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Sales Comp Guy

What California's Pay Transparency Law Means for Sales

183:906269490 • October 24, 2022

How to maintain a competitive environment for your sales people.

For the most part, pay transparency laws like California’s are going to affect individual businesses across all departments with a few variations. One area of business that will have to get creative is sales. When your employees’ roles are largely defined by competing for pay, the pay transparency can seem like a major obstacle. However, there may be opportunities within this particular challenge.


Here are some considerations for sales departments and organizations affected by California’s pay transparency laws.


[In case you missed it, part 1 of my series on pay transparency talks specifically about the inside of California’s new law. Part 2 is about how to prepare for the changes ahead. Part 3 is about the overall pros and cons of pay transparency. And to stay current on changes in pay laws and other compensation matters, be sure to sign up for my newsletter.]


You Still Need a Pay Structure


Sales employers are still required to submit documentation of pay ranges and structure as well as pursue consistency and reduce inequity. However, while your base salary structure is subject to the reporting requirements of California’s pay transparency law, there is little guidance given in terms of variable pay programs such as bonuses and commissions. While fairness is key, you will still be able to motivate your salespeople with variable pay in order to keep your sales program competitive.


Take the Opportunity to Differentiate Your Organization


Creative variable pay programs are a great way to differentiate your organization from others in the event that salary structures begin to become homogenized. With a goal-based bonus or commission program, you can attract motivated, enthusiastic salespeople who are driven by their innate competitive nature and desire to win. If possible, avoid caps on achievement, and even better, create accelerators for above and beyond performance—if it makes fiscal sense to do so. Make the effort to produce a program that is unique to your organization.


Make Sure Sales Program is Consistent and Fair


It can be trickier than you think to achieve equity in a variable pay program. Your initial rules may disproportionately favor some people over others. The language you use to describe your program can be coded with unconscious bias. And don’t forget to consider the territory perspective: do you create the same quotas and performance periods for a sales group in Wyoming as you do for a group in New York City? Would that be fair considering the difference in population? Fairness comes from equitable treatment in the territory assignment, quota allocation, and in the governance and exception process. Be sure to account for fairness in your processes.


Leverage Culture


Communicate aspects of your mission statement, core values, and purpose statement in the job description and in the incentive plan document. Highlighting the path to meaningful work for employees is core to gaining alignment for improved outcomes for the organization. Be sure to utilize transparency of the organization’s purpose and mission early and often so that there is engagement and support. The sales person carries this with them to the customer. Make sure how you treat them illustrates the desired reflection of your organization’s culture.


Regularly Assess Your Program and Results


Not only do you want to make sure your variable pay program is producing the sales results you want, you also need to operate within the spirit of the pay transparency law. That means periodically looking at a sample pay or performance period, documenting everyone’s pay, and analyzing the pay according to sex, age, ethnicity, and race. Analysis is a little trickier when it comes to variable pay because people perform at different levels and intensities regardless of sex, age, ethnicity, and race. Your task is to keep your finger on the pulse, watch for trends, and if you spot inequities or areas where one group of people is at an unfair disadvantage, correct those inequities. You will want to be sure to answer the question, did the inputs of performance equitably translate into the outputs of pay delivered? If not, take the time to fix that funnel.


Keep Your Variable Pay Program As Simple As Possible


The devil is in the details, so try and have as few details as possible. Make your variable pay strategy clear and easy to describe. Watch out for the language you use to describe it. Make sure every salesperson has a clear understanding of how it works.


There are a lot of unknowns when it comes to the short- and long-term effects of California’s pay transparency law and future regulation. The best employers can do is prepare, understand the objective of the law, and be proactive about creatively differentiating themselves from other organizations. For sales in particular, the challenge is in continuing to motivate salespeople while removing inequities in both the language and nature of the variable pay program.


By 183:906269490 December 16, 2024
In my first Best Practices post, I talked about the importance of knowing what you can pay for your sales roles before worrying about what the market is saying. In my second post, I covered ways to utilize culture in a sales organization . The following Best Practice in sales compensation involves job content. Job content plays several roles in your compensation plan: 1. It gives your salesperson a guide to what success looks like in their role. 2. It gives you a guide to evaluating the performance of your salesperson. 3. It rationalizes differing levels of variable pay outcomes for varying performance levels. 4. It provides your organization with the structure needed to comply with any reporting, pay transparency, or other regulations. Hopefully, that’s enough to convince you of the importance of taking the time to define your new roles and revisit the definition of your existing roles. Now, here’s how job content actually does those things. Defining the job The first role of job content is to define the who, what, where, when, and how of the function. It can be tempting to borrow a job description from LinkedIn, Glassdoor, etc., with the assumption that the content will be similar enough to fit your needs. However, the way a specific role performs is unique to the organization it’s acting in, which is why it’s important to take the time to define the job from scratch. Here are the questions you should be answering in your job content: What does the person need to do on a daily basis? How does this individual pursue sales, and in what segment or with what type of customer? Where should they focus their time and attention when building a pipeline of deals? Who should they be interfacing with, both internally and externally? When do they engage with customers and/or prospects? What portion of the sales process do they own or support? How do they interface with and influence decision-makers? Now, even though I said to write your job description from scratch, that doesn’t mean this is the time or place to get too creative. Job seekers are going to be searching by job title or category, so it’s essential to stick to the common vernacular regarding industry jargon and expected job titles. Job Description: A Byproduct of Job Content Another positive outcome of creating job content for your roles is that you will have generated much of the information needed for a job description if or when you’re ready to hire. Information such as: Job duties and responsibilities that clarify the type of work and engagement with customers. Qualifications/Requirements that are both minimum and desired. Those include education, knowledge, skills, capabilities, and competencies. Performance measures of the role include items like achieving sales targets, new logo acquisition, development of pipeline, accuracy in forecasting, etc. With all of this information on file, it will not only be easier for you to prepare to hire for the roles you want, but it will also be easier to evaluate existing employees in those roles. Beyond all of that, you’ll be well prepared for competitive market research and establishing your variable pay program. I’ll be posting more best practices on the blog, but if you’re anxious to dive deeper into the subject of sales compensation, you can grab a copy of my book Starting Simple: Sales Compensation and consider working through the companion Workbook to build a sales compensation plan from scratch.
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