Recently, I met with a couple of the senior sales leaders of a high-tech hardware company at a coffee shop in Dallas. They were at the end of their compensation design process – just waiting for the final nod of approval from their CEO.
Unfortunately for them, their CEO decided he wanted to get involved, at the end of the process. While he had received updates throughout the prior months, it was only now – after all the intricate details had been woven together – that he decided to take a closer look.
“He (the CEO) started digging into the financial modeling and challenging us about why the plan would pay more than the targeted cost of sales if we hit our company goal on average but had a lot of high performers,” said one of the sales leaders. “The team had agreed on the above-quota accelerators, and that’s what happens with accelerators. We worked hard on keeping him informed, but when he finally locked in, we were at the end of the game.”
C-level involvement in the sales compensation program is critical. It helps ensure that the plan connects directly to the strategy of the business. However, C-level engagement must come at the right times in the process, typically much closer to the beginning than what our friends in Dallas encountered. In-depth conversations about the strategy and ways to tie it to the comp plan should happen in the beginning. And, it’s essential the comp design team gets feedback from the C-level that he or she is absorbing the updates along the way, rather than scanning an email.
Eventually, the Dallas sales team completed the plans and rolled them out for an introduction albeit one quarter behind schedule. Was the re-design better than the proposed design? The CEO thought so, but it was hard to say. The senior sales leadership team had a lot of clean up to do with re-communication and incentive pay true-ups. Sales leadership had lost some credibility with the sales organization. And the executive steering committee, including the CEO, may have learned a lesson about getting real C-level engagement and support much earlier in process.
When does your C-level get involved in the incentive design process?
Mark Donnolo is the author of “The Innovative Sale” and “What Your CEO Needs to Know About Sales Compensation,” and managing partner of SalesGlobe. Email him at email@example.com .