Why Hierarchy Management is the Most Important Metric for Sales Compensation Success

Hierarchy management in sales teams is a foundational measure that makes sales compensation plans accurate, effective and fair. A sloppy or poorly understood hierarchy is the recipe for pay wars, waste and lower sales performance among sales teams.

Think of a B2B technology company that has sales reps, account managers, regional managers and sales directors. If the structure isn’t clear, it’s a matter of: Who wins when a deal is done? Who gets overrides or bonuses? Commissions can be mis-allocated without a system in place, and loyal contributors can be ignored. That opacity can sap morale and trust.

Why Hierarchy Management is Essential

Makes Credit Assignment 100% Clear:

For long sales cycles, several players work towards a deal. Getting the hierarchy right explains who gets credit and how much is paid out.

Favors Scalability:

As businesses scale, hierarchies naturally scale. With a system in place, companies can easily increase or decrease pay rates when territories or roles change.

Improves Accountability and Tracking:

Definite hierarchies help managers monitor performance across the organization, find the most productive employees, and hold targets accountable.

Best Practices for Defining Sales Hierarchies

1.Fit with Your Sales Structure:

Build structures based on your organizational structure. For instance, if you’re team-selling, keep team leads and support roles defined.

2.Automate Hierarchy Updates:

Use technology that automatically updates hierarchies when promoted, promoted roles or territories are changed. Manual updates are more prone to errors and inordinate time.

3.Align Hierarchies to Rewards:

Compensate for managerial overrides, split credits and cross-functional roles. Regional managers, for instance, should be paid on the basis of team performance.

4.Keep Things Clear:

Update the sales force with a frequency of hierarchy changes so everyone is clear where their role belongs on the compensation continuum.

Having hierarchy management at the top is how organizations can make sure the payments are accurate, sales motivation and set the stage for development and accountability.