A Day in the Life of an Effective Sales Compensation Manager

A Day in the Life of an Effective Sales Compensation Manager

Learn what makes a sales compensation manager so integral to modern businesses.

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Considering the intricacy and importance of well-run sales compensation programs, it's no wonder why qualified sales compensation managers are in high demand. In fact, according to LinkedIn's most recent Jobs on the Rise list, Sales Compensation Manager is one of the twenty fastest-growing job titles in the U.S.

But what does a sales compensation manager actually do? If you think you know the full answer, you might be surprised. On any given day, these skilled employees wear many hats, collaborate with a long list of stakeholders, and utilize several different tools in order to fulfill a highly consequential responsibility.

In this post, we'll put you in the shoes of an effective sales compensation manager, exploring their most important responsibilities and the skills they need for success. If you're an aspiring sales compensation manager - or if you're in the process of hiring for this position - then this article will answer all of your questions about one of the most critical roles in finance.

What you'll learn:

• What is a sales compensation manager?
• The core responsibilities of a sales compensation manager
• Skills and characteristics of a successful sales compensation manager
• Interview questions for a sales compensation manager

What is a sales compensation manager?

A sales compensation manager - sometimes called an incentive compensation manager or variable compensation manager - is responsible for the design, deployment, and continuous improvement of sales commission plans, along with the reporting and interdepartmental collaboration necessary to effectively manage sales compensation.

The average salary for a sales or incentive compensation manager ranges from roughly $74,000 to $155,000, but the total earnings for this role depend on several variables, including prior experience, skills and proficiencies, and the industry and size of the employer.

Sales compensation manager positions typically call for 5+ years of experience in compensation design and administration. Employees typically transition into a sales compensation manager position after gaining prior experience as a financial analyst, sales operations manager, or other roles involved in financial data analysis and compensation planning.

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The core responsibilities of a sales compensation manager

Now that we've broadly defined the role, let's zoom in and explore in detail the day-to-day responsibilities of a sales compensation manager.

Commission plan design

The sales comp manager oversees or plays a major role in designing a business's sales commission plans. A good sales comp plan accomplishes several goals at once: It incentivizes high sales performance, attracts and retains sales talent, and aligns with the business's financial needs and growth objectives.

An effectively designed sales comp plan is clear and straightforward, determining pay mix along with parameters for quotas, commission tiers, accelerators, and any other provisions that a rep's pay might be subject to (ex: spiffs or clawback clauses).

While plans should be simple to understand, the actual process of designing a commission plan is anything but simple. Due to its scope and complexity, this process requires collaboration across several different departments, including:

• Sales: The sales comp manager must communicate with sales leaders and even individual reps to gauge sentiment, uncover compensation-related concerns, and better understand the correlation between comp plan structure and sales performance.
• RevOps: Sales ops or RevOps teams are also a big part of this conversation. Depending on the organization, RevOps will help design and implement comp plans, handle logistics and data sharing, and ensure systems and automation run smoothly.
• Executive suite: Since sales compensation has such a big effect on a business's financial growth, leadership is often closely involved in - or at least closely monitoring - the commission plan design process.
• HR: Sales compensation has a very tangible impact on employee morale, retention, payroll, and sales turnover. The sales comp manager usually consults with HR, seeking to augment their data analysis with more human context, so they can design comp plans that motivate and inspire sales employees to become high achievers.

The sales comp manager must be proficient with, or willing to learn, a number of technologies in order to effectively design comp plans. These include any commission automation tools, CRM, and ERP solutions.

Key challenge:

Commission plan design isn't a one-time process, but a continuous series of iterations in pursuit of the perfect plan. Plans that are overly simple lack the specificity to drive the right sales behaviors. Overly complex plans, on the other hand, are more difficult for sales to understand and finance to manage without error. If the sales comp manager is slowed down by restrictive financial systems, data silos, or time-intensive calculation processes, they'll be stuck in an endless cycle of slowly making changes without reaching their desired outcome.

Commission plan administration

In addition to comp plan design, the sales comp manager performs a variety of administrative tasks in order to execute payroll each cycle and maintain an effective commission process. These tasks include performing and checking commission calculations, rolling out plans, fielding questions about the parameters of compensation structures, and resolving errors and disputes.

When changes within the sales organization necessitate compensation changes, the sales comp manager makes these iterations and communicates them to all stakeholders. They are also tasked with reporting to senior leadership, helping them understand performance within the context of their existing plans, as well as areas for concern and potential changes.

And no sales commission process is immune to error or miscalculation - problems that fall on the sales comp manager to quickly diagnose, remediate, and explore preventive measures to avoid future error.

The sales comp manager must be comfortable with a variety of tools that support this administrative work: collaboration and project management tools for interdepartmental communication, payroll and HR systems to monitor payment accuracy and timing, CRMs and financial platforms that integrate or share data with the commission management system.

