Stephen Hurrell's Analyst Perspectives

I recently published an Analyst Perspective on how the rise of omnichannel buyer engagement coupled with subscription pricing is increasing the complexity in achieving corporate targets. An example is the software provider who implemented a new self-service capability to speed fulfillment for existing customers by enabling the direct purchase of additional licenses without assistance from the assigned salesperson. But the desired outcome of faster fulfillment wasn’t realized. The initiative did not result in faster fulfillment because the organization did not address the root problems affecting people, processes and incentive compensation. Salespeople were only paid commission on their accounts if they processed the sale, so they manually processed these orders, delaying fulfillment. 

Incentive compensation is designed to provide monetary and nonmonetary remuneration for hitting targets or achieving goals. But incentives can also result in unintended consequences, as the above example illustrates. This is why when planning incentive compensation - especially as it relates to salespersons – needs to be in the wider context of the overall sales and revenue plan. 

For many enterprises, the number of ways that customers can purchase has moved beyond the single, person-to-person engagement model to include digital commerce and self-service portals, partners as well as customer service agents. Likewise, how customers pay for products and services have also moved beyond one-time sales to include flat fee subscription and usage-based pricing, and especially for bundled products and services. Together these changes have greatly complicated what needs to be taken into consideration when designing and executing on incentive compensation plans. 

Many larger and global enterprises require more complex selling motions to support global and regional account responsibilities as well as product and specialist overlay teams. But from a customer’s perspective, engagement can happen across many channels and touch points involving direct sales staff and even customer service workers. Increasingly, timing – in addition to subscription pricing models – alters when the selling enterprise collects payment and recognizes revenue. Consequently, incentive plans and attribution must be designed across multiple dimensions to enable the correct crediting of payments to whom and when. 

Not surprisingly, just changing technology without a corresponding adjustment as to how an enterprise needs to think of incentives and revenue will have the potential result of working against desired outcomes, of causing avoidable disputes over payment and not appropriately balancing resource levels commensurate with revenue contribution. This planning also needs to ensure that design and approvals need to include all stakeholders. As incentives for participants in any revenue channel - direct, indirect, digital commerce, customer service and self-service - can have an impact on other outcomes the planning and targeting needs to be managed as a whole. This will involve stakeholders across the enterprise such as finance, HR, sales, marketing, and customer success.  

Despite the importance of aligning incentives, we assert that through 2026, fewer than 2 in 5 enterprises will develop incentive compensation plans for everyone in revenue supporting teams impacting the enterprise’s ability to hit new, expansion and retention revenue targets. 

Enterprises must reevaluate traditional compensation plans and processes to support multiple revenue channels. This includes decisions on tracking attribution for crediting purposes. There is also a time dimension to computing incentives, which should be linked to when revenue is realized and recognized. Following a review of the compensation planning process across all revenue channels and all those involved, enterprises should also review the technology. There is a truism that if the technology constrains your business processes, then you are using the wrong technology. For organizations still using spreadsheets or custom applications, there should also be a review with a desire to replace with purpose built applications that will be able to take advantage of the development of new AI assisted optimization capabilities. 

Regards,

Stephen Hurrell