When it’s not (just) the Sales Compensation Plans…

Many of our engagements start with a client stating, “we need to make changes to our sales compensation plans”.  Their goal is generally some combination of increasing revenue or margin, reducing unwanted talent turnover / attracting high quality talent, reducing spend, or improving the motivational impact of their plans.  With compensation specifically, there are usually concerns about a misalignment between the role and base/variable pay mix, strategic focus vs. metrics used, too much or not enough upside opportunity, or unfavorable market positioning against competitors for sales resources.

That’s all well and good (and important!), but very often when we dig a little deeper there is a lot more to the story that can unfortunately detract from fulfilling their stated goals… For this article, I am going to break these other challenges into three categories:

• Strategic Elements
• Organizational Elements
• Support Elements

1. Strategic Elements

Strategic elements are often determined at the C-suite level and are foundational to all others.  These elements include decisions about which customers to target, what products or services to offer and their prioritization, how to optimize pricing, and which channels to utilize.  Poorly thought out or unclear direction related to these key decisions can hamper other related elements – For example, muddled customer segmentation can lead to customers covered in suboptimal ways by the wrong role (e.g., field vs. inside) or by overlapping, redundant resources – key parts of the organizational element.

What all these elements feed into is the value proposition of the company’s products and/or services.  There are two red flags we often encounter:

A. Weak Value Proposition –
This is a tough one to hear about from salespeople. The range of common themes includes competitors having more advanced technology or product features, manufacturing challenges impacting product shipments and service levels, high rates of defective products, and uncompetitive and/or rigid pricing rules.  Yes, you can argue a good salesperson can sell around drawbacks like these.  However, if leadership does not take note of it and work to address the issues, bad things tend to happen and salespeople tend to start to look for other opportunities – often at competitors.

B. Scattered Value Proposition –
A common question in our discovery process is “tell us about XYZ’s value proposition and how you talk about it to customers” – You can always expect slight variations as salespeople apply their personal spin or emphasize one aspect of the proposition that the customer may respond to more – However, when we hear significantly different answers, that’s a problem, and we know there is a lack of common understanding – This is a relatively easy fix through repetitive communication from sales leadership / management and standardized training.

2. Organizational Elements

Organizational elements include sales structure – e.g., by geography, customer size, vertical market, etc.  Building on that, decisions need to be made around the type of roles needed to cover the accounts, resources required, management span of control, territory / account assignments and so on.

Several themes pop up repeatedly in our engagements that directly or indirectly impact the field salespeople’s chances of being as successful as possible, and hence their ability to earn their target incentive (and more).  Highlighting a couple here.

C. Management Span of Control –
Anytime we receive org charts with headcount and we see broad spans of control, say 15 or more direct reports for a field sales manager, I know exactly what we will

hear from our interviews with the field team – “I feel like I never get much guidance and/or support from my manager” – Top tier reps are not a worry but many reps in that 60 percent in the middle can easily get shortchanged – A variety of factors impact what an ideal span should be but when we see something between 6 and 12 direct reports I am usually good.

D. Territory / Account Assignments –
Another red flag that can impact sales compensation’s effectiveness is a wide variance in rep territory / account assignments in terms of the number of customers and/or revenue or margin dollars associated with each territory –Clients using commission driven incentive plans where everyone has the same rates will struggle to adhere to any kind of total compensation target for the role – All sales leaders need to consider whether territories and/or accounts are maximizing their potential and accounts are being covered adequately.

3. Support Elements

Support elements can have an outsized impact on the success of a sales organization.  This category, among other, includes quota setting (a topic so important it also was covered on its own in a previous article…), systems/reporting, recruiting, and training and development.

For this article let’s again focus on two of the above areas – systems/reporting and training/development.

E. Systems/Reporting –
The next saddest thing I hear in interviews with salespeople after the value proposition challenge is “I have no idea why I got paid what I got paid in my last check/direct deposit…” – We always strive to understand what’s behind this and at times it is how the plan was communicated and rolled out– But in many cases it is the reports / statements salespeople receive or can access – Any performance statement showing sales results and the associated incentive pay is a report card and serves as direct feedback to the salesperson on what they are doing well or not so well – When they have no understanding or visibility into details of the outcome of their efforts and the associated rewards it strips away the motivational impact of the incentive plan itself – A fundamental question we always ask when evaluating performance measures is “can you track and report on it?” – If not, reconsider…

F. Training / Development –
Lots of viewpoints out there on whether great salespeople are “born with it” or developed through training – Why can’t both be true? Don’t disregard the value in hiring talent with the right traits and skills to have a strong foundation to be successful – Nonetheless, they still need to be taught how to use tools and processes, navigate customer environments, develop effective presentations and proposals to build on that foundation – I also strongly believe average performers can become above average with coaching and support – It’s always easy to deprioritize training and the associated investment but done right, it can really help sales teams up their game…

In summary, the effectiveness of a sales organization is driven by a multitude of factors.  Sales compensation and how its structure and design support the strategy and objectives of a given role is extremely important, but a comprehensive view is needed to ensure your sales organization is set up to achieve the highest probability of success!

SalesGlobe is a leading sales effectiveness and data-driven creative problem-solving firm. We specialize in helping Global 1000 companies solve their toughest growth challenges and helping them think in new ways to develop more effective solutions in the areas of sales strategy, sales organization, sales process, sales compensation, and quotas. We wrote the books on sales innovation with The Innovative Sale, What Your CEO Needs to Know About Sales Compensation, and Quotas! Design Thinking to Solve Your Biggest Sales Challenge.