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Sales compensation managers play a crucial and often underappreciated role. They are often the single most important link between sales, operations, HR, and finance. They fine-tune sales compensation plans features, analyse schemes performances in conjunction with sales ops reviews, and orchestrate pay-outs arrangement with HR and payroll. In short, they’re one of your most important and trusted employees.
They’re also the owner of the master Excel file. You know, the one that only a few people have access to and that even fewer understand. From the exceptions to macros, they’re often the only one who truly knows how it works. And it’s for a good reason. You only want a few, highly trusted team members to have access to the tools that manage everyone’s HR details, salaries, and variable compensation plans.
So, if your sales compensation manager decides to say “bye-bye”, you can find yourself in trouble. Here, we’ll discuss the potential business risks, ways of mitigating them, tips to find the right replacement, and onboarding advice.
They do a lot! If you’re not a sales compensation manager, it can be hard to grasp exactly how much they have on their plate. Yet, despite their importance, they are the oft-forgotten member of sales organisations. We see your hard work and appreciate it, sales compensation managers 💜
As you’d expect, they design incentive and variable compensation plans. In practice, it often involves managing a massive Excel spreadsheet and the various systems and processes that bring the data into it. We’re talking about CSV exports, custom templates, and sometimes even Python scripts, and that’s just to get the data into the spreadsheet. Once it’s there, they’re managing the different formulas, macros, and pivot tables while dealing with manual overwrites and plan adjustments.
And that’s only the tip of the iceberg. Even a small error can have a huge impact on trust, financial results, or both. On average, manual spreadsheet-centric compensation processes lead to error rates in the range of 3-8% of total variable payouts. That’s a big chunk of change. Consequently, this role requires extreme attention to detail to help avoid these situations. Even a minor typo can leave you with an unhappy sales team receiving less than expected despite a very successful quarter.
Sales compensation managers are also responsible for managing communication between different departments and teams as well as occasionally analysing sales data. As a result, they’re often on the front line when it comes to balancing conflicting priorities from different stakeholders and managing upset sales team members who don’t agree with or understand their payout (usually, lack thereof).
Being in the middle of everything, they’re often tasked with being the key communicator who brings the various teams together and keeps them on the same page. They also use that feedback to make sure that the various compensation plans stay aligned with business goals.
Sales compensation managers have a lot of responsibility. They are one of the key connectors and communicators in your organisation. So, if they decide to go, you’ll find yourself facing some risks. Some potential impacts of their departure include:
One of the biggest and most obvious risks when a sales compensation manager leaves is the disruption to the management of your sales compensation plans. As we were saying, not many people have access to the master spreadsheet they use to calculate sales compensation. Of those who do, no one is going to know how it works like your sales compensation manager.
If they go, someone is going to have to pick up where they left off. There's no guarantee that you’ll be able to find and properly train a replacement to understand all the ins and outs of this beastly spreadsheet in time. You may have to hand this over to an unlucky junior team member who doesn’t have the expertise or time to handle this complex process as a stopgap measure. Clearly, this isn’t ideal and, more than likely, leads to finance begrudgingly taking over the process while you look for a replacement.
When your sales compensation manager leaves, they take their valuable company-specific knowledge about your compensation strategy and processes with them. There are many factors that can make this even more devastating. Sometimes there may be no documented processes. In some other cases, they may be the only person managing the compensation spreadsheet and technical processes that populate it. If both of these criteria are present, the loss of their expertise can range from disruptive to catastrophic depending on the industry and payout frequency.
Their replacement or fill-in faces a difficult road just to maintain the compensation plan, not to mention making necessary adjustments. The knowledge gap can be so big that you may need to commit a ton of time and resources to rebuild that internal expertise (and hopefully document everything this time).
Sales compensation plans aren’t just governed by internal policies, they must also adhere to various labour laws. A knowledgeable sales compensation manager helps keep you compliant with these requirements. Now, when they leave and take all their expertise with them, there is a risk that you might unknowingly breach a regulation. This can lead to unwelcome legal and financial consequences.
