Sales compensation is first and foremost about strategy – the path to the larger goals of the entire company. It’s the foundation for the whole thing. If the strategy isn’t clear, the sales comp plan – no matter how good it is – can’t move the organization in the right direction. In this sales comp design season, before the calculators come out, make sure the objectives are clear. Consider the priorities of the business and acknowledge which ones sales comp can affect.
We recently worked with a company who outlined their top priorities for the business for that year. Those priorities became our north star for designing a new sales compensation program; we knew what we needed to accomplish. And as usually happens, when we got down deep into the compensation work, people start saying, “Well, do we really want to do that?” and “Finance is not going to support that.”
We responded, “Look, here’s what you want to accomplish as a business. And we’re going to have a hard time going back to the CEO and saying we missed a couple points that you said were important.” Clear priorities helped us to articulate where we were going and to drive change in the organization.
There are several different dimensions of strategy that can help guide you when aligning the overall strategy with the sales compensation plan.
1. The customer dimension. As you look at sales jobs, what customers do we want to focus on? Do we want to penetrate current customers or acquire new customers?
2. What market segments should we focus on: small, mid-market, or large? Should we focus on certain industries or certain needs-based segments?
3. What products will we offer?
4. What channels will we use? Will it be a third party channel? Will it be a channel manager that’s covering that third party channel or a direct role?
5. What do we want to accomplish financially, especially in terms of the ROI of the sales comp plan?
As we break apart this sales strategy question it helps to have some structures to be able to look at and say, “Ok, here’s what we want to accomplish: we want to go after customer penetration this year within the financial services segment, and we want to add more product services to our core products. We want to leverage our third party partners more so we
don’t want to try to sell everything ourselves, and we want to do it within certain financial parameters.”
You can start to make some statements about what we want to accomplish from a sales strategy standpoint. Why is that useful? Because we can translate that down to the sales roles, and we can translate that down to the plans themselves.
It sets the stage for a good structural approach.
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