A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z

A

Accelerator/
Kicker
An incremental incentive, whereby a salesperson is rewarded with greater pay for attaining higher levels of productivity. For instance, a salesperson could have a 3% commission rate for the first $100,000 dollars of revenue they produce. Anything over that amount would result in a 4% commission rate.

Click here to learn more about accelerators (v. SPIFs) using an interactive example.

Active User A person using a software product, usually on a monthly subscription basis. This term is typically used in contracts with software vendors and is defined in more detail within the contract.

 

Application Instance Refers to any active environment in which a software application is being used. Common instances include development, test, and production.

 

Attainment A sales achievement percentage toward a sales target (quota).

For example, if a salesperson sells $25,000 this quarter and their quarterly quota is $50,000, their attainment would be 50% ($25,000 divided by $50,000). If they sell $50,000, they’ve hit their goal and their attainment is 100% ($50,000 divided by $50,000).


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B

Bonus An after-the-fact incentive, usually calculated based on a target amount that is multiplied by one or more performance factors. Individual performance is typically the main factor, but other eligibility components may include teamwork, division or business unit results, and/or overall company performance. In most cases, bonuses also have conditions (such as the requirement to be an active employee when a bonus is paid), and payouts may be subjective or discretionary.

To see an interactive example highlighting the differences between bonuses and commissions, click here.

Broker/Agent A sales agent associated with a third party that sells goods or services they did not create (e.g., an insurance broker or stock broker).

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C

Channel A medium for distributing or selling products or services. A company could distribute or sell its products or services through a variety of channels, both direct (website, sales force, etc.) and indirect (brokers/agents, partners, etc.).

 

Clawback A recovery of incentives previously paid. For example, when a commission is reversed due to a customer returning a product.

Click here to learn more about clawbacks using an interactive example. To read a case study based on an actual client solution, click here.

Coaching and Performance Management Coaching, or performance management, is the systematic application of methods and tools to help create an ongoing dialogue focused on improving an individual’s behaviors.  These behaviors are linked to organizational KPIs (key performance indicators) such as revenue growth, customer satisfaction, etc.

Ultimately, the goal of coaching is to positively impact KPIs by focusing on the individual.

Click here to learn more, using an interactive explanation.

Commission A type of incentive often expressed as a percentage of revenues/sales or gross margin, though it can also take the form of dollar amounts per unit sold. Typically commissions are earned immediately and owed regardless of the payee’s employment status. Also, commissions may be paid in addition to a guaranteed salary or may constitute total pay.

To see an interactive example highlighting the differences between commissions and bonuses, click here.

Compensation Plan Design The process of creating a plan–consisting of components such as base pay, commissions, bonuses, etc.–that aligns sales goals and financial objectives with payee roles and behaviors.

 

Compensation
Strategy
The overall approach that aligns a compensation program–consisting of pay, benefits, and other rewards–with organizational principles and objectives.

 

Configure,
Price, Quote (CPQ)
CPQ systems allow sales representatives and/or customers to select options for products or services and generate pricing and quotes based on those selections. These systems typically include pricing engines, proposal generators, quoting systems, and rules or constraint engines, and are complemented by approval and authorization workflows.

These applications enable salespeople to quickly respond to prospects’ requests by reducing quote errors and rework, and by identifying appropriate product mixes or bundles.

Customer Relationship Management (CRM) System A tool for managing a company’s interactions with customers, clients, and sales prospects, throughout the sales and marketing life cycle.  Salesforce.com, SugarCRM, and Microsoft Dynamics are some examples of CRM solutions.

For a full definition, click here.


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D

Direct Credit A credit that is assigned to a payee based on sales (or other activity) that they personally generated.

 

Draw An amount of money that a payee may “borrow” against their future income (e.g., commissions), and that the company may (or may not) recover whether or not the person actually earns the income.

To better understand draws, and how they differ from guarantees, click here to learn more, using an interactive example.


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E

Effective Date(s) Refers to a date or date range where something is in effect. For example, for a sales contract, the effective date is when the contract begins (takes effect). Or, in a commissions system, the effective date entered for a payee indicates when that person is eligible to begin earning incentives.