A well-managed sales compensation plan is a powerful motivator for your sales team. When your error rate starts growing and payouts aren’t sent out on time, your sales team’s motivation is going to drop quickly and drop hard. And why wouldn’t it? It’s hard to ask them to stay motivated when they’re getting the wrong payout amount a week late.
In extreme cases where these issues aren’t resolved promptly, you may even see an exodus of sales team members. If they feel that their compensation is not being managed fairly or transparently, they may seek opportunities elsewhere. As we all know, high turnover can be costly to organisations, both in terms of recruitment costs and productivity losses.
Things change, that’s life. It’s not realistic to assume your sales compensation manager is going to stay with you for the next 50 years (it's usually six months to five years). So, it’s important to get to work on some things that will reduce the impact of their potential departure.
No one wants their sales compensation manager to leave, but the reality is that they will probably move on at some point. You need to anticipate their departure rather than have it take you by surprise. There are many things you can do to keep on top of this. From employee happiness surveys to informal feedback and formal performance reviews, keep an eye on the satisfaction of your sales compensation manager.
If they don’t seem super pumped and you haven’t done anything to reduce the impact of their potential departure (ex. haven’t done anything that we’re going to talk about below), now is a good time to get started. Understanding that they may be moving on is the first step to reducing the impact on your organisation.
The processes and spreadsheets your sales compensation manager is using are complicated, to say the least. However, in many cases, the know-how of how to properly use and manage them is in that big, beautiful brain of theirs. Given the crazy complexity of an average compensation spreadsheet and data import processes, it’s a good idea to get it in writing.
If they’re using a Python script to bring in some data, how does that work? How do they manage manual overwrites? What are some common issues they run into when importing data? Having the answers to all these questions in documentation form that can be referenced by you, your new hire, or the person covering for your compensation manager when they’re on vacation makes everyone’s lives way easier. Rather than needing to call them up each time, you can open the documentation, find the subject you’re struggling with, and get the answers you need.
Given you may have already identified some pain points during the documentation process, this is a great time to look at simplifying your sales compensation processes. This can take many forms but one common initiative is to get a sales compensation management solution (if you don’t already have one). Compared to Excel or Google Sheets, these tools dramatically reduce the need for manual processes, connect with your data source, increase accuracy, and help you be more transparent with your sales team.
Simplification has a ton of benefits: less training time, smoother processes, fewer errors, and easier onboarding. Since they know best, it’s best to get your sales compensation manager to lead the project. They know what’s working well and what needs to be ironed out while also having an in-depth understanding of the different plans, complex compensation formulas, and various thresholds contained in the mega Excel.
Having a single point of failure isn’t a good strategy. That same approach applies to your sales compensation processes too. Usually, that single thing holding it all together is your sales compensation manager. So, how can you avoid failure? Get them a friend!
Your sales compensation manager is on their way out. It’s sad but you need to move on and find their replacement. Naturally, standards need to be high when it comes to finding your new sales compensation star.
Now, things like experience level, software expertise, and industry background are going to depend a lot on your organisation and the profile of your departing compensation manager, so we’re not going to dive into those aspects of hiring.
What we will cover are some of the essential skills you should look for in your future hire:
It may seem strange that communication skills show up first on the list, but they are truly one of the most important things to look for in a potential new sales compensation manager. Remember, they’re the point of contact between your sales, operations, finance, and HR departments. It’s why they need to be able to communicate well, speaking each department’s “language”. When they do this well, they’ll also do a great job in keeping your compensation plans aligned with your business goals.
A more obvious key competency, fantastic analytical skills are a must-have. Sales compensation managers need to analyse sales data, identify trends, track performance, and make informed decisions and recommendations based on said data. An excellent analytical mind will also be able to easily spot errors and pain points in your processes, implementing tools or modifications to fix them or make them run smoother.
