The health crisis linked to the COVID-19 pandemic and its impact on sales may mean the incentive compensation schemes for sales teams need adapting. Many avenues are possible, including reviewing sales force objectives.
As the impact of the lockdown situation on sales depends on industries, products and distribution channels etc, the decision to review objectives must be based on a prior analysis, which may lead to different decisions depending on the teams and components of the scheme within the same company.
This analysis implies both specifying the impact of the lockdown situation on national sales, and determining whether or not it’s uniform among all employees, so as to define an action plan.
These analyses can only be reliably conducted at the end of lockdown. While it’s not possible at this stage to communicate on the level of the review of objectives, it is essential to give visibility to the teams as early as possible in the decision-making process to be implemented.
HOW SHOULD THE NATIONAL OBJECTIVE BE REVIEWED?
Budget approach
For some companies, the entry point for reflection will be the pool of bonuses that can be distributed over a period when the company is economically weakened.
In this case, the approach will be of a different nature depending on the performance period:
- For a short cycle, once the bonus pool has been decided on, it is possible to deduce the national review of objectives that allows this pool to be distributed accurately;
- For an annual cycle, one can only reason based on a projection of the pool with regard to the performance observed at the end of lockdown. This projection will make it possible to define the review of the annual objective. However, the pool distributed at the end of the year will also depend on the performance in the second half of the year.
Performance approach
For other companies, the entry point for reflection will be to seek to limit the effect of lockdown on performance. In this case, the approach is to explicitly define a reviewed national review of objectives between:
- The actual review of objectives observed at the end of lockdown;
- The actual review of objectives observed prior to lockdown;
- A 100% neutralised review of objectives.
Steps are then required to ensure the bonus pool distributed with this reviewed national review of objectives is in line with the company’s budgetary constraints.
HOW SHOULD SECTORAL OBJECTIVES BE REVIEWED?
The impact of lockdown will in most cases be relatively uniform for all salespeople. In this situation, the review of sectoral objectives remains exactly the same as that of the national objective: if the national review of objectives is increased by 5%, the performance of each employee must also be increased by 5%.
However, if each salesperson is impacted differently, the involvement of local management in the process of reviewing individual objectives is essential to continue to ensure fair objectives. This requires firstly a few rules to help with decision-making and assist managers in making adjustments and secondly a process for approving the reviewed objectives.
As is often the case in terms of incentive compensation, the step of communicating the reviewed objectives to sales teams is critical. In order to be efficient, it must be carried out before the payroll process and the rationale must be clearly explained.
