The sales compensation plan has to align with the overall business strategy, and the overall business strategy generally comes from the top. So unless the CEO is designing the comp plans himself, there needs to be some translation of that strategy to the people working on the comp plan.
To help direct those conversations, think about the goals of the business in five different dimensions: the customer dimension, the product dimension, the market coverage dimension, the financial dimension, and the talent dimension. Articulating the goals in each of these five areas from the C-level to the organization helps to simplify the overall strategy.
The customer dimension. What customer segments will we target? We may have unique customer segments on which we want to focus such as national accounts, key accounts, and mass market accounts. These may be further segmented by industry, sector, or customer needs. Within those groups, there are really only three types of growth opportunities: current customer retention; penetration of current customers; and acquisition of new customers.
The product dimension. What products or services are we going to offer, and what is the value proposition to each customer segment? We may wish to prioritize certain products, services, or combinations to reach our growth goals. These offers and priorities may vary by customer segment.
The market coverage dimension. As we align to our target markets, what sales channels and sales resources are we going to use? Are we going to use third party channels covered by channel managers? Will we use a direct sales organization? Will we use a combination of field and inside resources?
The financial dimension. What financial results are critical for the business? What is the anticipated ROI for the sales comp plan? In the end, the business needs to reach its financial objectives from a growth and profitability standpoint.
The talent dimension. How are we attracting and retaining the right talent to accomplish these goals? Does the current compensation plan drive the right behaviors to accomplish these goals? Our business priorities and strategies will dictate a certain mix of sales talent necessary to reach our goals.
To help facilitate the discussion, ask the following four questions for each dimension. For example, for the customer dimension, ask: What is important for the business to accomplish in terms of customer retention and acquisition in the next 3-5 years? What must we accomplish in terms of customer retention and acquisition this year?
1. What’s important for the business to accomplish in the next 3-5 years?
2. What must the business accomplish this year?
3. Does the current performance of the sales compensation plan align or not align with these priorities?
4. Where are our weak points?
What other important questions help define strategic goals for the company that the sales compensation plan can carry out?
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