How Can You Leverage Your Sales Compensation Design Process to Bring Clarity on Your Sales Strategy?
One of my former leaders would often say we did strategy projects masked as organizational design projects. Why would he claim that? The reality is that most company executives would say they own strategy, not a third-party firm.
No executive that’s worked for decades within their industry would admit to outsourcing their strategy. Yet, these same executives welcome an outside firm into the strategy development process through the org design.
The other practical reason for his comment is that ‘strategy’ is a particularly vague word. It says a lot without saying anything. In contrast, an organizational design is a tangible thing. You can see the boxes on the page, names filled in, and relationships drawn. The document can be shared internally, and people will understand its meaning. Structure and roles provide clarity to the often ‘unclear’ strategy articulation.
We work with clients that face the same challenges in defining their sales strategy. Sales strategy can come across as overly conceptual. Sales leaders need to translate their strategy into real terms for their teams. This is especially true for companies that are in transition with new capital, leadership changes, new product launches, or new market entry.
And just like the tangible appeal of organizational designs, we see strong interest in sales compensation as a way to bring clarity to a sales strategy – especially a potentially cloudy and undefined one.
But why a Sales Compensation Plan?
First, it’s concrete. A sales compensation plan comes to life in a physical plan document that everyone can read and understand. This document guides day-to-day sales operations, including who you recruit and how you track performance. It also defines the job itself. The sales comp plan document specifies what you want them to do, who you want them to work with, how much they have to deliver, and what they will receive in return.
But all these things represent the destination. In order to deliver a document that clearly articulates these items, we need to drive clarity into broader, dare I say, strategic issues.
So how can you leverage your sales compensation design process to bring clarity on your sales strategy?
What do you want the role to do?
All sales compensation designs start with the role. Roles live within an organizational chart. And just as organizational charts are proxies for strategy, your sales roles can be the proxy for your sales strategy.
Certain industries have fairly standard practices related to role design. However, there are always variations. Answering a seemingly simple question like, “What do you want the role to do?” can be very complex. Let’s work through an example:
Me: Tell about what this role should be rewarded for.
CRO: Driving revenue of course!
Me: Ok, is that all?
CRO: Well margin… we need to limit the discounting.
Me: Ok, what else defines success for this role?
CRO: We do have a number of strategic priorities this year that we need them to focus on.
Me: Ok, so some KPIs as well. Can they sell all the products?
CRO: Oh no, they need to focus only on the new products. And in fact, I don’t want them to sell the old stuff we’re famous for. They need to sell the new stuff that’s really hard to sell.
Me: Ok, got it. Who can they sell these products to?
CRO: All the accounts in their geography!
Me: What defines a geography?
CRO: We carve the country into zip codes and then build a buying index for each zip code to create equal territories based on potential.
Me: So, they can sell to any organization within the zip code?
CRO: Oh no, just organizations that have 50-500 employees.
Me: Ok, so any organization of the right size in their geography?
CRO: Well, just organizations that we haven’t worked with in the last 24 months.
Me: Right… ok, so to summarize this role has to drive revenue, margin, and strategic objectives for a select group of products, targeting employers with 50-500 employees in certain zip codes that we haven’t worked with in the last 24 months.
CRO: Yep… and remember we need a simple comp plan.
The dialogue above highlights the underlying sales strategy of the organization, whether they’ve explicitly defined it or not. In this example, the comp plan makes the sales strategy black-and-white for the field:
- How the sales organization should align to the market.
- What customer segments they’re going after.
- Which products they’re focusing on.
- Who will handle new business vs. existing business.
- The strategic emphasis for the year.
Many organizations struggle to articulate these answers by addressing them head-on. The sales compensation design process can tease out decisions in a very practical way. A PowerPoint of the new sales strategy isn’t particularly helpful compared to the specific direction provided by the comp plan design.
Taking Action Now to Impact Next Year
Now is the time to reevaluate your sales strategy. A thoughtful review of your sales compensation this time of year can help the organization determine your strategy heading into next year. For example, if you’re struggling to determine how many sales reps you need, build a compensation model that considers various market demand factors. This approach can provide a short-cut to a very difficult question.
Remember any compensation plan, organization design – and thus sales strategy – starts with understanding your sales roles. Defining what you want these roles to do can help you pull together all the aspects of your strategy. This conversation attacks the potentially vague concept of ‘strategy’ in a very practical way.
Stop the analysis and paralysis strategy approach. Get practical and get going!
We’re executing a series of bootcamps this September to help clients evaluate their plans and build the sales compensation change roadmap. Contact us to learn more.
About The Author
Ralph is a partner with The Brevet Group, and for 20 years he has led sales performance teams in the United States and Asia. Recently he also served as a sales leader in both the media and technology industries. Ralph’s work has focused on a unique blend of management consulting and sales enablement to help companies execute their sales strategies. Prior to this role, Ralph was the APAC sales effectiveness leader at Mercer.