Survey Panel” in the subject line and provide your(complete) business card information. To be accepted as a survey panelist, you must meet the following criteria: 1) you must have at least 20 customer contactsales representatives; 2) you have no commercial interest in marketing/selling products or services to sales departments; and 3) you agree to fully completesurveys submitted to you. Survey panelists receive a free copy of the survey results. Being a Sales Effectiveness Survey Panelist is voluntary and you can opt-out at any time. We keep all responses in strict confidence and are not used for solicitation purposes.

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About the Sponsor

The Alexander Group, Inc.® ̶ Revenue Growth ConsultantsThe Alexander Group provides revenue management consulting services to the world’s leading sales, marketing and service organizations, serving Global2000 companies from across all industries. Founded in 1985, the Alexander Group combines deep experience, a proven methodology and data-driven insightsto help sales leaders anticipate change. We help clients align their go-to-customer team with company goals to make better informed decisions with one goal inmind—to grow sales.

The Alexander Group has offices in Atlanta, Chicago, London, New York City, San Francisco, São Paulo, Scottsdale and Vero Beach. Visitwww.alexandergroup.com or call 480.998.9644.

About the Editor

David J. Cichelli is a revenue growth advisor of the Alexander Group. He is the author of multiple leading industry books, including the bestseller“Compensating the Sales Force,” Third Edition, published by McGraw Hill. He edits the biannual “Sales Compensation Almanac,” published by AGI Press. Inaddition, David is a regular contributing author to professional and trade publications.

David is a frequent speaker on sales effectiveness issues. To learn more about David’s publications and speaking engagements, visitwww.alexandergroup.com.


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2021 Sales Compensation Trends Survey

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