Let’s assume you are responsible for the economic well-being of your sales force.
You want to ensure they are paid competitively, recognized for their contributions and rewarded for sales results. Sellers want the same thing: They want to be successful, meet company objectives and be rewarded for their sales production.
Most likely, the current sales compensation program is working pretty well. However, questions have been raised about its motivational impact, competitiveness and alignment with corporate strategy. The next step is to assess the sales compensation program to ensure it rewards sellers for the right sales success. How do you accomplish that? Easy, start with the job content. Okay, oops, not so easy.
Start With Job Design
Sales compensation rewards sales outcomes. However, the definition of sales outcomes is embedded in the role of the sales job. There should be a direct link between the objectives of the job and the pay program.
Since sales compensation is an alignment tool, the pay plan must align with the requested outcomes of the seller’s job. In practice, each unique job will have its own crafted sales compensation plan. For example, what is the job role of an account manager? Grow existing revenue? Reduce buyer churn? Improve pricing/profits? Cross-sell or up-sell buyers? Increase usage? Sell to new buyers within the account? Improve terms and conditions? And potentially a half a dozen other, outcomes. Sales management defines the role of the account manager job—the job design. The compensation plan should align/reinforce the current objectives for the job.
Here is the challenge: Has sales management ensured the health of the sales job? Here are potential job design issues: evolved jobs, blended jobs, displaced jobs, corrupted jobs and overloaded jobs. A sales compensation plan built on top of job design errors will not function correctly. Misalignment between damaged sales jobs and the pay program presents a stalking weakness.
Take a look at what others do. Collect market pay data from industry and labor market competitors. This information will help confirm the target total compensation and upside earning potential for each job. Participate in surveys. Review competitiveness on an annual basis.
What about plan design benchmarks? Can you use this industry information to design the right plan? Unfortunately, while the data is informative, it’s not determinant. In fact, relying on benchmark plan design information usually leads to a dead end. Why? Each company uniquely configures its customer contact jobs. While the titles may sound alike, the actual job content and critical performance measures vary (substantially) from one company to another. Typical practices are meaningless for design adoption purposes.
Job Design Errors
Sales management does not set out to create poorly designed sales jobs. At the outset, the jobs are usually crisp, easy to understand, simple to execute and easy to measure and, thus, reward effectively. It’s the progression of time that chips away at the health of well-designed sales jobs. Let’s take a look at the practices cited earlier.
- Evolved Jobs. The most common occurrence is the evolved sales job. Consider this example: When the company hired its first salespeople, the job was to “get new customers.” Over a period of time, the success of the seller has created an embedded base of business that needs ongoing attention. The job evolved from a new account seller to an ongoing account manager, meeting existing customer needs. The pay plan needs to match the new, evolved job.
- Blended Jobs. Often, sales jobs begin with a simple sales model to call on all customers. However, soon the seller is asked to work with other types of customers, such as local outlets of major accounts, local distributors or major buying centers. When the cadence of selling becomes too varied, the seller is pulled in too many directions, often causing confusion regarding time allocation. The confusion of blended jobs cannot be solved by a sales compensation plan.
- Corrupted Sales Jobs. Another challenging condition is the corrupted sales job. A job becomes corrupted when other types of tasks invade the job content. Non-selling challenges are a good example. If the job is asked to solve service, billing, collections and shipping issues, then it is not focused on selling. Compounding this role corruption are the expanding requests from marketing, CRM staff and administrative personnel. Expect sales results to be compromised. These added requests are not (and should not be) addressed in the sales compensation plan. However, these “asks” erode the selling time and the primary role of the seller and the pay program’s objectives of sales growth.
- Displaced Jobs. When the product is new, customers are uncertain, and risks abound. Customers need salespeople to guide them. However, over a period of time, customers become product, price and service knowledgeable. With readily available web data, most customers are fully informed and prepared to make a purchase. The persuasion role of the seller has devolved to a fulfillment function. Many customers are more than eager to purchase via e-commerce, thus displacing the role of the salesperson. Salespeople belong where there is customer risk and uncertainty.
- Overloaded Jobs. Congratulations on the success of your start-up sales job. As is usually the case, the company expands its family of products, including bundled customer solutions and the addition of newly acquired adjacent offerings. Digital engagement methodologies connect sellers and buyers. More internal administrative systems arrive. More and more content is pushed to the sales team. At some point, they reach the extent of their bandwidth. Each new product set, customer type, administrative program and additive goals push the capacity of current sellers to meet all the demands of the job. The job becomes overloaded. When less than 45% of the sellers can reach all goals, take a look at what you are requesting of the sellers. The job may have reached its maximum absorption. Hint: Does your pay plan have more than three measures? If yes, it’s time to look at job content.
Sales Job Design Best Practices
Sales compensation plans work best when the jobs have mission clarity. Use these factors to ensure sales job alignment and effectiveness.
- Identify. Customers come in all sizes and flavors. Some are large; some are small. Some need specific products; others are open to alternative solutions. Some customers purchase centrally; others purchase locally. The variations continue. Effective job design begins with account segmentation—grouping accounts into like “needs” and purchasing preferences. When done correctly, numerous customer-facing jobs will be correctly aligned to the buyer populations: global accounts, national accounts, government accounts, key accounts, named accounts and territory accounts. Each job will have its own set of objectives. These objectives are the input for the sales compensation plan featuring unique performance measures.
- Enable Job Incumbents. Provide the right tools and training for the sellers. Give them reports so they can track their progress. Provide marketing collateral and qualified leads. Assign supervisors who can help develop the sellers to their full potential.
- Protect Sales Time. Sales organizations have one asset: time. In other words, the summation of seller time is the available time to locate and secure customer orders. Unfortunately, sales time is not infinite. Seller time must be protected from things other than selling, including excessive internal meetings, excessive staff requests, excessive non-selling tasks such as service and billings issues. Measure seller time. See if there are time pirates. Erect an access gate that precludes unfettered access to salespeople. Sales operations can provide this filter to ensure sellers are not diverted from their primary task of selling.
- Pick the Right Measures. Sales compensation rewards successful persuasion. Select measures sellers can influence. Avoid administrative compliance measures, corporate measures and input/activity measures. No more than three measures. Fewer is better. No measure weighted less than 15%. Avoid MBOs unless the seller needs to be assigned unique measures due to global account responsibilities.
Jobs and Sales Compensation Link
Sales compensation is an enabling program to improve sales productivity. The compensation plan needs to align with the job responsibilities. Well-designed jobs allow for clear performance measures, thus uncluttered and focused sales compensation plans.
Inventory jobs. Ensure job clarity. Confirm job effectiveness. Reconfigure the pay plan to match the improved charter of the sales jobs. Update sales compensation plans to align with contemporary and effective job designs.
David Cichelli is a revenue growth advisor for the Alexander Group. Connect with him on LinkedIn.