Current Trends in Sales: Companies Plan to Alter Their Pay Mix, Not Further Cut Jobs, According to a New Study

U.S. companies don't expect to reduce their sales forces much further over the coming months, but they do plan to tinker with the pay mix for their sales professionals. It's all part of an effort to manage their sales force investments more effectively in a down economy, according to a new survey of 160 mid-sized and large companies by the sales effectiveness consulting group of Mercer Human Resource Consulting.

Nearly one-quarter of the firms surveyed (23%) said they had reduced their sales force during the past six months, but only 5% expect to make a reduction in their sales force over the next six months. The same number (23%) said they had changed the pay mix within their sales compensation plans over the past six months, but 18% predict they will change the pay mix through plan redesign in the coming six months. Twenty-two percent specifically said they had increased the focus on commissions, and 14% plan to do so in the future.

The action most frequently taken in response to the economic downturn (by 26% of the respondents) was to provide discretionary or special bonuses for top sales performers to prevent unwanted turnover among this group of employees. "Companies are keeping a close eye on their sales force productivity and their sales expenses," says Craig Ulrich, a senior consultant in Mercer's sales effectiveness consulting group. "While they are taking a number of actions, there seems to be a sense of 'wait and see' that is heading off any dramatic changes. Many expressed optimism that the situation will improve soon."

Mercer's study also reveals that most companies (76%) do not manage to a predetermined ratio of sales compensation expense (the cost of sales compensation as a percentage of revenue). The industries most likely to use such a ratio are telecommunications and high technology. Among companies that do not use a predetermined ratio, almost half (47%) report managing to a budgeted dollar amount.

In today's business environment—rife with layoffs, lower revenues and declining profits—managing to a predetermined ratio can be beneficial, says Mike Pekkarinen, also a senior sales effectiveness consultant with Mercer. "A predetermined ratio helps to answer two important questions: 'Do we have the right number of sales resources in place?' and 'Are our sales costs in line with our sales productivity?'" he says. "You can't get that kind of information when you manage to a budgeted dollar amount."

Finding new sales professionals does not appear to be an issue, according to Mercer's survey. Only 32% of the respondents said they currently were having difficulty finding qualified sales talent. Companies having less difficulty attracting sales talent are resisting the temptation to throw money at the sales force, Mr. Ulrich notes. Instead, these companies have been more likely to resize their organizations, change the pay mix and adjust sales goals accordingly.

Mercer's sales effectiveness consultants offer the following observations on managing a sales force in the current economy:

• Play offense, not defense. Companies would be better off making proactive change rather than adopting a "wait and see" posture. This could pay significant dividends as the economy emerges from recession.
• Get beyond "how much?" Companies should think more strategically about pay and performance; money may not be the answer to every sales force problem. Companies should look at job content, skills and role-fit before addressing the question of "how much?"
• Study productivity. Organizations should assess their sales force demographics to determine who are their most productive sales professionals and why. This will go a long way toward managing return on sales investment.

The complete results of Mercer's survey, “Managing Sales Force Investments in a Challenging Economy,” are available at no cost at
www.mercersnapshot.com

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