Compensation season is right now for many sales organizations, as companies prepare for the 2015 sales year. For most, that means examining incentive pay levels and mix, defining pay metrics that align with the company’s new goals and adjusting pay-for-performance relationships to make sure the right salespeople are rewarded. These housekeeping steps are necessary to maintain a healthy culture and productive sales organization.
But sometimes, more radical change is needed: for example, when competitive dynamics shift, profit models change or new information comes to light. All that (and more) is happening right now in the asset management industry, and we believe the time is right for a major change.
In a recent Ignites opinion piece (subscription required), my colleague Peter Manoogian and I advocate for a shift from asset-based compensation (gross or net) to market-share based compensation. We think that market share does a better job of capturing the current competitive dynamics in the industry—and it also reflects the new, improved state of industry data.
Our argument in support of tying compensation to market-share performance is fourfold:
- Market-share-based compensation aligns goals of the firm and the wholesaler;
- It controls for market fluctuation;
- It reduces wholesalers’ urge to hoard territory; and
- It provides an avenue for long-term cost control.
You can click here (subscription) to read more, including advice on how to structure share-based plans and how to manage a significant compensation transition.