Despite Massive Spend, Just One-Third of Compensation Professionals Align Incentive Programs With Organizational Goals and Objectives
CaptivateIQ’s Inaugural State of Incentive Compensation Report Highlights Growing Complexities, Opportunities for Automation as Organizations Struggle to Scale Incentive Compensation Efforts
CaptivateIQ, a leading incentive compensation management (ICM) solution, published its inaugural State of Incentive Compensation Management Report. The company surveyed 200 U.S. compensation leaders at enterprise B2B companies to uncover trends in incentive compensation management and identify strategies for improvement.
Incentive compensation is often an organization’s largest go-to-market expense. The opportunities to drive real impact on revenue by aligning individual incentives with business priorities are endless, yet compensation management is surprisingly outdated, leaving compensation teams spending their days wading through manual to-dos.
An organization’s path-to-growth constantly evolves as new product lines, go-to-market strategies, or market expansions are prioritized. Effective incentive compensation programs should reflect those changing business priorities; however, their complex nature makes it difficult for organizations to scale and evolve as quickly as needed – and in fact, the inability to scale incentive compensation programs was rated a top challenge by almost half (49%) of those surveyed, largely due to the complexity of these managing these programs.
In fact, just one-third of survey respondents said they align their incentive programs with organizational goals and objectives, exposing the need for compensation leaders to shift their focus from day-to-day tasks to investing in scaling programs and optimizing spend. The research sheds light into the many ways organizations can become more strategic in how they manage incentive compensation, turning it into a lever for growth, including:
Striking the Right Mix of Tactical vs. Strategic
Despite incentive compensation professionals reporting that they are mostly satisfied with many aspects of their programs, there is still a lot of manual work being done as well as a desire to shift toward more strategic work. In fact, just 25% of those surveyed feel they can currently dedicate the right split between tactical and strategic tasks, with 42% wanting to do more strategic tasks.
The survey highlights a gap in the current state of ICM. While the ultimate purpose of an incentive program is to align what is best for the rep with what is best for the business, and motivate behaviors and outcomes that more efficiently help the business meet its goals, incentive compensation professionals are settling. Respondents are admittedly dedicating too much time and energy to administrative time-sucks and not enough on initiatives that move the needle.
Motivating Teams With Incentives to Efficiently Drive Growth
Aligning incentives with organizational or team objectives, such as less customer turnover, more closed-won deals in certain segments, or higher quality lead generation, is the first step toward optimizing incentive compensation spend.. However, the survey found that the majority of compensation plans are still based on new business revenue.
Just 17% of respondents pay commissions on account renewals and just one-quarter on upsells, which represents an opportunity to incentivize post-sales success. Only 21% pay commissions on overall team performance, a metric that can motivate teams to work better together instead of acting more as lone wolves.
As incentive compensation programs continue to expand to new functions, organizations should be mapping incentive programs to desired business outcomes and motivating behaviors that go beyond more traditional factors (e.g. revenue).
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Looking For Ways to Improve Measurement
Measuring plan impact, reporting on performance, and surfacing key data points for analysis is essential for strategic incentive compensation planning and execution. However, less than 40% of respondents are actively reporting on how programs are performing, only 35% make changes to reflect changing market conditions, and 40% are optimizing their program based on insights.
“Go-to-market leaders are settling when it comes to incentive compensation,” said Mark Schopmeyer, Co-Founder and Co-CEO of CaptivateIQ. “To move beyond the status quo, they need to first get a better understanding of how much these programs actually impact the bottom line, and then work to continuously measure and optimize performance.”
As incentive compensation strategies become more complex and organizations shift from tactical to more strategic approaches, the report points to AI and automation as becoming necessary for success. While 91% of the respondents already report using some form of AI within their day-to-day incentive compensation management workflows, continued investment will better equip organizations to automate manual processes, scale programs without additional spend, and become more efficient and strategic in their approach to ICM.
