Aligning Sales Compensation to the Sales Strategy

“I like to say that the comp plan is the caboose, not the engine,” says Doug Holland, director of HR and compensation at Manpower. “Compensation should never be driving the strategy. The strategy drives the compensation. It’s incredible, especially in times of stress, how that message can kind of get lost. Comp issues are often symptoms of bigger problems, and it’s the easiest, most tangible thing to look at. The challenge is, do we have the right job designs? Do we have the right people? Those are harder conversations. That’s often the struggle with comp plans.”

When thinking about sales strategy and sales compensation, it’s critical to have a framework. We developed the Revenue Roadmap from our decades of work with hundreds of high performing sales organizations to be that framework. The Revenue Roadmap℠ identifies four major layers, or competency areas, and 16 related disciplines that must connect for the organization to grow profitably,

Insight pertains to understanding the market and competitors and how the business is performing. Insight is the highest level competency: understanding the voice of the customer, the macro market, competitor moves, and the performance of the business. That insight will drive certain decisions to the next downstream level, which is sales strategy. Insight includes listening to the voice of the customer; considering the macro market environment; understand competitors’ strategy; and understanding your historical performance as a business.

Sales Strategy defines the sales organization’s action plan to achieve its goal. The sales strategy will drive decisions concerning product and service focus, concentration on certain markets, value propositions, and the resulting approach to market. Strategy includes defining the strategic products and services; segmentation and targeting; account planning; and value proposition.

When developing the approach to market, sales leaders should incorporate decisions about product, service, target segments, value propositions, and potential sales resources into a plan that can be executed by the sales organization. The customer coverage layer converts that plan into action.

Customer Coverage defines how the organization will use its channels, roles, processes, and resources to go to market. Customer coverage includes sales channels (third party resellers, referral partners, retailers, or company sales force); sales roles; sales processes; and sales deployment. Sales channels and sales roles integrate with the processes for working with customers. In fact, the best customer coverage models are built from the customer’s buying process with a sales process and roles that reflect how the customer prefers to work. Sales processes lay out the common approaches for how the sales team identifies prospects, qualifies opportunities, develops solutions, manages the momentum, closes the sale, and implements the product or service for the customer.

Enablement supports all of the upstream disciplines within Customer Coverage, Sales Strategy, and Insight. Enablement includes areas such as incentive compensation and quotas, which aligns sellers to the sales strategy. It includes recruiting and retention, which define the current inventory of talent and determine how the organization is going to attract and retain the right talent for the long term.  Training and development builds the capabilities of the organization for people currently in their jobs and in junior roles that will progress into key sales roles. Tools and technology provide leverage by enhancing the effectiveness of gaining insight and implementing the organization’s decisions around sales strategy, customer coverage, and enablement.

Jeff Connor, chief growth officer for ARAMARK, a global provider of food services, facilities management, and uniforms, is involved in the sales compensation process. “People confuse incentives with alignment, and they jump to incentives as the answer, as opposed to the hard work of alignment,” he says. “When you look at the Revenue Roadmap, sales and incentive compensation is at the bottom. In my experience, when you talk sales compensation everybody wants to just take big business objectives and assign incentives, as if the sales people will go after anything where there’s a buck.

“In reality, anybody who’s every worked on sales comp knows it doesn’t operate like that. The alignment work – getting the correct insight, aligning it to the sales strategy – has to happen first. The last think you do at the end of the day is work on the incentive plan. Confusing incentives for alignment happens all the time. People just go right to the ideas without understanding context. I think this idea of alignment is really important.”

The Revenue Roadmap℠ helps a company to align its strengths and ensure everyone is firing on all cylinders. While it begins with Insight, all 16 disciplines are connected, and the decisions and actions flow from one to the next. When looking at sales compensation it helps to know where it fits within the overall framework, downstream from sales strategy and customer coverage. That’s why issues in the upstream disciplines will show up as symptoms in the sales compensation plan.