Key challenge:

The administrative legwork that a sales comp manager is tasked with depends on the systems and technologies they have in place. If they're using a spreadsheet or legacy systems with limited functionality, then administrative work and troubleshooting will eat up a large portion of their time - preventing them from focusing on more strategic tasks like ROI analysis and proactive plan improvement.

Compliance and legal regulations

Sales compensation plans are subject to a number of government regulations concerning pay transparency and pay reporting, like ASC-606.

As a result, the sales comp manager must stay abreast of these legal changes and aware of what future situations might impact their commission process. They work closely with legal departments to resolve compliance issues and develop plans to address incoming regulatory requirements.

The sales comp manager maintains compliance by being a proficient auditor, frequently reviewing the organization's financial records and commission data to identify missing data points or inaccuracies that might jeopardize their future standing.

Key challenge:

Maintaining compliance isn't always as simple as adding a provision to a commission plan or earnings report. For example: if a new regulation requires the company to report on compensation data they're not currently tracking, they'll have to quickly fill gaps in their reporting process in order to remain compliant- which again diverts the sales comp manager's focus towards administrative housekeeping and away from value-driving activities.

Trend monitoring

Standards for fair compensation are constantly evolving, both within specific industries and on a national and global scale. When it comes to sales compensation, employee expectations around issues like base salary versus variable pay inform their satisfaction in their current roles and their likelihood of leaving their employer for another. So, if a company's commission structures are out of step with the industry standard, they risk losing top sales talent.

A good sales comp manager stays up-to-date on compensation trends and understands how their business's commission structures compare to others in their space. This continuous monitoring of industry news, financial reporting, and market analysis enables them to recognize when aspects of their commission plans have become antiquated or need refinement.

Key challenge:

The sales comp manager often finds him or herself caught between the results of their analysis and the priorities of the business. For example: leadership might hold the firm belief that a commission-heavy pay mix will support the business through a financial down period, while the sales comp manager recognizes their industry trending towards higher base salaries for sales reps. When such a disconnect occurs, the sales comp manager must work hard to earn executive support for commission changes that run counter to leadership's initial philosophies.

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Skills and characteristics of a successful sales compensation manager

As the above responsibilities indicate, sales compensation managers must tap into a diverse set of skills. Though the role is highly technical, it's important to remember that the best comp managers balance their hard skills (job-specific, technical, and often quantifiable skills) with a handful of equally essential soft skills (subjective, intangible, less easily teachable skills).

Here are some of the most essential hard and soft skills required of a sales comp manager:

Hard skills required to be a sales comp manager:

• Data-driven: They are skilled at processing and understanding data, putting it into context, and using data to inform and justify their decisions.
• Strategic: They understand how sales comp programs fit into the company's larger business strategy and objectives.
• Technologically proficient: Their tech proficiency extends beyond the confines of a single platform.
• Analytical: Beyond being comfortable with numbers, they know how to analyze data and take away actionable insights.
• Research-minded: They stay plugged into important trends in the industry, the broader technology landscape, and regulatory developments.

Soft skills required to be a sales comp manager:

• Communication: They are an effective communicator, able to translate complex financial concepts into easily digestible documentation that colleagues across departments will understand.
• Attention to detail: They can spot an error and correct it before it makes a negative impact. Whether they're calculating payroll or fulfilling a simple invoice, they proactively check their work.
• Composure: They stay calm when something goes wrong. They're able to address problems with both urgency and composure.
• Multitasking: They can juggle several important tasks at once, from updating comp plans to resolving commission disputes, without faltering in their accuracy or efficiency.
• Empathy: They handle disputes or miscommunications with confidence and justify their decisions with numbers, but also approach these interactions with kindness and compassion for their colleagues - especially when dealing with sensitive information related to an employee's earnings.

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Interview questions for a sales compensation manager

By this point, you understand the impact a sales compensation manager can have on the overall wellbeing and success of an organization. So, if you're looking to hire a sales comp manager, you want to be sure you pick the right person.

To do so, you must be sure to ask the right questions during the interview process. To help you identify high quality candidates for your role, we put together a few sample interview questions that get to the heart of what makes a sales comp manager effective.

"What are three important aspects of a successful sales compensation plan?"

Why ask?

A good candidate displays a familiarity with both the how and the why of designing sales comp plans. A skilled data analyst might be able to grasp some of the processes that go into sales comp design, but they won't succeed if they don't also possess an understanding of business strategy, sales behavior, and the actual intent behind plan design.

How to answer:

The best answer to this question draws from information the candidate's already absorbed about the hiring company and their goals. But in general, a good candidate will mention clarity, alignment, and motivation.

Example:

Three important aspects of a successful sales compensation plan are clarity, alignment, and motivation. Clarity ensures that the plan's structure and metrics are easily understood by the sales team. Alignment means the compensation plan is closely tied to the organization's goals and sales objectives. Motivation is crucial, as the plan should incentivize and reward desired sales behaviors and drive high performance.

