CEOs and managers may hunt for new tools and techniques to ensure their C-level messages resonate with their sales teams. But one of the most powerful tools available likely exists within your organization already. It’s the sales compensation plan, and many aren’t using it to achieve maximum results. Put simply: The sales organization goes where compensation leads. Use it to connect the corner office to the front line.
Starting with Strategy
Defining the C-Level Goals is the most important first step in success of the sales team. When the leadership group creates, updates, and modifies goals, it should consider priorities in these five areas, with modifications to fit the needs of the company:
- Customer: What or who are the right types of prospects for our business? How do we retain our current customers?
- Product: What are the products and services that should be promoted? Which are critical for cash flow and which are more important to brand strategy?
- Coverage: How should we align sales resources to specific customer segments, channels, and areas of opportunity?
- Financial: What are our priorities for revenue, profit, and market share? How will ROI be measured against our programs?
- Talent: What skills and experience do we need in our talent inventory? What do we have versus what we need to build strength and grow?
Once defined and refined, C-Level Goals serve as the foundation for all organizational plans and should be communicated in several ways.
Rather than sticking with generic sales jobs that may have always existed in your company, sales roles should be shaped by the C-Level Goals. With those priorities in mind, here’s an example of using the C-Level Goal language to clarify your priorities:
Let’s say Team A is focused on growth of strategic accounts (Customer), selling a full portfolio of services (Product), and working with reseller channels to close sales (Coverage). This organization requires roles such as major account managers, who have a broad understanding of customer business issues related to all the company’s products, plus experience with value-added resellers to originate and close deals. These major account managers likely will need an organization of sales engineers (Talent) with deep technical product knowledge to support sales. With this foundation, we can start to focus on supporting programs for each of those priority areas.
Because each company will have several C-Level Goals, multiple organizational and role decisions will be driven by these areas of focus.
Different Roles-Segment Goals
While it’s common practice to announce organizational goals or a new compensation plan once, with some short-lived follow up communications afterward, the message fades with time. But communicating C-Level Goals within the context of an ongoing program, such as sales compensation, means high-level goals are continuously within view and tied to individual and group performance.
For example, in a sales compensation program, these goals should be reflected in the performance measures and salary/incentive mix. This all should align with the company’s priorities (such as revenue, bookings, total contract value, number of new customers) in ways each sales representative can influence. The key is ensuring each sales role is tied to elements of high-level goals they can directly influence. And compensation should be reflective of those directly influenced elements. A bookings number could be important for a company. But an account manager may have control over revenue growth and retention, while an account executive may have greater control over bookings, so the different roles must have tailored support goals.
The salary/incentive mix defines the portion of total target compensation that is classified as variable pay. If C-Level Goals define new customer acquisition as important, then sales “hunter” roles with a large portion of pay at risk, or variable pay, can support that type of goal. Sales teams’ goals should add up to the organization’s goals both in dollars and measures (total revenue, retained revenue, and bookings.)
When It’s Not Used Correctly
When the sales organization is working toward goals that aren’t consistent with the company’s C-Level Goals, leadership may not be converting those goals to front-line programs. Without translating C-Level Goals to support measures the sales organization can influence, companies can expect the sales team to experience lower productivity, frustration about goal clarity, and turnover.
SalesGlobe worked with a manufacturer that runs a capital-intensive business with a great deal of property, plant, and equipment expense. Making the best use of these assets is critical to the organization’s bottom line, so C-Level Goals included focus on effective asset utilization in measures such as Economic Value Added and Product Inventory Levels. These were incorporated in the sales compensation plans for years. But the sales organization was not only underperforming, the team also had no understanding of how it could impact those measures. This led to a disconnect between company goals and front-line activities, with reps trying to do what they thought was right for the business.
Alignment = Success
The sales comp plan for the company above was redesigned, changing measures to those the sales organization could understand and affect: units sold, profitability, and days sales outstanding. For the operations teams, the original operational measures could still be used because they had a direct connection to those measures. When combined, all measures across teams then supported overall company strategy.
Under the old Economic Value Added plan, the sales team pursued varying self-determined goals and experienced low productivity. The new, clear plans with understandable pay expectations resulted in vast improvements in sales performance and morale. Compensating based on achievement of measures the sales organization could control drove performance, ultimately supporting the C-Level Goals in ways appropriate to their roles.
Continuous Evaluation Required
The sales compensation program for each role needs to incent that job’s small piece of the organization’s C-Level Goals. It should represent the behaviors controllable by that role that are needed to drive realization of company-wide goals. Check your path between the C-level and the front line: If your sales compensation plans aren’t driving actions that support leadership goals, the path and plan need to be redefined. When your sales compensation plan is aligned with your C-Level Goals, this powerful tool can enable a range of disciplines in your sales organization—from driving the sales process to attracting top talent—that ultimately will improve sales performance.
Mark Donnolo is managing partner of SalesGlobe, a leading sales innovation firm that works with Global 1000 companies and focuses on sales innovation, sales strategy, and sales performance challenges. Visit www.salesglobe.com for more information.