Economics at present: How to Proceed in times of turbulence
How to Compensate Sales Teams During Trade Wars and Economic Uncertainty
In today’s volatile global landscape, manufacturers and distributors are facing unprecedented pressure from rising tariffs, supply chain disruption, and shifting geopolitical alliances.
Your sales compensation plan needs to be more resilient than ever.
Here’s how to design a compensation strategy that keeps your sales team aligned, motivated, and focused on growth — even in turbulent times.
Understand the Trade War Impact on Your Sales Motion
Before rewriting comp plans, assess how a trade war reshapes your core sales levers:
- Margins: Tariffs shrink profitability — you can’t afford to pay on gross revenue alone.
- Demand Patterns: Orders may shift from long-term commitments to short-term rebuys.
- Sales Cycles: Customers delay buying decisions, increasing pressure on the funnel.
Your compensation plan needs to flex with these dynamics, not fight them.
Principles for Resilient Compensation Design
- Protect the Base — Balance Fixed vs. Variable
In uncertain markets, sellers crave stability. Comp plans with a higher base salary ratio (60/40 or 70/30) offer security while still incentivizing upside. This balance keeps morale high even when deals slow down.
- Incentivize What You Can Control
During trade wars, sales reps may lose control over pricing, availability, or timing. Shift performance measures toward:
- Renewals and customer retention
- Product mix optimization
- Margin-conscious selling
- Volume-based incentives (when inventory is stable)
These are actions within a seller’s control — and they still move the needle.
- Add Flexibility Through Tiered Incentives
Use a tiered commission structure with accelerators for overachievement but build in soft landings for underperformance. Instead of cliffs or decelerators, create structures like:
|
Attainment % |
Multiplier (of Base Commission Rate) |
|
0–80% |
0.8x |
|
80.01–100% |
1x |
|
100.01–125% |
1.5x |
|
>125% |
2x |
This allows reps to stay engaged even in choppy quarters — while still rewarding top performers.
- Make Renewals King
If 80-90% of your revenue is recurring (as in most manufacturing or channel sales businesses), tie a meaningful portion of compensation to renewal rates.
Use a step-up schedule that rewards improving retention, not just hitting quotas.
- Shorten the Feedback Loop
Move from annual to quarterly comp plans if volatility is high. This lets you adjust to external forces faster and gives reps a renewed sense of control over their earnings.
Migration Strategy: Shifting from Stability to Agility
If you’ve had the same comp plan for 5+ years, now is the time to evolve. Here's a migration path:
|
Phase |
Action |
|
Phase 1: Audit |
Map out how trade wars affect your sales process and pricing. |
|
Phase 2: Segment |
Separate roles into “growth” (new business) and “protection” (renewals, retention). |
|
Phase 3: Redesign |
Build comp plans that reflect this segmentation, with different levers. |
|
Phase 4: Test |
Run a shadow comp for 1–2 quarters to see the real-world impact. |
|
Phase 5: Launch |
Roll out with training, sales tools, and clear modeling scenarios. |
Final Thoughts
Compensation is more than just a paycheck — it’s a signal. During a trade war, it must signal stability, focus, and adaptability.
The best comp plans reward resilience, not just revenue.
If you lead a sales team through uncertain times, now’s your chance to turn volatility into a competitive advantage. With the right incentives, even the most turbulent market can become a moment of growth.