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What is Governance in Sales Compensation

183:906269490 • July 11, 2023

Evolving the mechanisms and processes for governing sales compensation.

Depending on how small or large your organization is, you may just be approaching the question of who owns sales compensation. The formation, management, and administration of sales compensation may seem like it would fall to sales management, but as your organization evolves, you’ll find that more departments have stakes in the sales compensation program.


Who Owns Sales Compensation in Your Organization?


Because the pursuit of revenue touches so many parts of the organization, the way sales people are compensated affects these departments, and those affected should have a voice in the development and management of sales compensation. So who are these key stakeholders?


  • Sales – Most obviously, the sales director or manager should be involved in developing and guiding sales compensation. They will have the hands-on knowledge of sales processes and what it takes to motivate and reward the sales team.
  • Operations – As the group responsible for the actual product or service your organization is providing, operations plays a part in the sales process either indirectly or directly, sometimes involving product or service demos to help move a deal along to closure.
  • Finance – Another obvious stakeholder is financial leadership as they will be able to offer budgetary guidance and objectives when creating the sales compensation plan.
  • Human Resources – You’ll want a voice at the table who is there to keep decisions rooted in organizational values and philosophy as well as consider the needs of the employees and external competitive practices.


Representatives from each of these departments can be brought together to form a governance committee.


What does the governance committee do?


You may be wondering why you need a committee once a sales compensation plan has been developed. Roles beyond forming a compensation philosophy and plan include:


  • Regularly assessing the effectiveness and fairness of the plan and evolving it while adhering to the organization’s compensation philosophy.
  • Making decisions regarding compensation disputes or situations that weren’t accounted for in the original documentation.
  • Determining and approving exceptions to the regular compensation program and processes.
  • Creating a regular structure and process for reviewing and assessing the compensation plan.
  • Creating and managing the decision-making structure in terms of who makes which decisions and with what level of authority.


Sales compensation, by its nature, will never be a set-it-and-forget-it program. There are too many factors at play and too many changes that occur both within an organization and the market overall. So having a governance committee with members representing different aspects of your organization is essential to keeping the comp plan relevant, functional, and fair.






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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