"How do you handle commission disputes?"

Why ask?

Commission disputes are inevitable, so a good candidate is experienced with tracking and resolving disputes on an operational level - and comfortable with handling disputes on an interpersonal level.

What to look for in the answer:

A good answer first speaks to solving disputes. The candidate might start by explaining how they investigate the issue, looking at the data to determine whether the cause stems from a technology error, a miscalculation, or a misunderstanding. Then, they will speak to preventative measures they'd take to avoid similar disputes moving forward.

For example: When handling commission disputes, I would approach the situation with empathy and open communication. I would carefully review the terms of the commission agreement and gather all relevant information from both parties involved. Then, I would work towards finding a fair resolution that aligns with company policies and promotes a positive working relationship.

"How do you ensure that sales compensation programs remain compliant with legal regulations?"

Why ask?

When it comes to compliance, any oversight or error could land an organization in hot water. A good sales comp manager displays a general knowledge of the law and an awareness of the specific regulations that impact the company's comp programs.

What to look for in the answer:

A good answer will include references to specific regulations, what they entail, and how an organization maintains compliance. A great answer will also speak to proactive measures a sales comp manager should take to ensure future compliance. The candidate might discuss their approach to research and staying up to date on regulatory trends, communicating with the legal team, and auditing the company's existing procedures to identify areas that might become compliance risks down the road.

Example:

I am familiar with regulations like ASC-606 and the correct processes surrounding commission expensing. And, to ensure sales compensation programs remain compliant with future legal regulations, I would stay updated on relevant laws and regulations through continuous research and professional development. I would collaborate closely with legal and HR teams to review and validate the compensation plans. And I would plan to conduct regular audits and internal reviews to identify and address any potential compliance issues promptly.

"What technology are you familiar with or have used in the past to manage sales compensation?"

Why ask?

The hiring company likely already has specific systems in place for commission management, so a new sales comp manager needs to be comfortable with their tech stack and get up to speed quickly. A great candidate will also display a broader knowledge of sales commission solutions, automation, and the overall technology landscape - which indicates they'll be able to make recommendations once they're in the role.

What to look for in the answer:

A good answer doesn't need to paint the candidate as a master of all sales commission platforms, or even the platforms that the organization is currently using. But a good answer does display a familiarity with the tools in question, as well as the current landscape of sales commission technology.

Here's where both hard skills and soft skills are useful - a good candidate might speak to their experience with specific tools, but also highlight their strengths as an adaptable, quick learner with strong attention to detail. They might use this question to share an anecdote, perhaps explaining how their data analysis skills have enabled them to move between complex platforms and learn new solutions quickly.

Example:

In the past, I have experience using Salesforce and Xactly to manage sales compensation. These platforms provided comprehensive tools for tracking sales performance, calculating commissions, and generating reports. Additionally, I am adept at utilizing spreadsheet software like Microsoft Excel to create and maintain customized compensation models when needed.

"How do you ensure reps understand their pay structure and know how to access important information regarding their pay?"

Why ask?

An effective sales comp manager knows how to design or contribute to the design of sales comp plans that reps are able to understand. They can adeptly communicate with reps when rolling out new plans or updating existing plans. This question will gauge a candidate's ability to discuss compensation with clarity and confidence, as it's one of the most important aspects of the sales comp manager position.

What to look for in the answer:

A good answer highlights the importance of clarity and simplicity, both in the design and rollout of comp plans. The right candidate might provide details about how they've interacted with sales reps in the past, what kind of communicator they are, and what methods they've used to explain pay structure and commission most efficiently.

A good candidate will also speak to the importance of documentation and give specific examples of resources the sales comp manager might provide to educate sales reps on compensation.

Example:

To ensure reps understand their pay structure and have access to important pay information, I would conduct comprehensive onboarding sessions that include detailed explanations of the pay structure and related policies. I would also provide clear and accessible documentation, such as a compensation plan handbook, and establish regular channels of communication to address any questions or concerns. Additionally, I would leverage technology tools, like an employee portal or dashboard, to provide real-time visibility into their performance metrics and pay details.

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Understand what makes a sales compensation manager invaluable to your business

Compensation management is a massive undertaking, both in terms of its impact on the business and the complex, multilayered processes it encompasses. That's why it's important for organizations to not only hire the right people for the job, but also understand the sales compensation manager's many responsibilities, how they operate, and what tools to equip them with in order to maximize their success.

When the sales comp manager has the support and resources they need to manage compensation with efficiency and accuracy, they can leverage the full power of their many skills and become invaluable strategic assets to the business.

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With eight years of experience as a marketing writer, Sam has explored a wide range of topics including sales and finance best practices, product innovations, and groundbreaking industry trends.