If there is a universal truth in business it’s this: companies want more revenue. Or more of the “right” revenue. For the Sales Leader, there are several significant challenges to accomplishing this. One critical challenge is how to incentivize the right behaviors.
Senior Consultant Bill Turner has been assessing, designing, and implementing comp for over fifteen years. He also specializes in change management. Here’s what he says about compensation:
“The big mistake is thinking that changing compensation plans alone obtains the desired results. Many times comp isn’t the problem at all. Showing leaders the role quotas and territory assignments play in compensation opens their eyes.”
“Another error is designing plans without clearly understanding what your successful salespeople really do. How are they different? The short answer is they usually understand your customers’ buying process better than others.”
“Finally, companies know their best reps will figure out how to ‘beat the plan.’ They’ll find a way to make the most they can. But how about going one better? TELL your reps how to beat the plan. Inform them exactly how to maximize income under the new plan. Share the specific behaviors that will optimize results. Enlist your sales managers as change agents. They understand the compensation plan dynamics. They can constantly reinforce your sales strategy by coaching reps against the plan. Done correctly, you’ll see an increased focus on weekly funnel and deal strategy calls. The ‘blocking and tackling’ of the team will improve.”
Bill closes with this: “Whatever you do, don’t simply create new plans and let reps figure them out on their own.”
Senior Consultant Scott McLeod has been assessing and executing comp plans for over 5 years. He echoes many of Bill’s sentiments:
“Compensation plans that are not aligned with corporate strategy are like ships without rudders. For example, one company’s corporate strategy hinged on increasing gross margin dollars. But they were paying reps primarily on revenue! Here’s another analogy: the quarterback was running a different play than the coach called. We all know how that works out for the team.”
“It’s also critical to integrate compensation design into business strategy and goal planning. Several departments should play an active role in the comp design and development process. Human Resources benchmarks comp in and out-of-industry to ensure yours is competitive. Marketing brings macro-level data on market and account segmentation. These are some “inputs” that let you assess your territory design. Finally, sales leadership brings micro-level details about the reps motivations and desires. Don’t sub-optimize. Compensation design and implementation works best by giving other divisions seats at the table.”
Bill and Scott clearly have a passion for the science of compensation. Do you have a win/win sales compensation culture? Is your reps’ success and your success tightly aligned? At this time of year, step back and assess your comp plans. But don’t assess them in a bubble. You must understand how other elements affect them. You must do things in the right order.
For help, download the SBI 2015 Research Report. This report covers much more than sales compensation. It places 78 other critical components of your sales organization into context. So whether it’s comp, or something else, you can see how all the pieces fit together.
Image courtesy of Forbes.com
