Sales Compensation Blog

It is critical that you align sales plans with corporate strategy.  That's easier said than done, but following these four steps will get you thinking in the right direction.

First, the organization needs to agree on the corporate strategy that will be delivered though sales.  Is the goal to increase revenue, further penetrate the market, increase profitability, improve retention, sell long term contracts?

Some of these goals are mutually exclusive and, unfortunately, you can't have it all.  You need to ensure that the strategy doesn't compete with itself. Also, look at the number of goals.  If you try to focus on too many of them, they get diluted and the company will not achieve any of its objectives.

Next, see if the corporate strategy differs from last year's.  If the strategy will remain unchanged, did the sales plan deliver the desired results in the previous year?  If it didn't, search for the disconnect and adjust your sales plan.  Analyzing your team's performance distribution may point to the source of your problem.  ( See our post on "Building A Performance Distribution Curve On Your Sales Team". )

Once the corporate and sales strategies are defined, determine how the various job roles support the strategy.  Defining job roles goes beyond a focus on revenue numbers.  A change in strategy may lead to adding job roles to focus on developing channel partner relationships or separating new sales from renewal sales.

Lastly, look at measures within the roles. Measures are things a rep carries a quota or goal for. It is imperative that these measures align to the sales strategy.  With its visual approach, Makana's alignment view helps the plan designer ensure that the measurements support the corporate strategy and that the plans are aligned along job roles.

As you embark on the planning process for next year, it's an excellent idea to make a quick graph of your team's performance versus pay. By making this comparison, you can quickly see if you are getting what you pay for. All too often, sales plans have been designed with so much nuance that you end up paying some people or job roles more than others for the same overall benefit to the company.

In the picture below, we have a scatter graph of people at their annual performance attainment compared to their overall commission payout. You can see that some individuals are receiving $20,000 at 100% while others are getting close to $100,000. Plans that reset quotas and rate ramps too quickly - either quarterly or monthly can create this situation. Reps tend to hold their sales until the next period where they can exceed the goal.

Making the quotas annual will prevent this kind of gaming. Another possibility is that commissions are earned in an earlier period and not paid until a much later event. This scenario causes uneven release of payments and invites reps to live off their prior accomplishments instead of focusing on new business.

In both cases, you end up with a situation where reps can get higher earnings without delivering the results the company really needs.

 

Another way to look at this graph is to make the x-axis Bookings or Revenue. It can be even more obvious that you are not providing top rewards to your top performers.

If your graph reveals this kind of inequity, you will have a clear area to improve for next year.