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Compensation Insights

Hitting the Target: Take Stock of Sales Roles and Compensation

tie sales comp into business strategyIt's that time of year again when sales organizations review performance against sales goals and start thinking about next year. But this year, I propose that companies take a more thorough approach to this process by:

  1. Making sure sales goals truly support overall corporate objectives;
  2. Considering whether current sales roles and priorities are fully aligned with what the sales organization is trying to accomplish.

You might be shaking your head right now thinking, “Of course, sales goals support corporate objectives! Otherwise, what is the point?” However, that link should never be taken for granted. Too many companies have underperformed because the goal-setting process for sales has evolved into something resembling an automatic renewal instead of a thoughtful exercise in corporate strategy execution.

Re-Connecting Sales

Consider the company with a sales goal setting process that had become disconnected from corporate strategy and objectives. In this case, the company not only missed its sales goals, but it also missed broader corporate objectives related to production volume, profitability and market penetration.

Part of the problem was that the sales compensation system was measuring and rewarding performance and achievements that did little to further the achievement of overall marketing objectives and broader company goals. For example, the company based sales compensation on enhancing profit margins, so salespeople focused on selling the company’s most profitable products.

However, this focus on profit margins was hindering rather than supporting company growth. Each product line has different profit margins so that narrow criteria caused the sales force to neglect other products that could help the business grow. As a result, the company’s market share had started to decline before it had even reached its peak.

A New Approach

The solution to this type of situation is twofold. First, the company changed sales goals and objectives to reflect the desired mix of selling for margin and for volume. Then, to prevent this situation from happening again, the company instituted a more robust annual process for sales planning, including a review of sales roles and how the sales function is organized overall.

Beyond that, the company now undertakes a more significant review of sales compensation at least every three to four years to ensure sales compensation structures remain aligned with the overall corporate direction and strategy and the company’s stage of growth.

Second, the company looked carefully at the job description for each sales position. Using McDermott Associates MASTER Job Descriptions©, roles were rewritten to to better support necessary sales activities.

The company also needed to ensure the people fulfilling various roles had the knowledge, skills and experience necessary to succeed. For example, because the company began focusing on both profitability and sales volume, people in certain sales roles needed to have the skills necessary to acquire new customers and penetrate new markets while also service existing customers. Because increasing sales volume was a new focus for the company, this analysis revealed that not all salespeople had the necessary background to succeed at that part of their objectives.

With this information in hand, the company had the opportunity to address these weaknesses through training, moving people into new roles and other means before those weaknesses impacted the attainment of sales goals.

Not surprisingly, these changes reinvigorated the business and positioned the company well to respond to a changing marketplace. By having this annual review of sales, the company had a built-in point at which it could consider the longer-term role of sales, as well as the more immediate requirements of the coming year.

To learn more about sales team compensation strategies, check out our case studies and compensation consulting pages. 

 

Tags: compensation, compensation plan, comp plan, sales force, business strategy