Forty-nine percent of compensation leaders at enterprise B2B companies say the inability to scale incentive compensation programs is a top challenge. Just one third of such leaders say they align their incentive programs with organizational goals and objectives.
According to CaptivateIQ, an incentive compensation management company responsible for the State of the Incentive Compensation Report, these numbers represent a significant missed opportunity. "Incentive compensation is often an organization's largest go-to-market expense. The opportunities to drive real impact on revenue by aligning individual incentives with business priorities are endless, yet compensation management is surprisingly outdated, leaving compensation teams spending their days wading through manual to-dos," the report said.
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The report, which surveyed 200 U.S. based compensation leaders, shows that many businesses struggle to find the right balance between tactical and strategic tasks. "Just 25% of those surveyed feel they can currently dedicate the right split between tactical and strategic tasks, with 42% wanting to do more strategic tasks," the report said. According to the study's authors, these numbers suggest that many respondents are dedicating too many resources to "administrative time-sucks" and not focusing enough on more impactful initiatives.
However, the survey found that the majority of compensation plans are still based on new business revenue. Only 17% of respondents reported paying commissions on account renewals, and 25% on upsells, respectively. What's more, just 21% reported rewarding commissions for overall team performance.
According to the study's authors, organizations should align incentives with organizational or team objectives. Such objectives might include lowering customer turnover, a higher rate of closed-won deals in specific segments, and higher quality lead generation.
Beyond tailoring incentives to the specific business goals, the study's authors recommend mapping incentive programs to desired outcomes and motivating behaviors that go beyond more traditional factors like revenue. To do this, they suggest measuring plan impact, reporting on performance, and surfacing key data points for analysis. Maryk Schopmeyer, Co-CEO of CaptivateIQ, stressed the importance of tracking incentive programs' impact and reacting accordingly. "To move beyond the status quo, they need to first get a better understanding of how much these programs actually impact the bottom line, and then work to continuously measure and optimize performance."
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