• Strategy
  • CFO.com | US

Are Sales Set to Explode in 2010?

An overwhelming majority of sales executives predict revenue gains next year. Companies, though, are hedging their bets by tweaking sales compensation plans.

Do you trust your sales-team leaders to make accurate forecasts of future business? If so, you won’t be surprised if you find a pot of gold just around the corner.

Among the many signs that the recession may be starting to lift, 83% of 129 sales executives surveyed by Watson Wyatt projected revenue growth in 2010, with 43% saying sales will rise by 6% or more. The respondents were from Fortune 1,000 and Global 2,000 companies, the consulting firm said.

In tandem with the earlier-than-expected beginning of an economic recovery, the overwhelming optimism of top sales officials is opposite from the prevailing view just five months ago. In a similar survey performed in April, only 3% told Watson Wyatt they thought the recession would ease up for the rest of 2009, while 86% said it would continue or worsen.

Indeed, John Bremen, global director of sales effectiveness and compensation for Watson Wyatt, said that in the more than 20 years he has been conducting such research, he has never seen such a degree of pessimism as was registered earlier this year. Sales executives tend to be optimistic by nature, he conceded, and they maintained their typical sunny outlook “right up to the precipice” of last fall’s economic meltdown. “Then they got very pessimistic very quickly.”

But judging by results of the recent survey, which was conducted in August, the recession’s impact on sales in the first half of the year was even worse than had been expected. While 57% of the responding companies reported a falloff in sales performance relative to their business plan, only 34% had decreased sales goals and quotas from 2008 levels.

That makes the enthusiasm for 2010 all the more notable. The 83% of sales leaders who expect revenue gains next year “is a much larger number than any of us would have predicted,” said Bremen.

Yet opinions tallied in future-looking surveys, which probably reflect current moods as much as actual expectations, may prove to be unfounded. After all, the outlook as 2009 heads into its final quarter is much brighter than sales executives had allowed themselves to hope for only a few months ago.

So it shouldn’t be much of a surprise that sales-incentive plans may be in flux. Sixty percent of survey respondents anticipated that performance measures will change, 50% said the same for performance-measurement weightings, and 49% said incentive-formula mechanics will change.

In the economic run-up, Bremen noted, performance measures generally focused on pure revenues and growth. “Companies lost sight a bit about things like customer profitability and deal quality,” he said. Now those measures are increasingly back in the mix.

In fact, said Bremen, a number of companies, especially within the financial sector, are restructuring incentive plans to make salespeople accountable for deal risk, such as the risk that a key new customer could go out of business. “That’s brand new,” he said. In the survey, 17% of respondents anticipated that more pay will be at risk next year, compared with 4% who said less pay will be at risk.

Another new trend is adjusting incentive payouts upward for better performers. For example, if last year’s payout was 1% of a salesperson’s sales volume, this year it might be 1.2% for top performers and 0.8% for those at the lower end of the spectrum. “There’s a lot of that kind of jockeying around right now,” the consultant said.

 

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