Sales odd couple – compensation and strategy

Sales Compensation + Sales Strategy

Sales compensation systems and sales strategy have long been established factors that impact sales performance.  A significant amount has been written on both topics.

There are countless books and articles on sales strategy.  Although perhaps less has been written on sales compensation, a substantial body of knowledge exists – a particularly comprehensive and insightful treatment is Compensating New Sales Roles by Colletti and Fiss.  So, in both areas we have a pretty good idea about what makes sense and what doesn’t.

Although we know if sales effectiveness is to be achieved both of these areas need to be addressed and although we know a lot about each, these two topics don’t seem to get together very often.

The Boston Consulting Group published the results of an interesting research article on this odd couple entitled Paying for Performance – Aligning Sales Compensation and Strategy. The authors noted – “Few companies had payout schemes that were aligned with company growth and profitability.  In some companies, the compensation plan had not kept current with changing drivers of success. In other companies, the plan’s original designers did not fully understand the profitability and growth potential of all their products and customer segments.”

The authors went on to point out – “If the sales reps compensation is not aligned, then the company’s sales strategy will not be implemented.” So compensation systems and sales strategy are often not aligned and it is important that they are.

This is a revenue and profitability problem.  One answer is designing specific sales training to address the dilemma.  Let’s examine some dos and don’ts for putting sales training together that will help reps see the connection between the company’s sales compensation system and the company’s sales strategy – starting with a short list of the “what not to do’s.”

  • Substituting coaching for sales training. One answer that has been tried is letting the sales managers do it.  This doesn’t work very well for several reasons ranging from the sales managers never find the time to do it – to they don’t know how to do it.
  • Using a training handout. Even if sales reps got around to reading it, which is unlikely, it is had to bring the story to life in a written document.
  • Building it into the sales compensation system introduction session. Possiblebut again unlikely particularly if you use the people that designed the compensation system to do the sales training since they may or may not know enough about the company’s sales strategy.

As is always the case it is easier to identify things that don’t work as compared to delineating ides that do.  With that thought in mind let’s describe two core ideas for designing a training program to address the alignment.

  • Explain the components. Sales reps cannot develop an understanding the alignment unless they understand the two components.  In too many cases the sales team has only a superficial knowledge base about the compensation system and a limited understanding of the company’s sales strategy.
  • Connect the dots. This should be the central objective of the sales training.  The key design consideration is to move the discussion from the conceptual to the practical.  The training needs to help sales reps see how they can optimize personal compensation and drive the initiatives in the company’s strategic plan.  Customer scenarios work particularly well for keeping the training at the practical level.

Sales reps will always over time figure out how to use a compensation system so they maximize their revenue.  The question is whether it makes sense to help them learn how to do that and achieve the company’s strategic imperatives.  Given that objective can be achieved in one day of well-designed training, the answer seems pretty straightforward.

As a final note – this discussion all assumes a well-designed compensation system.  As the BCG authors noted: “A poorly designed plan, by contrast, can unwittingly direct the sales force to focus on the wrong customers, encourage unnecessary discounting, and overpay for poor performance. It can also inhibit teamwork and discourage the sales force from taking the time to educate customers about new products.”

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©2012 Sales Horizons, LLC

About Richard Ruff

For more than 30 years Dr. Richard Ruff and Dr. Janet Spirer - the founders of Sales Horizons - have worked with the Fortune 1000 - such as UPS, Canon USA, Smith & Nephew, Boston Scientific, Owens & Minor, Textron - to design and develop sales training programs. During his career Dick has authored numerous articles related to sales effectiveness and co-authored "Managing Major Sales", a book about sales management, "Parlez-Vous Business" which helps sales people integrate the language of business into the sales process, and "Getting Partnering Right" – a research based work on the best practices for forming strategic selling alliances. Dr. Ruff received his Ph.D. in Organizational Psychology from the University of Tennessee and a B.S. from Rennsselaer Polytechnic Institute.
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