CPOs are now charged with greater responsibility than in years past. Contributing to the revenue plan is now expected of the HR function. Retaining A-players is just one of the levers CPOs must constantly evaluate.

A company’s most valuable assets leave at the end of each day with no obligation to return. This concept is enough to keep even the most senior Chief People Officers (CPOs) up at night. CPOs understand the correlation between sales rep retention and revenue, but what other metrics matter? In a world where unemployment is at a near 100 year low, CPOs are being charged with a greater commitment to contributing to the revenue plan. The pressure is on.

 

Download the Sales Compensation Best Practice Guide to utilize a list of sales compensation best practices, rate your organization’s current comp plan, and jump start perfecting sales compensation within your company.

 

Retention Is Just One Component of a CPO’s Revenue Contribution

 

Having a means to measure and benchmark KPIs is the best way for a CPO to proactively evaluate HR’s contribution to the revenue plan. Tracking the right metrics ensures a CPO is constantly evaluating talent, leadership, and incentives. These three areas are central to the core of revenue planning. It also informs decision making. For example: these areas can help determine whether the sales force needs to scale, or is disproportionally aligned with A/B/C players. CPOs ensure they contribute to the revenue plan by having the right sales talent, in the right roles, at the right time.

 

When Did Things Change?

 

It was not until recently that CEOs and CPOs became aligned in terms of understanding the importance of the HR function. Just a few years ago, Harvard Business Review highlighted how CEO’s ranked the HR function 8 or 9th in magnitude of importance. Fast forward to current state and we see HR involved with corporate strategy planning. Budgets are built at an incredibly granular level, with input from a CPO.

 

CPOs are now on the hook for contributing to the revenue plan and this means retaining A players. CPOs are expected to give input on employees’ ability to meet quota.  While concepts such as tenure and ramp time remain important, new metrics and processes are gaining popularity to help CPOs track their organization’s talent.

 

Levers to Track and Manipulate:

 

  • Tracking KPIs –candidate flow (pipeline), employee engagement (through surveys/interviews), and A/B/C player distribution give CPOs levers for which they can pull on to drive change. These KPIs allow a CPO to evaluate current state and report to the CEO in an effective manner. An instance of why these granular data points are important: budgets are built bottoms up, evaluating a sales force on an A/B/C scale and the probability of individuals hitting their number.

     

  • Evaluating talent regularly – my colleague Ellen Wade recently wrote on the importance of quarterly talent assessments and why. In her blog: Top Grading Your Sales Talent Should Be a Quarterly Exercise, she lays out an approach to methodically conducting QBRs which encompass: talent strategy, top-grading, and reporting. To net it out, talent strategy must provide a consistent and clearly defined path for top-performers to move up in the company. Employee engagement is critical to evaluating and retaining talent.

     

  • Retention – turnover has the most devastating impact on revenue. Ramp time for reps can range from a quarter to full year. For executives, this picture gets much worse, with ramp time being extended to 18 months. To mitigate this risk, it is key to constantly benchmark your A-Players’ compensation to market. Download the Sales Compensation Best Practice Guide to help evaluate whether or not you are following best practices. This will help you understand if you are appropriately thinking compensation through. It is also important to evaluate the effect culture impacting events have on a company – through employee surveys, interviews, etc.

     

  • Succession Planning – I recently worked with a small company, where the material portion of new and retained business came from two people. After some quick financial analysis, I discovered that these two employees accounted for 70% of annual revenue. Both of these folks were over the age of 70 and had no intentions of retiring. They refused to talk succession planning. The problem was remedied through a long and painful process of demonstrating how the company would cease to exist if anything happened to either. Succession planning needs to be a multi-year conversation and CPOs must play an instrumental role.

     

Below is an additional summary of the points discussed above, inclusive of an estimate of impact on revenue:

 

 

CPOs are now charged with greater responsibility than in years past. Contributing to the revenue plan is now expected of the HR function. Retaining A-players is just one of the levers CPOs must constantly evaluate. For a further discussion on this topic, come visit my friends and I at the studio.

 

Download the Sales Compensation Best Practice Guide to utilize a list of sales compensation best practices, rate your organization’s current comp plan, and jump start perfecting sales compensation within your company.

 

 

Additional Resources

 

For a further discussion on this topic, come visit my friends and I at SBI’s Studio. 

 

Located in Dallas, TX, our facility offers state-of-the-art meeting rooms, lounge, full-service bar, and a studio used to tape our TV shows. SBI provides the location and facilitators, all at a compelling price point.

 

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ABOUT THE AUTHOR

Geoff Schuler

Blends the classical approach to strategy with cutting edge data analytics to help clients make their number.

Geoff is an experienced management consultant with a heavy background in working directly with executive leadership to help achieve strategic outcomes. His experiences range from engaging full executive teams on corporate strategy development, to revamping compensation structures to align with firm  goals. Recently, he worked with the senior executives of a mid-size company to tailor financial assumptions, build, and present a pro forma model that depicted the impact an acquisition strategy would have on revenue and EBIDTA. The company followed the model’s guidelines as they executed on their strategy.

 

Geoff is a CPA and self-proclaimed data hound, whose demonstrated skill set includes: commercial due diligence, go-to-market strategies, market segmentation, competitive analysis, data analytics, development of M&A strategy & all related diligence, financial modeling, and compensation evaluation & restructure.

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