As sales leaders, we are all too familiar with the adage that compensation drives behavior.
We missed our quarterly number on new logos, or the cross-sale of the new product launch is significantly lagging expectations, or perhaps the field isn’t leveraging pre-sales resources to close more upselling opportunities…. Well then, it’s clear that we’re just not driving the right behaviors by compensating them correctly.
Defining the Problem. Symptom or Root Cause?
Many sales leaders would be hesitant to identify the specific attributable to their success, conversely the more elusive evidence tied to failures. There are many potential symptoms in the KPI data. However, correlation does not always indicate causation.
As your company evolves its corporate GTM objectives and you evolve your sales & marketing strategy in unison, refreshing the incentive compensation design is imperative if you want to hit the revenue target….
But what about territory & quota design? Is the sales org structure & design optimal? Do we have clearly defined roles and corresponding responsibilities by role?
If you’re in the right pond, you must do more than just have the right lures, bait & tackle to ‘out-fish’ your competition. The approach and methodologies you employ once your boat is over the fish is critically important to achieve, measure and sustain success.
In other words, your sales & marketing motion may be exceptional on tactical execution (doing things right) but falling short on strategic approach (doing the right things).
Sales Organization & Territory Design
To do this, let’s look beyond the compensation plan for a moment at other potential root causes through the lenses of the sales organization and territory design. No compensation plan will be able to solve a misalignment here.
Sales organization and territory design are also dependent on your capital allocations of people, money, and time. To implement the most efficient GTM strategy, you must leverage tech-enabled touch points to maximize the customer experience and limit the amount of human middleware to align only with the potential customer’s desired outcomes.
Have you truly done the homework on which of the seven (7) B2B sales organizational models best serve your current customer base and go-to-market strategy?
- Stratification: The pyramid approach where you have your key accounts at the top, your bread and butter accounts in the middle, and your small business customers at the bottom.
- Hunter/Farmer: Hunters go after new business and farmers cultivate cross-sell/up-sell of existing accounts.
- Product Specialist: This is used for complex products where the end customer values the product knowledge of the sales rep’s or pre-sales resources (SMEs) etc.
- Industry specialist: This strategy is deployed when it’s imperative for the sales person to understand the challenges of specific verticals or industries at a granular level to be successful, and the customer values that knowledge.
- Role Specialist: This is an innovative approach to sell by role. This may involve someone who sells to the CEO, someone who sells to the CIO, and someone who sells to the CFO. The benefit is you get to know the persona so well that you can be effective and relevant to that person. Deep expertise in buyer segmentation and personas is a pre-requisite for success.
- Geographic: Organized by zip code or geo map where one sales person sells all things to all customers in that area. This is a widely adopted approach and more of a traditional model.
- Hybrid: Some combination of two or more of the organization models listed above. Widely adopted by new & legacy organizations with new product launches, or a legacy organization gradually shifting models to adapt to the market.
Aligning Compensation with Territory Design
Assuming you’ve struck the right balance in terms of design above, the next question is whether your sales capacity is effectively deployed against the market opportunity, not just incentivized.
- Does your incentive compensation plan reward the territory or the sales rep (right place at the right time)?
- Are territories not realigned dynamically due to poor data and the perceived complexity of the process?
- Do you have a transition incentive plan that allows the current and future sales rep to participate in the success of the account/territory?
If you lack clarity on any of the above, then your root issues go beyond just compensation.
Show Me the Money
Old compensation concepts are both a blessing and a curse. Stick to the way you have always done things and you are sure to miss your revenue targets but over-rotate to the new concepts, and you will push talented reps out the door.
If you still believe that Comp is your sole problem child, then you can test your current compensation strategy against our Sales Comp Best Practice Tool and read more about strategic alignment here:
Too often leaders from small business to large enterprise spend a disproportionate amount of time working ‘in the business’ instead of ‘on the business’; whether the organization has 8 layers and 10 BUs or an all-hats wearing head of sales who dabbles in ops, marketing, service and support.
If you would like to participate in a custom workshop, bring your team to engage with a hand-picked team of experts in Dallas at The Studio, SBI’s executive briefing center.