Sales Compensation Consulting

Sales compensation is the payment a salesperson receives for their work. It usually includes a base salary, commission, and additional monetary incentives to motivate a sales representative.

Sales compensation is an important factor in motivating your sales team. This is why choosing a sales compensation model that is targeted to your sales reps’ expectations as well as aligned with your company’s goals is a number one priority if you are pursuing sales growth. 

Companies looking to improve upon their sales compensation plans often struggle to answer many of the same questions and manage the following difficulties:

• Is there an inconsistent reward strategy for the sales team?
• Does the plan align to budget?
• Do sales force incentives reward top sales performers?
• Does the sales compensation plan drive business initiatives?
• Is the sales compensation plan attainable across all roles?
• Are "windfalls" driving sales plan attainment?
• Is there higher turnover among high performers?
• Are the sales strategy and sales performance expectations misaligned?
• Does the organization have inaccurate sales performance data?
• Why do we need sales compensation plans?

These struggles are not unique but must be addressed to achieve effective sales management that supports the underlying business goals for the organization. This starts with sales departmental calibration and tightly aligning the objectives of sales management:

• Coordinate targets: Though it seems simple, we often find one of the most important first steps of a well-executed sales compensation model is to ensure sales targets align with the goals of the earning plan.
• Consistent conversations: Create a unified and consistent message with upper and middle management in the sales organization to get them "talking the talk and walking the walk" when it comes to sales compensation plans; motivate them to take advantage of the incentives offered to bolster winning behaviors.
• Equitable treatment: Effective sales management means a level playing field that includes fair and balanced incentive programs, supporting appropriate rewards for everyone.
• Maintain great talent: Keeping the best sellers at your company is a key objective for sales management. This type of talent retention comes from a well-articulated, smartly implemented, and fair sales compensation plan.

In our experience working with thousands of large, successful global companies, we've discovered that these three approaches often lead to the most effective sales compensation design:

1. Create transparency when designing sales compensation plans

• Challenge: Sales compensation plans are often too complex for the sales force to understand, resulting in excessive "shadow accounting" and payout disputes.
• Action: One of the objectives for sales management in this process is to distill down key metrics and align to business imperatives with clear "If-Then" calculations.
• Impact: By removing multiple hurdles and qualifiers, the plan becomes more readily accepted and trusted by the sales organization, reducing payout disputes while simplifying the understanding of payout calculations. Sales leaders are actually able to plan, and salespeople are clearly motivated by the easy-to-understand incentive track.

2.    Streamline sales compensation plans

• Challenge: The company has too many role-based compensation structures, leading to an excessive total number of sales compensation plans. This individualization results in complexities, delays and potential errors in administration.
• Action: Develop clear role definitions with a streamlined blueprint for sales compensation design for each grouping. The larger the sales organization, the more complex the roles within your sales compensation design. Typically, for an organization with fewer than 300 sellers, we establish 2-3 role definitions; for larger organizations, we may design a compensation plan featuring 5 or more roles. The goal is to make the plan less complex, which makes it easier for sellers to understand and for companies to administer.
• Impact: Sellers benefit from clear guidance on how they earn their compensation, and sales compensation plans become easier to administer, resulting in improved on-time performance of payouts and accuracy of disbursements.

3.    Optimize current sales compensation plans

• Challenge: Your company invested in effective sales management by creating and implementing a sales compensation plan that coordinates targets, clearly communicates goals to salespeople, achieves equity across the organization and structures your organization so it maintains the right talent. So why aren't things working? If the sales compensation plan fails to drive the desired sales behaviors, it is time to evaluate it for weaknesses and make sure it aligns to corporate objectives. Updating sales compensation plans runs a high risk--people leave when you get it wrong.
• Action: Assess compensation plans to ensure they align effectively with overall corporate strategy. Most organizations struggle with talent and messaging—as they fix these issues, it's critical to make sure that compensation aligns to these goals and drive the right behaviors. Companies also need to use the right data to feed good sales compensation design by measuring what truly drives an impact on corporate goals as part of evaluation criteria.
• Impact: Organizations improve alignment to corporate or marketing objectives by tying behavior to incentive achievements, ultimately resulting in overall performance improvements. 

Once an organization decides it wants to move forward with a new or updated sales compensation design, they must follow a three-step process to support successful adoption and utilization:

Step 1: Assessment

We begin by collecting documentation around all sales strategy, sales process, compensation plans, and verticals to establish the current objectives of sales management. By understanding your current practices, we can begin to shape recommendations for a go-forward strategy. Next, we conduct interviews with key stakeholders (leadership, sales, customers) while simultaneously reviewing past performance data to further understand the current efficacy of your sales compensation design. This often involves conducting a remuneration benchmark, a pay and performance analysis, and assessing legal requirements for the organization.

Step 2: Validation

Once the data point collection concludes, we validate all information against market trends and practices to identify opportunities for change and agree on the new objectives of sales management that will drive your sales compensation design. Through this validation process, many organizations revise their sales compensation plan to include changes such as: aligning to new roles and buyer journeys; leveraging leading and lagging KPIs that measure performance; and emphasizing that top performers in the new environment will be recognized.

Step 3: Implementation

The implementation strategy for a new or revised sales compensation plan anchors a rollout strategy that includes a clear communication plan. Key tenets of that communication address, "What's in it for me?" for the individual salesperson. To sustain change to the sales compensation plan over time, organizations will monitor key metrics, regularly solicit feedback, and modify or adjust as needed.