Article: Variable component in pay is natural selection mechanism: Agarwal

Strategic HR

Variable component in pay is natural selection mechanism: Agarwal

Create an incentive plan that is transparent and simple and focuses heavily on recognition. This in turn will help people create careers and not just a job

Companies need to invest in training and coaching for employees moving from ‘solo' to ‘manager' level, as expectations and skills in both roles are different


A strong variable component in pay is a natural selection mechanism - Shiv Agarwal, CEO, ABC Consultants

Q. What are the basic characteristics in sales talent pool in these industries?

BFSI, FMCG, and pharmaceutical are industries with very large sales team are characterized by a big obsession with numbers, have a competitive mindset and are ambitious. Given these characteristics, there is a unique way in which these teams are managed in terms of recruitment, reward practices, recognition needs etc.
These teams are also characterized by the fact that they live with a paradox of balancing short-terms revenue while maintaining long-terms relationships that will bring repeat business. Companies need to be aware of this paradox and create processes to help sales people manage this balance better, through incentive plans and recognition mechanisms.
The industry has a natural selection process in the way compensation is structured. You will tend to see people who are very confident with their abilities to perform in a sales role usually comfortable in accepting a sales incentive plan, where part of the compensation is linked to his or her performance.

Q. What key challenges would you highlight in managing sales talent?

There is a huge lack of qualified available talent. When looking for sales profiles, the pool of interested candidates is large, but the challenge is that most of them are not qualified for the job. In my experience, I see the MBA graduates better qualified for sales jobs as they understand the business cycles and customer requirements better, but they are not ready to take such a role after a post graduation which poses a major challenge for organizations.
In terms of managing talent, one of the biggest challenges is to manage the ‘A’ players differentially while maintaining the ‘B’ players performing at the target-achieved level. Most often, companies tend to focus on the ‘A’ players, leaving the ‘B’ players feeling ignored.
Designing and managing rewards is also a big challenge for organizations. On one hand, India is not as matured in accepting a high percentage of pay at risk; and this is partly cultural and partly based on the maturity of these industries itself. On the other hand, there is also skepticism from candidates about the realization of the promised payout as sometimes sales incentive plans are not transparent. The reward plans across companies vary largely and there is no trend in terms of fixed and variable pay ratio that I see, and each company and each industry works differently.
This space also sees a challenge in managing career within the profession. Many organizations do not plan the transition between sales executive and sales manager, which create a lot of disruption, leaving the employee frustrated, often resulting in attrition. Companies need to invest in training and coaching for employees moving from ‘solo’ to ‘manager’ level as expectations and skills required in both roles are different.

Q. What are the key trends in ensuring a successful sales force?

1- Hire for attitude and train for skills.
2- Create an incentive plan that is transparent and simple, while building trust by delivering on what the sales incentive commits. Most companies have started using reward programs as retention tools by phasing payments over time.
3- Focus on recognition.
4- Make sales a career and not a job, build on role models and justify entry at the front-line sale.

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Topics: Strategic HR, Talent Acquisition

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