The Strategic Value of HR in Sales Compensation Design

By hrlineup | 17.12.2019

A sales compensation design or plan is a combination of a sale representative’s base salary, commission and incentive, all which are geared towards constituting the representative’s earnings. The plan is designed in such a way as to drive performance as well as increase business revenue.

Where does the HR come in?

In any business, HR professionals are considered as exerts in all matters regarding compensation and in this case, sales incentive compensation, which is very particular to sales organizations. As a sales compensation expert, the HR focuses mostly in providing valuable market insights as well as creating an incentive structure with strategy and also designing a plan that will motivate the desired sales behavior for better results.

The HR can also collaborate with sales and finance divisions to keep the compensation plan at par with the company’s culture, strategy, values and policies. After all, it is the HR who has a better overall view of the organization, so he makes sure that the plan they create will remain aligned with the desired corporate objectives. Using this approach, sales, finance and HR will not make decisions as per their individual knowledge but according to the business tradition.

Besides, the HR is the one in charge of the compensation market trends data. Before making any decisions pertaining sales compensation plan structure as a part of the total compensation package to offer, any business will need to consider the competitive market and complete a thorough analysis. This can involve going through several other sales compensation plan examples form other organizations.

HRs are in a better position to provide insight into how the business competitors evaluate their job content, how they plan structures and how they price the jobs they offer. He is able to understand the sales compensation trends and market pricing better to help the company pay competitively and fairly in order to attract top talent and also retain the best talent.

Again, HR is the only expert in performance management and compensation methodologies in any organization. He has the required knowledge about strategies that can be used to motivate sales people to be able to offer insights into how this can be done.  He is well skilled to offer concrete advice on what performance criteria can be used and what strategy should have more weight for excellent results in developing a compensation plan.

The success of any business is in most cases in the hands of sales people. They bridge the gap between potential customers’ needs and the products/services that a business is offering, which can fulfill those needs. Sales compensation programs are therefore very important in ensuring that the people who do more for a business are well compensated.

Designing the best sales compensation plan can be very complicated without the expertise of a HR. There is just so much that a HR can do in setting up sales compensation plan that is acceptable and one that will bring more benefits to the business at large.