Compensation mistakes often end up affecting your sales team's paycheques. Spoiler alert: salespeople who got a smaller payout than they were supposed to get are not happy. Even one mistake can cause your team to lose confidence. That’s why you need your new sales compensation manager to be super detail-oriented. They need to be meticulous in their work, ensuring that compensation plans are accurate, performance tracking is working correctly, and the right amount of compensation is paid out.
Your new hire also should be superb at thinking strategically. In the world of sales compensation, it’s easy to get bogged down in plan details and payout processing. However, a good sales compensation manager will take a step back and understand the company’s goals, then make the sales compensation plans align with those goals. If they don’t, it’s up to the manager to make the adjustments that put them in sync while continuing to keep the sales team happy and motivated.
With your beloved sales compensation manager heading out the door (or already out) and your new favourite sales compensation manager on their way in, it’s time to get them onboarded. This is all about transferring as much of your old compensation manager’s knowledge and responsibilities to your new one during the onboarding process so they’re feeling comfortable and ready to succeed.
Getting down to business, you need to bring your new team member up to date with your organisation’s current compensation plans. This means doing a deep dive into the various structures, territories, thresholds, SPIFFs, and tiers that inhabit that huge Excel spreadsheet of yours. Dive into all the dirty details, the macros, everything, to make sure they have the full picture.
It’s always best if your departing manager leads this process since they know the ins and outs better than anyone. If you’ve made any recent plan updates, have your old sales compensation manager review them with the new one. It provides an excellent opportunity to illustrate how changes to different aspects of the plans affect the sales team’s compensation and gives insights into how they can be used to improve motivation and performance.
Understanding the sales compensation plans isn’t enough, you also need to know how that data gets there and where it comes from. Getting your new hire familiar with the various processes that make sales compensation possible is crucial to keeping things running smoothly. Again, that means looking at the details and outlining the various technical steps that need to happen to get the data into that spreadsheet.
The same goes for your systems. Your new sales compensation manager needs access to and training on all the various systems you use, including Excel. Actually, that especially includes Excel given how hardcore sales compensation spreadsheets usually are. They need to understand what data from which source goes where, whether it’s done automatically or manually, and who’s responsible for supplying them with it.
As we said, the sales compensation manager is at the crossroads of sales, operations, HR, and finance. You need to get them to a “nod in the hallway as they walk by each other” level pretty quickly.
Arrange introductions with all the key players in the sales team, finance team, HR team, and operations team. Understanding who they need to go to when they encounter an issue and who will be asking for things from them helps your newbie get an understanding of how to manage the different stakeholders and keep them aligned on organisational goals.
This part of the transition will be heavily dependent on how much overlap (if any) you have with your new and departing sales compensation managers. If there is a good amount of overlap, your incumbent manager can slowly but truly guide their replacement through each step of the sales compensation process (and spreadsheets), giving them a hands-on learning experience while keeping them from making any missteps. If there’s a shorter overlap, this process may need to be condensed but its hands-on nature is still extremely valuable.
If there happens to be a situation where there’s no crossover, you’ll need to rely heavily on your documentation and internal expertise. If you followed some of the advice above, you should have both at your disposal. Even though your expert has left, these fail-safes will help you keep the onboarding process smooth and effective.
The departure of a sales compensation manager can expose your company to some big risks. Not to worry though, knowing is half the battle. If you’re reading this article, it means it's already on your mind and now you can start taking some steps to make sure you’re ready.
Things like creating documentation, simplifying your processes, and avoiding having only one person who knows everything about your sales compensation processes all go a long way to keeping your organisation running smoothly. You’ll often find that when you do this, you’ll uncover pain points you didn’t even know existed and find solutions to make your sales compensation manager’s life way easier (regardless of whether they’re leaving or joining). In the end, you’ll be able to take action to tighten up your sales compensation plans, processes, or systems and take your new hire, your sales team, and your whole organisations performance to the next level.
