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ICM Trends to Watch: Incentive Compensation Plans are Evaluated and Modified More Frequently

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In our “ICM Trends to Watch” blog series, we explore the five key trends we’re keeping an eye on in 2024, and dissect the ways in which innovative technologies, evolving GTM (go-to-market) cultures, and more are impacting incentive compensation strategies and revenue performance management.

Regularly reviewing your sales performance and understanding how your compensation strategy contributes – especially in today’s ever-changing business landscape – is crucial for running a sustainable revenue engine. Compensation plan modifications allow a company to course-correct when the incentives and actions of their sales teams aren’t in line with or effectively driving towards company goals.

According to CaptivateIQ survey data, only 21% of organizations made zero modifications to their sales compensation plans, while just over half of respondents modified at least 50% of their plans, and 41% modified more than 75%. Of those who modified plan components, the most common modifications were made to refine calculations to better align companies’ objectives for efficiency with the need for strong motivation: 83% modified quotas, and 79% modified tiers. 

Further, less common areas for modification indicate the shift to efficiency-led performance from growth-at-all-costs approaches, putting financial protections in place to ensure the business is appropriately balancing spend with revenue results: 29% modified clawbacks, and 21% modified payment triggers.

The frequency and complexity of modifications serve to highlight a need for flexibility and speed in response to changing market dynamics and selling environments.

Additionally, our State of Sales Compensation Report showed 85% of sales managers would like the ability to adjust compensation structures quarterly or more frequently, and 95% percent of sales managers want the ability to flexibly change plans to reflect shifting business dynamics. Unfortunately, however, many existing solutions — including spreadsheets and clunky legacy ICM systems — often limit their ability to remain nimble and quickly iterate and launch new or updated plans.

All that to say, the current macroeconomic climate is spurring organizations to more frequently evaluate what is working and what’s not, and make changes to more urgently address areas of misalignment between sales incentives and the overall health of the business.

Our State of Sales Compensation report also showed that 56% of companies have multiple compensation plans for different departments, highlighting the heightened complexity of plan changes at the enterprise level. While evaluating the success of and iterating on your sales organization’s compensation plans may seem like a straightforward task, the implementation process demands careful planning, strategic thinking, and effective execution to be successful — and this is especially true as you think through accomplishing this at scale. Incorporating effective change management strategies can help you optimize modifications, add value to your revenue team’s efforts, and ensure a smooth transition.

You can learn more about the top five trends redefining incentive compensation management in 2024 by downloading the full report.

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