Sales Compensation Plan Redesign

Mature organizations should take a fresh look at sales compensation.

Over time, growth success often involves expanded offerings, new roles, more complex coverage models and a growing list of sales priorities. The long-standing incentive structure that fueled past success may not keep pace. Strategic misalignment, misplaced seller focus and an unmanageable number of plan components and variations, among others, indicate symptoms of a sales comp program gone awry. Without an updated and comprehensive assessment of sales comp effectiveness, these symptoms can spiral out of control and compromises seller productivity and growth objectives. The case study herein provides an example for how to successfully mitigate damaging symptoms by getting to the root causes and aligning the sales compensation program to growth strategy and selling roles.

Driving Seller Behavior

Alexander Group research shows that overall investment in sales roles has increased for 2022, with 75% of companies investing in sales roles. However, to realize the benefits of these investments, companies must ensure clarity in roles, responsibilities and how sellers should prioritize and spend their time.

Aligning commercial strategy to appropriate job roles is the first step in understanding seller priorities and desired  behaviors. Clearly defined roles set the stage, making it easier to set pay standards that attract and retain the right talent. Leveraged incentives allow companies to reward top performers appropriately while also directing effort towards strategic priorities such as cross-sell opportunities.

Communicating job expectations and incentive structures is essential to drive desired behaviors. Companies must develop a communication strategy to share with all appropriate roles, across all business units, so individuals understand compensation drivers.

When an organization clearly articulates and links their sales strategy to sales roles and incentives, sellers can focus on the task at hand and maximize their incentive pay – and everybody wins.

Case study: F500 Business Services Comp Plan

A F500 business services client found themselves with an outdated comp plan that did not support their complex go-to-market model. Without aligned roles and behaviors, they would not be able to reach their ambitious sales targets, leaving sellers missing the mark and disgruntled with their pay.

The organization experienced complex comp issues that included conflicting programs due to acquired sales teams, numerous business units and misaligned seller roles. By gathering information from interviews and surveys, Alexander Group compared our client’s results with our proprietary benchmarks and sales comp framework for validity.  The approach included the following steps:

1. Clarifying the pay philosophy. We confirmed our client’s strategic approach to compensation, balancing rewards for top performers while providing incentives for team-based roles. As cross-selling played a more significant role in sales strategy, compensation must reflect team contributions while still incentivizing individual performers.
2. Aligning job roles. We clarified job responsibilities across business units and aligned positions to our client’s coverage model. Once defined, the company could more easily specify job roles that supported their existing coverage model and set expectations for sellers.
3. Assessing the current sales incentive plan. We analyzed the current plans, including pay for performance, upside/leverage analysis, large deal impact analysis, alignment to company strategy and objectives and gap analysis. This analysis created a baseline to compare with revised plans while validating the existing plan’s effectiveness.
4. Highlighting unique findings. In-depth analysis revealed “ah-ha” moments about top performers, overall compensation and cross-sell performance. These findings increased the urgency to make course corrections and better align comp plans to the company’s pay philosophy and sales strategy.
5. Redesigning and approving sales incentive plans. After gaining buy-in on the comp imperatives, we collaborated with a group of cross-functional leaders in Sales, HR and Finance on plan redesign. Our revised comp plans were rigorously tested to ensure financial feasibility and alignment to growth targets and budgets. Final approval by the Steering Committee included an acknowledgment that new comp plans were much needed and would serve as a ‘big win’ for both the business and sellers.

As a result of our analysis, our client experienced better job mapping to platform roles, plan measures that better align to the focus of the roles and fewer plans for similar job types. They also streamlined comp administration due to a more straightforward plan design and fewer plans to manage for acquired sales teams. Feedback post-implementation indicates plans were well received by sellers and are successfully driving business results – another win-win!

Is It Time to Change Your Comp Plan?

Our research shows that over 85% of companies are changing their compensation plans.

Alexander Group is a leader in sales compensation solutions, using our expertise, proven framework and analytics to create comp plans that work. In addition, our experience with leading international clients helps us to develop best-in-class comp plans that drive positive sales behaviors that align with each company’s unique business objectives.

If your company is experiencing symptoms of a misaligned program, how can you be sure you are ready to change your sales compensation plan? What standards need to be in place before attempting to overhaul your program?

Does your company:

• Have a clearly articulated sales compensation philosophy and set of guiding principles?
• Include a plan to align evolving commercial strategies and emerging job roles?
• Sufficiently correlate pay and performance reward for top performers vs. team-based incentives?
• Have a simplified measurement system that includes no more than three (3) measures?
• Allow you to predict the cost of your comp program under relevant performance scenarios?

These are a few of the issues to consider when redesigning your sales compensation program.

Please contact a business services practice lead for more information on how Alexander Group can assist you with your sales compensation program.