Don't Let HR Determine Your Sales Compensation and Destiny

August 29, 2012 at 7:00 AM

If you’re allowing the HR team to drive Sales Compensation strategy and design you could be making a serious mistake. This blog is NOT about the capabilities of our HR brethren. I’m a huge fan of HR for the support, value, and role they play. This is about making sure your sales goals are clearly represented.

The VP of Sales must own the decision on who will be determining sales compensation. Get a copy of the Own Your Sales Comp Tool here.

Ask yourself this; if I had a life-threatening heart problem, would I go to my general practitioner? Of course not. I would find the best heart doctor and get the specialized treatment I needed to save my life.  Why then would you allow HR to contract with a generalist compensation company to design your sales compensation?

The VP of Sales must own the decision on who will be determining sales compensation. Why does this matter? Your ability to drive your team’s behaviors is directly linked to how the compensation plan is built. A compensation plan that misses the mark will impact your ability to Make the Number in 2013. Don’t put your fate into the hands of someone else – control your destiny.

What’s the difference between a Sales Force Effectiveness firm and an internal or general compensation consultant? There are key differences in two areas: Assessment and Design.

Sales Compensation Assessment

In our experience, compensation is typically a component of a bigger sales problem. Therefore, the way we approach compensation assessment is different than a typical Compensation Consulting Company, or your internal HR resources. Specifically we: 

  1. Conduct stakeholder interviews to understand senior leadership’s opinion of the compensation plan. Is the plan generating the desired results? Do you feel you are generating the right ROI on your sales investment?
  2. Perform DILO (Day in the Life of) meetings with sales reps.  Specifically, we observe how the Sales Representative interacts with the Customer. What level of technical ability does the customer require? What kinds of questions does the customer ask?
  3. Execute a Sales Rep Survey to understand what Sales Reps like and dislike about their compensation plan. Questions could potentially include: What motivates you about the current compensation plan? Would you like less or more variable pay? What would you like to change in your current compensation plan?  Why?
  4. Review job descriptions and match them up with our field observations.  Are the skills that are documented in the job description actually required?
  5. Conduct Benchmarking Analysis to determine how the compensation plan benchmarks to not only similar organizations, but also the organizations you recruit from and lose talent to. Benchmarks include Base Pay, Variable, On-Target-Earnings (OTE) Compensation Distribution, # of Reps hitting quota, Sales Rep Turnover Rate, Engagement Rate, Excitement Index, and many more measurements. 

This level of compensation assessment will provide your organization with a complete picture of your compensation program. It will enable you to design an updated compensation plan that will positively impact the organization.

Sales Compensation Design

Armed with the Sales Compensation Assessment, we now have the ability to make course corrections and design a plan that generates a true ROI on Sales.

In the Design phase, we take into account the following key items:

What do you need more of?
  • Is your lead generation team generating enough leads for the sales force? Are the size of your sales deals big enough? Are you launching a new product and need to ensure a certain level of market penetration in year one?
What are you willing to pay for?
  • Are we looking for new logos? Are we trying to protect the core of our business? Are we launching a new product? Do big deals matter? What skills do I need my people to develop?
How do you want to structure your sales organization moving forward?
  • What roles are my customers asking your sales people to play? Which parts of your sales organization are going to grow, contract, or remain the same in 2013 & 2014? How does this impact the number of sales reps going forward?
What does your customer want from your sales people?
  • What kind of interactions do your customers want? How frequent is the interaction? What type of interaction? (Phone, Email, In person)
How does this program mesh with the culture of your firm?
  • Does the compensation program fit in with your organization’s overall view on compensation? What is the maximum you are willing to pay a sales rep? What is the minimum you are willing to pay a sales rep? How much risk is acceptable? 

Ultimately, the difference between working with a Sales Force Effectiveness Firm and a general compensation consultant, or internal HR resource, is that you receive a complete assessment of your organization’s existing compensation program and a design that looks at your sales organization holistically.

You now have the information you need to make the right decision about who will control your Sales Compensation. Don't let someone else dictate your destiny. Download the tool featured here to get started.

Tony Albachiara

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Topics: sales strategy, VP of Sales Resources, Sales Compensation, Sales Force Effectiveness

Posted by Tony Albachiara

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