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kasina Study Shows Sharp Compensation Decline, Projected Rebound, and Offers Recommendations To Optimize Practices

This week, kasina released Costs of Compensation: Sales and National Accounts 2009 . As you would expect, data showed that on the heels of the fourth quarter meltdown that drastically took down markets and fund flows, Sales and National Accounts professionals took a big compensation hit in 2008. For example, external wholesalers saw declines of 10% in base compensation, 22% in variable compensation, and nearly 21% in total compensation versus 2007 levels (see graph below).

The data show that, depending on their roles, most Sales and National Accounts professionals experienced total compensation declines ranging from 10% to 30% in 2008 (versus 2007). Internal and hybrid wholesalers were mostly insulated from these declines. The silver lining is that firms estimate that 2009 will see modest increases in total compensation for most roles, but not enough to get back to 2007 levels.

Despite the fact that all firms were dealing with similar challenges in the sales space, three distinct approaches to handling compensation and headcount during the financial crisis emerged (see my prior blog piece, Crisis = An Opportunity Not to be Missed, for a discussion of these approaches):

1. Duck and Cover: 33% of firms
2. Across the Board Cuts: 45% of firms
3. Opportunistic Rationalization: 22% of firms

The report makes three main recommendations:

1. Rationalize intelligently to ensure reasonable pay and keep top people happy
2. Incentivize productive activities, not just end results
3. Tie sales to profitability

We found that firms starting to deploy these strategies are better positioned to capitalize as the economy and market recover. Their best sales professionals will still be fully engaged and with the firm. Furthermore, their compensation systems and processes will be aligned to reward performers who help advance the firm's long-term value creation and profitability.