Accurate pay benchmarking data
Setting pay benchmarks can be fraught with emotion and lead to heated debates. To defuse tension and take the emotion out of the equation, sales organizations need to look to objective factors; namely cold, hard compensation data.
But you can’t just set and forget sales market pay rates, says DiMisa. “Frequent pay benchmarking is essential to stay on top of market fluctuations,” he adds. At a minimum, sales organizations should benchmark market rates for sales representative salaries and sales manager salaries at least every two years; for the most accurate information, they should benchmark compensation annually.
Effective decision-making regarding target pay levels relies heavily on comprehensive market pay data from reliable sources, such as surveys and industry reports. Key considerations when selecting benchmarking sources include the following:
- Reliability: Choose surveys from reputable associations or consultants that regularly publish benchmarking data.
- Cost: Surveys can be expensive. Keep in mind that if your organization participates in a benchmarking survey, you may be able to snag a discount.
- Age: You need fresh data to make the best decisions; outdated data will lead you astray. Most surveys are conducted once a year or every other year. If you are going to age the data so all of your sources share a common date, use an industry standard for the year(s).
- Validity: Choose survey data based on participants that mirror your organization’s industry, size and reputation. The data must also be based on a sufficient number of participants to be reliable.
- Job types: Ensure that job descriptions in surveys align closely with your benchmark positions. Minor adjustments (typically up to 10%) using another data source may be necessary, but significant disparities (>20%) may require you to use an alternative data source.
- Ease of use: You must be ready to defend your market analysis, so choose surveys that provide data by percentile and scope (e.g., company size) and that use a clear methodology. Document why you chose the data you did and how you used it to reach your conclusions.
DiMisa advises sales leaders to keep in mind that the more data you have, the more accurate and convincing your findings will be. “Always link your pay level discussions to your compensation philosophy, job roles and business strategy.”
Invest in the art and science of setting sales market pay rates
Setting sales market pay rates is part art, part science. Invest a significant amount of time and thought into the best pay levels for your people—then verify your decisions with data. Then, be sure to document your decision-making process and align it with your corporate philosophy, so you can persuasively defend your compensation strategy.
Visit our sales effectiveness solutions page to learn how Korn Ferry’s experts can help position your sales organization more competitively in the market.