SalesCompInsights

Effective Sales Compensation Starts with the Sales Role

Over the years in our work on sales compensation we’ve engaged with companies of all sizes.  One of the more instructive aspects is the way in which a small firm, as it grows, formalizes its sales roles and uses this structure as a competitive advantage.  Many firms we encounter are loose on this approach, giving salespeople the autonomy to focus where they see fit, or directing salespeople in ways that conflict with how they’re paid.

A similar issue comes when the company has no formal approach for profiling sales job roles after an acquisition.   Either the acquired job stays in its legacy plan and is “off the radar” from a governance perspective, or the job gets slotted into a plan without any formal analysis to ensure alignment.

In either case the sales compensation approach does not align with the job role.  Salespeople complain they’re being asked to focus on account development, new products or profitability while the sales compensation plan doesn’t adequately reward for these initiatives.  In addition to salespersons’ perspectives are those of sales management.  If the rank order of salesperson contribution, as perceived by sales management, doesn’t align with the ranking of salesperson earnings, then there’s a disconnect between job role and comp plan.

At core is a lack of role profiling and ensuring the compensation approach aligns with the role profile.

Components of the Role Profile

Many firms rely on a narrative job description and generic leveling matrix.  Read the descriptions for a number of different job titles and they start to all sound the same.  Problem is these descriptions lack key components of the sales role.

More thorough is a role profile that targets priorities of the job, including:

• What’s the degree of market maturity into which the salesperson selling – e.g.: mature; high-growth? 
• On what is the salesperson’s knowledge oriented – e.g.: accounts; products; technical solutions; partner relationship?  To what degree is the solution a stand-alone versus configured?
• What are the buying patterns and overall segment characteristics of the targeted customers – e.g.: sporadic; aligned with budget cycles?
• What percent of the sales time is on new versus current accounts?  What percent of current account focus is on maintaining current business?
• To what extent must the role team with other sales and support roles?
• Where is the role to focus during the sales process – e.g.: prospect; persuade; fulfill?
• What’s the length of the sales cycle?  What’s the timing of revenue recognition following the sale?

Should-be, As-is and Multi-Source Inputs

Those responsible for profiling the roles should construct a template using the factors above.  The next step is to complete a “should-be” version based on the coverage model and strategic intent for each job.  We are often asked to assess the gap between this ideal profile and how incumbents currently execute — “as-is.”   For the as-is profiling, consider multiple inputs, including incumbent surveys, management surveys and interviews, team interviews and focus groups, and observation.  The observation track can be particularly insightful. 

Long ago I spent six weeks with over 30 field sales representatives from Alliant Foodservice (later acquired by U.S. Foodservice), visiting customer accounts in territories around the U.S.   Using the templates my colleagues and I performed as-is profiling for over 100 field sales personnel, and inputs from surveys and management focus groups, we observed seven distinct profiles for a single job title.  Relative to the “should-be” profile, we assessed coverage gaps and other deficiencies – information critical to training, cross-role coordination and change management.  Typical of what we’ve observed in similar assignments, the reps were critical of their as-is execution and saw significant opportunity for refinement. However, they were not likely to start executing on a new role profile until first being heard and perceiving their input helped shape the future-state approach.

Aligning Sales Compensation

Aim to design a sales compensation plan for each unique job role.   Start with the target total cash amount.  Profiling often identifies an increase in the job’s strategic content, from where management had thought it was previously.  This shift requires an increase in base salary.  Use market pay surveys appropriate for your industry as an input for appropriate target total cash levels.

Pay mix, the proportion of target cash that is both base salary and target incentive, should align with the job’s relative influence over persuasion on deals.  Many factors for determining the appropriate mix tie directly to components of the job profile.  For example, jobs focused on more complex segments of customers tend to command higher base salaries in the pay mix.

Performance measures and pay mechanics must align with each profile as well.  Suppose the account manager role earns variable pay according to revenue quota achievement, yet the role profile indicates the job’s primary responsibility is to penetrate the account base with new products.  Therefore we’d expect the plan to include an account penetration measure, with pay mechanics geared toward the sales cycle and deal’s revenue flow.

Managers often attempt to design and apply sales compensation programs on unfocused or misdirected job roles, believing the plan will focus and guide behavior accordingly.  This puts the cart before the horse.  Formal role profiling is a critical step in the evolution of a sales organization and the foundation for sales compensation effectiveness.