Over a company’s lifetime, the person or team responsible for sales compensation will likely change multiple times.
In the early days of a company, it’s common for commission payouts to be calculated based on proximity to sensitive pay information and the company’s sales data. That could be a sales operations manager who knows the CRM data like the back of their hand, a finance person who tracks sales goals for reporting, or an accountant who’s good with spreadsheets and already knows all the payroll numbers.
As companies mature, the sales compensation process improves. Still, the owner of this program frequently stays in one of these teams — revenue operations, finance, and accounting — based on their legacy experience. Different roles and teams bring different skill sets and strengths, so sales compensation ownership varies from company to company.
According to a sample of our customer data, as companies grow, the leverage of their operations teams grows, and the number of payees per ops person grows significantly. On the other hand, smaller companies have more ops personnel relative to payees. This is likely because operations roles are less specialized at smaller companies. — Jacob Sperry, VP of Business Operations & Strategy, CaptivateIQ
In this article, we’ll explore who owns sales compensation administration today and, more importantly, who should be the owner of this mission-critical process.
What processes makeup sales compensation administration?
For anyone who’s managed and administered a sales compensation program — that is, ensuring plan participants’ payouts are calculated promptly and accurately — you know all too well that commission operations cover so much more than calculating payouts and letting the payroll team know before their deadline.
Managing a sales compensation program is no easy feat. From target setting to designing plans to facilitating payment approvals on statements, it's a complex and time-consuming process that requires diligence and accuracy. We can simplify this unruly process into five key tasks, or process inputs, that will power reliable payout calculations for everyone involved.
- Set overall sales targets
- Set individual sales targets
- Set individual compensation ranges
- Design sales compensation plans
- Administer compensation plans (process commission calculations)
It is precisely the breadth of these inputs to the actual plan calculation that result in the administrator of compensation plans sitting on so many different teams at a company. Since there are so many parties involved in the process, where the calculation is performed can be a natural appendage to different teams. — Jacob Sperry, VP of Business Operations & Strategy, CaptivateIQ
Who are the people who most often perform each sales compensation task?
As we indicated earlier, the sales compensation process is a complex operation that often requires collaboration between sales leadership, sales operations, finance and accounting, and people/talent teams. This table shows the most common owners across these five tasks — based on a sample of our customers.
Where are the areas of greatest involvement from different teams?
The chief executive officer (CEO) and sales leadership are most heavily involved in parts of the process that cover company targets and quotas. They are often significantly less involved in setting individual compensation and ongoing plan calculations.
Sales operations is a less common owner of tasks, notwithstanding heavy involvement throughout all of these steps. Larger organizations tend to have sales operations teams that own plan designs.
Finance and accounting teams are closest to the company-level goals and often have the technical expertise to support automating and calculating the most robust calculations.
Talent (HR) teams are the most common owners of the on-target earnings (OTE) for the sales team, but with heavy involvement from leadership as well.
- CEO and sales leadership: often responsible for major decisions like company-level targets and sales quotas
- Sales operations: often responsible for setting individual targets and designing and administering compensation plans (in collaboration with sales leadership and finance, or for smaller companies, the CEO)
- Finance and accounting: often responsible in ensuring sales meet business objectives while staying compliant and following regulations, and in some cases, responsible for administering plans
- People/Human Resources/Talent: often responsible for overseeing the process of setting compensation levels for individual roles
Together, these four entities help ensure sales teams are compensated appropriately for their efforts.
Who should own your sales compensation processes?
It’s rare for a single role or team to truly own sales compensation end-to-end. It’s a collaborative, high-impact process that draws on the talent, resources, and expertise of many different teams.
Ownership will vary based on your team’s background and experience. A company with a CFO with a strong background in supporting revenue teams can be a great fit and provide additional segregation of duties and oversight. On the other hand, a sales operations team close to the sales data could enable more automation and provide additional benefits, such as “feeling the pain” when plans are overly complex — giving a strong voice to simplifying and optimizing sales compensation plans.
More important than the hierarchical ownership of this impactful program is the cross-functional collaboration and teamwork. A successful sales compensation owner needs to consider and weigh your organization's different points of view and priorities. All of these voices should be heard so the best possible sales compensation can happen — one in which payouts are fair, accurate, and motivational.
At CaptivateIQ, we believe that compensation program leaders need both flexibility and control to adapt incentive compensation to suit changing business needs and use it to their advantage.
We needed a solution that was agile, and could be owned by finance professionals that were very comfortable in spreadsheets. We’re a small but mighty team that manages comp for 200+ sellers. — Michael D., Senior Revenue Operations Manager, Gong
CaptivateIQ can help you design the right sales compensation plans for your business, regardless of complexities. Our agile compensation management platform supports rich data outputs, transparent rep statements, and approvals so businesses can organize and streamline the sales compensation process.