How Do We Pay Strategic Account Managers?

There are many potential pitfalls with strategic account manager compensation. The two that we believe have the most power to kill the program are (1) how the account manager compensation is balanced between salary and any short-term incentives and (2) whether the strategic account manager is compensated in such a way that field salespeople and internal employees will find it worthwhile to help the manager, the customer, and the program.

First, when SAM compensation is heavily weighted toward short-term incentives, account managers tend to ignore all things strategic or long-term and focus on generating new business. And who could blame them? That is where their payoff lies. Compensation drives behavior; short-term compensation drives short-term transactional thinking and selling—not strategic account management.

Our experience, echoed by the annual SAM compensation study conducted by the Strategic Account Management Association, has been that strategic account manager compensation is most often balanced 75 to 85 percent salary and 15 to 25 percent incentive bonus.

The salary usually includes explicit revenue-growth goals that strategic account planners develop. Incentives might include hitting certain account share or profitability targets, or creating longer-term strategic initiatives. This compensation allows the account manager to concentrate on longer-term strategic solutions, which also tend to be larger and more profitable.

Strategic account manager compensation is most often balanced 75 to 85 percent salary and 15 to 25 percent incentive bonus.

The other potential compensation pitfall is how the strategic account manager's compensation impacts that of the field salespeople and operations folks, an area account management programs designers too seldom consider. One firm serving a multilocation strategic account hired an account manager from outside the firm and paid her 50 percent salary and 50 percent commission. She assumed responsibility for eight large strategic relationships. As is typical, though, she depended on the field salespeople to manage and service the strategic accounts' local relationships. Everyone agreed this made sense. The supplier, however, did not want to descend into the briar patch that is sales compensation and decided that the account manager and the field salesperson should split the commission on any incremental sales. As is the case with most pitfalls, this made sense only in theory.

Three basic field responses to the compensation change emerged, only one of which was positive. In the first field response, salespeople started spending less time at the strategic account because they could earn full commissions by serving nonstrategic accounts. This meant certain field salespeople devoted less attention to strategic account locations than they had before the program existed.

In the second scenario, the field salespeople sold to the strategic account and then went after their full commission by arguing their case to their regional vice president. In several cases, the highly autonomous regional vice presidents had initiated the strategic relationship and didn't like to see their power taken over by the strategic account program, particularly by an "outsider." They therefore let their salespeople earn their full commission, dealing the account manager and the program serious blows. And because of the time this arguing and refereeing required, certain account locations received less attention.

The third scenario was rare but deserves mention. A few field salespeople (out of 100+) saw what was possible in a strategic account management program. They worked with the account manager to realize that potential. In several cases, these salespeople, some of whom were relatively low performers in field selling, later became effective strategic account managers.

Now let's examine a particularly thorny case from IBM Global, which faced the account manager-field compensation problem in its global account management program and came up with an ingenious interim solution.