Transform your company with these 5 Steps to Aligning Sales Plans with Corporate Strategy
Your sales compensation plan is how you communicate your corporate strategy to your sales team. It is critical that you align these sales compensation plans with corporate strategy and if your strategy changes, so should your commission plans. Corporate strategy really doesn’t change that often but when it does, you need to align your sales compensation plans with that new strategy. That's easier said than done, but following these five steps will get you thinking in the right direction.
1. 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, introduce a new product line, etc.?
Some of these goals are mutually exclusive and, unfortunately, you can't have it all, which means you need to prioritize these goals and reward the sales organization appropriately for delivering. You also need to ensure the strategy doesn't compete with itself. How many goals do you have? If you try to focus the sales team on too many things, the focus will get diluted and the company will not achieve any of its objectives.
2. See if the corporate strategy differs from last year's or when the sales compensation plans were first created. You may have been using the same commission plans for years! If the strategy remains unchanged, did the sales plan deliver the desired results in the previous year? If it didn't, search for the disconnect between your sales plans and your corporate strategies and adjust your sales compensation plans to be aligned. Analyzing your team's performance distribution may point to the source of your problem.
3. Once the corporate and sales strategies are defined, determine how the various job roles support the strategy. Defining job roles goes beyond just 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. It is very common to need different job roles as a company grows rapidly, offers new products and services, or matures.
4. Look at measures within the roles. A measure is something a sales rep carries a quota, goal or expectation for. If you can’t measure or count it, you can’t use it in the sales compensation plan. It is imperative that these measures align to the sales strategy and you are fully transparent with your sales reps on the value and crediting rules.
5. Now it’s time to reward the sales reps for delivering the results. This is accomplished by tailoring the commission formulas with rates that relate to the importance of the measures to the company’s strategy. Remember that only one formula, the one that pays on the most strategically important measure should have an accelerated rate.