- Make progress against problems. A straightforward sales compensation program may help companies mitigate myriad issues.
- Blueprint can be beneficial. Companies with a strong sales compensation blueprint may see reduced plan leakage and a stronger alignment between seller pay and sales strategy.
- Be better prepared for change. A consistent, centralized governance program may increase companies’ ability to keep pace with change.
For companies managing through heightened merger and acquisition (M&A) activity, geographic expansion and localized decision-making autonomy — or simply accelerated growth — decentralized functions introduce an array of new challenges that may affect a company’s bottom line. The resulting mix of sales compensation programs often is both costly and difficult to manage.
A straightforward sales compensation program may help companies mitigate myriad issues. With consistent practices across the entire organization, companies will likely find it easier to establish a blueprint for the future, integrate subsequent organizational changes, provide appropriate local flexibility and improve financial performance. The following five-step approach may allow companies to rectify decentralization.
1. Document People and Practices
To understand sales compensation program effectiveness, a first step is to fully understand each role and process across the organization, especially in terms of how each relates to the current program. Documenting the current state may help to uncover potential changes or the degree to which practices should be altered. Particularly in cases where companies have multiple unique compensation programs within a single organization, capturing all information on sales roles, sales compensation plans and pay, and performance results can provide accurate visibility into the current operations.
2. Validate Each Role
Once the company understands what roles and activities are essential to the sales process, it may then confirm individual role responsibilities and objectives. Decentralized organizations often have misidentified sales roles and outdated job descriptions; therefore, it’s advantageous to validate that each role has clearly defined responsibilities, expectations and objectives.
Interview sales leaders to understand how they expect their teams to collaborate, and collect input from field sales team members to gain insight into how they execute their roles. This process should aim to identify existing or perceived gaps and determine if compensation plans align with the sales roles as those roles currently exist.
3. Group Sales Roles by Contributions and Responsibilities
When a company collects relevant information on its sales roles, it may well discover duplicative or conflicting roles that require simplification or categorization. To address this, group sales roles into common categories that reflect their contributions and responsibilities using a “job platforming” approach.
By leveraging this approach, companies can simplify the job design and sales compensation update process, as well as determine whether each unique job is appropriately categorized to improve plan alignment. Decentralized companies may find reducing the number of sales job titles and clarifying performance objectives can drive desired behaviors. At the same time, sellers are more closely tied to their job responsibilities and benefit by having clear goals that support corporate growth objectives.
4. Assess the Program for Effectiveness
Companies may begin to assess the program after collecting sufficient information on the sales process and calibrating roles. The assessment should seek to:
- Clarify the corporate growth strategy driving revenue goals
- Compare plans to sales compensation leading practices for each unique job
- Analyze the connectivity between seller performance and earnings
- Identify key opportunities for program improvement.
This assessment phase will likely help companies gain deeper insight into sales compensation plans and the associated program costs. This understanding can aid alignment with shifting regional, product or customer requirements.
5. Establish a Sales Compensation Blueprint
To maintain organizational consistency, companies can develop a sales compensation blueprint that outlines the guiding principles and guardrails across compensation design elements. By creating goalposts for local sales, HR leadership or other teams, companies can allow teams greater freedom and autonomy to design compensation plans that best align with organizational strategy and objectives. Some scenarios may require input and support from HR leadership and other stakeholders outside of the sales organization.
Leverage Strong Sales Compensation Governance
This five-step process may help companies transition from localized autonomy to organizational consistency. Building a strong sales compensation blueprint can drive increased profitability by reducing plan leakage and creating a stronger alignment between seller pay and sales strategy. Companies that develop a consistent, centralized sales compensation governance program may find they are better able to build the foundation for future sales planning and keep pace with change.
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