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.
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.
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.
Sales compensation plans work best when the jobs have mission clarity. Use these factors to ensure sales job alignment and effectiveness.
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
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©2021 The Alexander Group – All Rights Reserved – Issue No. 200721
READ ALL ISSUES:
Test Your Knowledge
You Can’t Hide From It
Getting the Mix and Leverage Right
2021 Sales Comp Hot Topic Findings
Should Salespeople Be Paid on Profits?
Sales Compensation Starts With Job Design
Sales Compensation Victims
Global Sales Compensation
Are Salespeople Coin-Operated?
2021 Sales Comp Trends Findings
Is Sales Compensation Just for Sellers?
Sales Comp: Rewarding Sales Profits
Pay Equity and Sales Compensation
2021 Sales Compensation Planning
Avoiding Common Misunderstandings
2020 Sales Comp Hot Topic Findings
What COVID-19 Found in the Shallows
Best Revenue Recovery Solutions
Save the Sales Force
Sales Dept Seek to Protect Incentive Pay
Should You Protect Sellers’ Pay?
Use the Right Measures!
Are Sales Comp Plans Industry Specific?
Careful About That Threshold
Commit to the Money Not to the Mechanics
Should You Change Your Sales Comp Plan?
Are sales comp costs variable?