Sales Compensation Maturity Model: Levels From Manual to Autonomous

Most Companies Don’t Know Their Level of Sales Compensation Maturity

Sales compensation processes have evolved immensely over the last decade. However, most companies believe they are much further along than they actually are. Something many organizations are mistakenly basing this false assessment on is if they have a compensation platform or automated payout functionality. While automation improves efficiency it doesn’t equate to “smart” yet many sales enablement organizations believe they have arrived. Organizations operating on SAP Commissions or Xactly Incent still spend their time designing plans manually reacting to decisions and having very little visibility into what’s driving performance. Automated payout just means no more calculation errors and on-time payouts. These are great improvements but they don’t move the needle on how compensation is changing seller behavior and ultimately revenue results. Level of technology doesn’t determine maturity. Mastery of compensation as a lever to increase growth, profitability, and predictability does. The key to leveling up is viewing sales compensation through the lens of a maturity model.

5 Levels of Sales Compensation Maturity 

To understand where you fall in the evolution from managing compensation to optimizing it we created a 5 levels Sales Compensation Maturity model .

Level 1: Manual 

This is where most orgs feel they are and it’s quite the opposite. Level 1 is spreadsheet heavy and largely disconnected processes. Riddled with errors, it’s very difficult to have transparency which leads to low trust in the eyes of the sales team.

Level 2: Automated 

Dedicated compensation systems are put into place to improve efficiencies and accuracy. Payouts are now done right every time, on-time but decisions are still very reactionary and visibility into performance drivers is minimal.

Level 3: Insight-Driven 

Dashboards and reporting allow organizations to start seeing trends around attainment, how payouts are distributed, and what sellers are doing. But that insight is happening long after the fact, and isn’t fully actioned on.

Level 4: Predictive 

Predictive analytics and some AI kick in. Companies are now able to predict quota attainment, forecast commission expense and even simulate incentive plan changes before they happen. Optimization becomes proactive vs reactive reducing risk. 

Level 5: Autonomous (Human-in-the-Loop) 

Compensation technologies continuously track performance, recommend actions, and allow for real-time optimization. Humans are still in the-loop for decision making. Governance and risk around “what” and “why” we make certain decisions is put into place. Automation should never mean no-governance. Think of level 5 as a system that measures and changes revenue outcomes.

Charting Your Course: How to evolve through the levels of sales compensation maturity

To make any gains in moving up through the curve you need to focus on cultural mindset shifts, data foundations, and operating best practices. As a level 2 company your first goal should be focused on creating visibility. This could look like creating dashboards that allow you to see what’s happening behaviorally, financially and motivationally across your plans. If you’re thinking about jumping from level 3 to level 4 you’ll want to make sure you have all your historical data in one place, start to adopt predictive models, and create a process for testing incentive changes before you run them. Making the jump to level 5? Establish a governance framework, implement tools that allow you to monitor in-real time, and define human vs AI decision rights. There are common mistakes we see at each level such as buying smarter tools with data that’s not clean or integrated, trying to over automate everything without controls or defining what success looks like based on the tool vs the business need. Hopping levels in compensation won’t get you to your goal and building a strong foundation at each level will serve you better than rushing to the top.

Conclusion 

Looking to the future of sales compensation, smart companies are shifting their perspective from measuring revenue outcomes to continuously optimizing the levers that impact them. If you don’t know what level your organization is at start there. Once you’ve defined your current level take inventory of what you need to do to level up. In the coming years we’ll see companies that have mastered sales compensation as a strategic lever.