Achieving Revenue Growth Through Alignment

How can you achieve revenue growth through alignment of roles expectations, business objectives, and compensation plan elements?

Recently, a global leader in transportation solutions faced the challenge of driving new revenue growth. They desired a high-impact sales compensation program that aligned rewards with results. Due to a recent acquisition, the goal was to implement a consistent definition and pursuit strategy that supported account management and new business development. This program had to drive the company’s strategic objectives within a competitive environment while being motivational to sellers to meet the performance goals.

Let’s explore the initial findings uncovered from the evaluation of the current sales compensation plan, participant interviews, and analysis of performance data.
Revenue Growth Through Alignment

  • The two roles in question, account managers and sales executives had no clear role definition based on expectations.
  • Account managers could hunt for new logos while sales executives could farm existing clients.
  • The financial goals were not supported by a specific client, segment, or market opportunity/potential.
  • The financial goals were not directly tied to a role or an individual. The current commission plan paid for raw production and not necessarily performance.
  • Part of the plan included paying for renewals. However, the plan structure lacked governance and incented undesirable behavior.
  • Not all measures within the current sales compensation plans aligned with each role’s expectations. Sales executives could be rewarded for selling to existing clients. Account Management sales incentive plans were complex with six measures made up of sixteen elements.

To drive revenue growth, the recommendation was to focus on three key areas:

    1. Plans: Provide clear bifurcation of role through role definition and expectation.
    2. Objectives: Align business objectives to role and opportunity. This step includes linking client opportunity to organizational goals, linking individual goals to organizational goals, and rewarding for goal attainment.
    3. PLAN Elements: Simplify the sales compensation plan by reducing the number of measures, aligning measures to the role expectations, and reward for performance and desired outcomes.

Now let’s take a deeper dive into each recommendation and the steps the organization needed to take to operationalize the emphasis on revenue growth.

M&A - mergers and acquisitions

Roles: Clearer Bifurcation of Roles to Drive Business Outcomes

In the first decision, Account Managers would focus on existing clients only whereas Sales Executives would focus on only new client acquisitions.

As an Account Manager to existing clients, the expectation was to retain the business and expand the business with additional products and services. To support these two objectives, the Account Manager’s core functions were to maintain client satisfaction and to keep an overseeing eye on product/service installation and ongoing performance. The Account Manager’s role was to ensure a stable revenue base that allows revenue to expand upon it.
On the other hand, as a Sales Executive serving new clients, the expectation was to acquire new revenue from new clients and from within new markets. To support winning new clients, Sales Executives’ core functions were maintaining a market/territory strategy, developing new relationships, and networking as a company advocate. The Sales Executive is the driver of business development, therefore, the revenue they generate is the largest building block for revenue growth.

To achieve revenue growth, each role needs to play a distinct part. Avoiding overlap in expectations allows the Account Managers to stabilize and expand the foundation while the Sales Executive builds the growth on the base.

M&A - mergers and acquisitions

Objectives: Align Financial Goals to Growth Opportunity

When your team is setting financial objectives, keep in mind that they should be realistic and support quantifiable opportunities and potential with new and existing clients.

Furthermore, when identifying growth opportunities take a top-down bottom-up approach to goal setting. Ask the following questions and consider each one’s impact on revenue growth:

  • What existing revenue is at risk, and what can be done to preserve it?
  • Where is the expansion opportunity with existing clients?
  • What new client opportunities have been identified? Which has the highest potential? What can we do to optimize those opportunities?
  • Are there new market and product/services opportunities for us that are missing today?

Financial objectives should be realistic and supported by quantifiable opportunity and potential within a role or individual’s territory. When establishing a seller’s quota, consider the following four areas:

Baseline Revenue: All businesses have exposure to revenue loss. Whether it’s price compression, client shrinkage, or competitive loss, the organization must know the revenue exposure to be able to understand what a reasonable revenue growth expectation is.
Whitespace Opportunity: Take a close look at the existing client base. Analyze current client products and services mix to identify areas for expansion. Does the client have the need or desire for these additional products and services?
Greenfield Opportunity: Evaluate each territory or segment for clients not yet doing business with the company. What is the need or desire level? How do the products and services compare to the competition? Consider each aspect of the client’s decision-making process.
Market Opportunity: Determine if there are markets the business can expand into to broaden its footprint and gain market share. Understand which competitors play in that space and quantify the addressable market.
Often, finance is the driver and establisher of sales and revenue targets. This top-down and bottom-up approach is key for leadership to understand how the goal can be achieved along with how to align the resources and go-to-market support.

M&A - mergers and acquisitions

PLAN Elements: Align the plan measures to reward desired behaviors and expectations

. Under the existing plan, Account Managers carried no sales quota. Instead, they were rewarded for product turn-up, retained contracts, profitability, ops cost savings, and year-over-year revenue growth. Under the new plan, the focus moved to the two key expectations of the role: expansion sales and revenue growth. Although contract renewal is not a stand-alone measure, contract activities align with both sales and revenue. Expansion sales require a signed contract, and a strong revenue base requires contracts to be renewed.

This means that the existing Sales Executive plan rewarded existing client sales even though client management shifts to an account manager after the client contract is signed. The Sales Executive is responsible for new client acquisition, not add-on sales. Under the new plan, only new client sales retire quota, but the sales are rewarded at a much higher rate. Winning a new logo takes relationship development thus leading to a longer sales cycle. This role takes on considerable risk which then supports a higher reward.

In conclusion, this global leader in transportation solutions walked away with two plan designs that not only supported their revenue growth objective but also ensured the following sales compensation best practices were met:

  • The plan is limited to two or three measures.
  • The measures are performance-based not activity-based.
  • The measures are within the role’s control and align with role expectations.
  • The measures support financial objectives while driving strategic outcomes for the business.

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