3 Ways HR Can Help Optimize Sales Compensation Strategies – Lessons from a Total Rewards Leader

Some of the most common issues in sales compensation can be mitigated by involving the Human Resources (HR) team more closely.

Many comp teams struggle to create fair and equitable comp plans that account for varying rep responsibilities, adhere to strict compliance and governance requirements, and ensure comp plans are motivational and well-understood.

Meanwhile, with HR’s focus on employee wellbeing and legal compliance, HR teams can:  

• advocate for fairness and equity in target setting and comp strategy  
• oversee compliance and governance requirements  
• aid in comp plan communication  

HR has the potential to be an invaluable partner in target setting, comp strategy, and rollout. However, their involvement is often limited to final approval and legal sign-off.  

Forma.ai leaders Nabeil Alazzam and Eliot Offutt spoke with Jerry Pritchard, Sr. Director of Total Rewards at Independence Pet Group, to discuss how HR should be involved in sales compensation.

They identified 3 ways that HR can help optimize sales compensation strategies.  

1. HR Can Advocate for Fairness and Equity in Target Setting  

One of the most significant areas where HR’s influence is pivotal is in setting fair and equitable targets, particularly quotas and territories. This aligns with HR’s major goal of maintaining employee wellbeing, as each rep expects and deserves a comp plan that aligns with their unique role and responsibilities.

The discussion identified how the potential for sales varies significantly across different territories and customer bases, which must be factored into quota setting. Every rep has a specific customer base to target, which is usually determined by their territory assignment. The number, type, and demographic data of customers varies for each territory. Therefore, the use of data in assessing the performance and equity of sales targets is essential.  

"When I start thinking about different territories and sizes, things like that, my brain automatically goes to ‘Are we comparing apples to apples?’…We need to have controls, guiding principles, around how we set quota, how we think about it."- Jerry Pritchard, Sr. Director of Total Rewards at Independence Pet Group

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By evaluating territory-specific metrics such as the number of customers, types of customers, and demographic data, HR can help detect biases and ensure quotas are set in a way that reflects the true potential of each territory. This data-driven approach enables a more equitable distribution of targets and rewards, aligns sales efforts with company goals, and prevents disparities that could demotivate the sales force or lead to perceptions of unfair treatment.  

Related Article: 7 Ways HR Can Help Increase Sales

2. HR Can Oversee Compliance and Governance Requirements

Compliance and governance are foundational to effective sales compensation plans. HR is crucial in ensuring sales compensation plans comply with legal, regulatory, and ethical standards, safeguarding the company against potential legal challenges. This includes everything from wage and hour laws to equal pay regulations, as well as internal policies that govern sales practices within the organization, which vary by region.

"The cost of not being compliant…has significant consequences. A rollout of a comp plan is different by country, by geo. Even within the same country, across states, it’s going to have different requirements. And if you missed that, there’s some significant consequences, especially when you think about the cost of the investment that’s made in this space."
- Nabeil Alazzam, Founder and CEO of Forma.ai

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Moreover, HR’s governance role involves setting up frameworks that ensure compensation plans are consistently applied and managed across the board. This includes establishing checks and balances to prevent and address biases, discrepancies, or inequities in how sales personnel are compensated. This allows HR to help build trust within the sales team, ensuring that every member feels valued and fairly rewarded for their contributions. It goes beyond simply creating fair and equitable targets – HR can standardize the target setting process by governing what data to use, how to track performance, and how to communicate plan decisions openly.

HR is uniquely poised to ensure that compensation plans not only drive desired sales behaviors in a way that complies with legal requirements, but also reflect the organization’s commitment to ethical and equitable treatment of its employees. Involving HR can improve the efficiency of the comp planning process by addressing governance and compliance requirements proactively, rather than reactively during approval processes.

3. HR Can Aid in Comp Plan Communication

Part of employee wellbeing means that employees well understand how they’ll be compensated and how success is measured. HR teams play a pivotal role in the effective communication of sales compensation plans, ensuring transparency, understanding, and trust throughout the organization. The speakers particularly mentioned comp plan rollouts and new rep onboarding, where HR can help sales leaders craft clear documentation that outlines all aspects of rep compensation, such as salaries, bonuses, commissions, and non-monetary benefits. HR sets the foundation for clear expectations and serves as a reliable reference for both management and employees.  

"The HR team is going to go back in and share documentations…prepare rollouts…drive the conversation, thought process, even touch on workforce plan – but that’s really kind of with sales leaders at that point."
- Jerry Pritchard, Sr. Director of Total Rewards at Independence Pet Group

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HR also ensures ongoing, transparent communication about compensation. This can include scheduled one-on-one meetings and documentation around comp plan updates. Through clear documentation, educational initiatives, transparent dialogue, and feedback mechanisms, HR ensures that compensation plans are well-understood and appreciated across all levels of the organization, thereby promoting a motivated and aligned workforce.

Related Article: What’s After Rollout? (Post-SKO Checklist for Sales Comp Leaders)

Give HR a Seat at The Table

Oftentimes, sales comp teams at enterprise companies only leverage HR for final approval on comp plans. However, several elements of sales comp align with HR’s top priorities. As a result, HR has many change requests to make comp plans more fair, compliant, transparent, and well-communicated.

Instead, we should give HR a seat at the table during target setting and comp planning. They can also design comp plan communication strategies alongside sales leaders. This will make for much more efficient processes and improved wellbeing of employees.

Having sales comp technology that not only brings together various systems and stakeholders but also provides essential analytics to easily assess fairness and equity is key. To learn how to do this in Forma.ai, request a demo.