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kasina Study Highlights Compensation as Strategic Management Tool

By Steven Miyao & Aylin Von Meer

Next week, kasina will release "Compensation as a Strategic Management Tool: Aligning Sales & National Accounts with Company Objectives". While a number of asset managers have made potentially productive adjustments to their compensation plans as a result of the current economic crisis, many compensation systems as a whole fail to align compensation strategy with company objectives. Firms should therefore use sales compensation as a strategic management tool to accomplish four fundamental goals of compensation:

We are encouraged to see signs that firms are adopting practices which we have been writing about for some time. The market has enabled firms to moderate the expectations of internal and external wholesalers to keep compensation essentially flat from 2009 to 2010 (see below). Composition of compensation for these positions has altered slightly to increase the proportion of base compensation and reduce variable compensation.

Moreover, to recognize their strategic importance, firms have increased pay for Heads of National Accounts, as well as for Internal Wholesaling Managers and National Sales Managers, acknowledging the importance of having a strong internal team and a seasoned National Sales Manager able to recruit and retain talent. Similarly, Hybrid Wholesalers got a bump in recognition of their value to meeting objectives of the firm.

Despite that, all firms struggle to balance competing objectives. In particular, firms are challenged to:

• Keep their best, most experienced performers motivated with appropriate rewards
• Stabilize pay in all markets with adjustments to compensation components
• Manage sales costs by using net sales or proxies

The report makes several recommendations to better align the compensation strategy with company objectives and optimize the compensation structure:

• Reward intelligently to ensure reasonable pay and keep top performers motivated
• Incent productive activities as well as results
• Tie sales to profitability
• Manage change responsibly

In an ever more competitive marketplace, firms need to embrace sales compensation as a strategic management tool to attract and retain great sales people and focus on building profitable relationships by selling a full array of products. A combination of the four recommendations above will help firms to achieve a tighter integration of the sales team to the firm's overall corporate strategy and nurture loyalty among the sales force and a desire to participate in the firm's successful future.