 

Executive Compensation Includes all aspects of incentive and compensation programs for senior leadership, such as annual and long-term incentive plans, competitive benchmarking, special incentive and retention arrangements and deferred compensation, and so on.

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G

Guarantee A minimum amount guaranteed to new sales representatives/payees to ensure they earn a certain level of pay, in case their sales activity does not generate enough commissions. The company may or may not require the guarantee to be deducted (paid back) from future commissions.

To better understand guarantees and how they differ from draws, click here to learn more, using an interactive example.


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H

Hierarchy Most commonly refers to a level-based reporting structure within an organization. For example, within a sales organization, salespeople may report to a regional manager, who may then report to the vice president of sales, etc. Sometimes a person who is higher in the hierarchy may receive a percentage commission from the sales/revenues generated by someone lower in the hierarchy (known as a rollup). In software systems, organization hierarchies are often used to control what a person can access in the system (security), as well as the information they see on reports.

Hierarchies may also represent relationships between products (e.g., categories/sub-categories/products), customers (U.S./Southeast Region/customers), and other types of data.


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I

Incentive
Compensation Management (ICM)
ICM applications usually represent the core feature of SPM solutions, automating functions for calculating and reporting on commissions and other variable compensation (e.g., bonuses). The key benefit is the automation and flexibility of compensation plans.

To register for a brief, online course about ICM concepts click here (it’s free).

Indirect Plan A payment plan that compensates payees based on sales that they did not personally generate.

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K

Key
Performance
Indicators (KPI)
High-level, quantifiable measures used to help a business or organization monitor its success in moving toward its broader goals, and tied closely to organizational health and initiatives. For example, a company focused on growth may include KPIs such as revenue and market share, whereas a business focused on increased profitability may emphasize KPIs such as net margin and cost of sale.

To see an interactive example, click here.


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L

Line of Business (LOB) Segments of a business typically defined by products or services offered by that business. For example, banking generally has multiple lines of business including credit card services, wealth management, consumer, commercial, etc.

 

Long Term Incentive Any incentive where the value is determined by multi-year performance.

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M

Management by Objective (MBO) A process in which a manager and one or more of their team members jointly identify and establish common performance goals as a basis for driving behavior and assessing performance. The unique feature of MBO is the collaboration and input of the individual(s) being managed.

Another aspect of MBO is that it accommodates situations where traditional performance measures may be insufficient for evaluating success (e.g., new hire, transfer, person on leave, etc.).


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O

On Demand Refers to applications that require little or no software to be installed by those using them. Often, the system simply requires logging in via a web browser to begin using it.

 

On Premise Refers to applications that are installed and maintained by the customer on their own infrastructure.

 

OTC (On-Target Commissions) Commissions earned if a payee achieves their target sales.

 

OTE (On-Target Earnings) OTE (also known as Target Earnings) refers to the amount of compensation a payee can expect to receive if all quotas are achieved and other conditions are met (i.e., if everything is “on target”). This is only an estimate, and is often used for expectation setting and budgeting. While the rep could earn this amount, they could also earn less, or exceed their targets and earn more.

Broadly speaking, OTE = Target Variable Compensation + Base Salary.

To see an interactive example, click here.

Override In the context of compensation, this concept refers to an additional percentage or incentive that a payee receives based on a sale made by another payee (similar to a rollup). For example, a product manager might receive a 2% override on their products sold by sales representatives, even though the representatives do not report to them. This is a form of indirect payment.

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P

Payee
(Plan Participant)
An individual or entity (e.g., a brokerage) that is eligible to earn incentives and receive payments, typically for sales transactions.

 

Plan Defines the incentive components (e.g., commission rates, quotas, territories, etc.) used to determine what a payee (often a sales representative) is eligible to receive credit for and/or earn. Plans usually define pay for one or more periods of time—monthly, quarterly, and annually are the most common.

 

Position Usually indicates where an individual is located within an organization, and is often related to other positions to define the organizational structure or hierarchy. It is sometimes helpful to think of positions as “chairs” in an organization chart, with individual employees occupying those chairs. Conversely, if someone leaves a position, the “chair” may still be available on the org chart, but may be unoccupied until a new person fills it.

 

Premium Compensation at greater than the payee’s usual pay rate (e.g., overtime, double-time for holidays, etc.). In insurance terms, this could also refer to the rate of a policy sold by a broker/agent (e.g., a life insurance premium).

 

Production Run A calculation performed in order to finalize payment amounts for the current pay period.

 

Prorate/Proration To make an adjustment or pay a portion of an incentive, usually based on eligibility rules. This concept may apply to a variety of situations, but, most commonly, prorations come into play when a payee hasn’t been in their position for the entire commission period. For example, when a Sales Representative transfers into a position midway through an incentive period.

Click here to learn more using an interactive example.


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Q

Quota A target amount that a salesperson must sell for a particular period (month, quarter, year). These targets may be stated in dollar amounts, number of goods or services sold, percentages, etc. Incentive payouts are often based on a person’s performance relative to their quota (i.e., their attainment).

Click here to view an interactive example of a quota.


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R

Recurring Revenue Typically associated with subscription services that are paid on a regular frequency (monthly, quarterly, annually). This term is often included in acronyms such as MRR (monthly recurring revenue), QRR (quarterly recurring revenue), or ARR (annual recurring revenue).

 

Retroactive An input or decision made today that needs to be effective as of a date that has already passed. Back payments or other adjustments to prior payments may be due as a result.

 

Rollup/down/over Typically refers to sales credit that is rolled from one payee to another, based on the organizational reporting relationship between the two. For example, if one payee receives credit for a sale, and they report to a manager who also receives credit from the same sale, this would be known as a rollup. 

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S

Sales (Incentive) Compensation Monetary amounts paid to sales representatives or sales management that vary in accordance with accomplishment of sales goals and/or overall business goals.

 

Sales Force
Automation (SFA)
Generally refers to the automation of sales-related tasks.

 

Sales Performance Incentive Fund (SPIF) An additional incentive given to the sales rep to drive certain behaviors, generally for a specified time period, and sometimes in the form of a contest. An example might be added incentives for truck sales during “truck month” at an automotive dealership.

Click here to learn more about SPIFs and accelerators using an interactive example.

Sales Performance Management (SPM) SPM refers to those capabilities that are necessary to support the planning, management, analysis, and improvement of sales organization performance. Ideally, the SPM program aligns sales focus with both sales strategy and corporate goals.

Key SPM components include:

  • Plan design and modeling
  • Quota and territory management
  • Plan communication and acceptance
  • Compensation administration and reporting
    (Incentive Compensation Management)
  • Dispute resolution
  • Coaching
  • Analytics
Service Level
Agreement (SLA)
Indicates the performance levels that a vendor promises to meet. For example, a software provider may guarantee that their system will never be unavailable for more than one hour during normal business hours. There are often service-level credits associated with a vendor’s failure to meet SLA requirements (i.e., the customer receives a credit due to an SLA requirement not being met).

 

Split A cost or payment that is split between two or more entities (for instance, a commission that is split between two salespeople).

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T

Term The duration of the contract (e.g., a one-year subscription). There are often fees or penalties associated with terminating a contract early.

 

Territory A combination of factors often used to segment prospects and accounts in order to determine what and/or where a salesperson sells. Territories can combine industry verticals, geographies, product offerings, company sizes, etc. Territories usually help define which salesperson gets credit for sales.

To see an interactive example, click here.

 

Threshold The lowest performance level that must be achieved in order to earn an incentive payment.

Click here to see an interactive example of a threshold (and how it’s different than a quota).

Total Compensation/ Total Rewards Encompasses all aspects of employee pay and recognition, including annual compensation planning, reward and recognition programs, benefits programs, training and professional development, performance management processes, and so on.

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V

Variable
Compensation
Compensation that is dependent upon performance or results achieved, or compensation that is discretionary. Amounts paid may increase or decrease from one pay period to the next. These components may also be referred to as “pay-for-performance” or “at-risk” pay.

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W

Workforce
Management (WFM)
Systems you may hear mentioned as being “WFM” vary, but may include Kronos, ADP, NICE, Oracle, Workday, etc.

For a full definition of Workforce Management, click here.

 

Workflow The automation of a business process.

Within SPM/ICM, workflows can include processes such as new sales rep onboarding, sales plan acceptance, dispute resolution, etc. Workflows can be simple or complex, depending on the business need.

To see an interactive example, click here.

 

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