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Best Practices for Managing Sales Compensation during Mergers and Acquisitions

In today’s market, mergers and acquisitions are strategies for growth and have become common. No one likes change, but people have become more accustomed to it. To say that a merger or acquisition is seamless and smooth is a stretch. In reality, the process is complex, far from foolproof, and requires a tremendous amount of preparation.

During mergers and acquisitions, two sales forces come together. Both sales forces may be used to different approaches, structure, leadership style, and compensation plans. Sales leadership often shifts during restructuring as groups are combined or re-organized, creating redundant or new leadership positions.

Help your sales people deal with these challenges by uniting sales leadership, carefully evaluating the situation, and communicating effectively.

Help sales people deal with challenges during mergers and acquisitions by uniting sales leadership, evaluating the situation, and communicating effectively.

 

Along with making organizational changes, most companies also take the opportunity to re-evaluate sales compensation, to ensure it will be effective for the new sales force. Sales may resist the move to restructure compensation, citing the golden rule “if it ain’t broke, don’t fix it,” even though management knows the plan is faulty or has become outdated.

Mergers and acquisitions present an ideal time to revisit sales compensation:

  • All parts of the organization and processes are changing anyway, so the sales force may accept compensation plan changes as part of the larger disruption.
  • Even if the current plans work for the respective sales forces, there are bound to be redundancies as well as conflicts in strategies, goals, and processes.
  • The combined organization will have a new, unified sales strategy and goals, so compensation must be in alignment

1. Prepare for change

To ensure a successful evaluation process and compensation change process, here are some best practices to keep in mind:

Buy-in from sales leaders: Get sales leadership from both organizations involved. It is easier and faster to decide the scope of change and design the implementation process, when sales leadership is united.

Transparent and timeline-oriented approach: Insist on a reasonable timeline to conduct the evaluation and roll out new plans. Involve every department that has a role – HR, payroll, IT – in building the timeline, and include regular milestones. Make the timeline transparent and update it regularly.

Interim compensation strategy: Put an interim compensation strategy in place during the evaluation and compensation plan design period. The interim plan can be based on prior period averages, for example. Set up a guarantee for everyone during this interim period. Also, determine how you will reconcile the interim plan with a potential new plan, should you decide to change compensation.

Understand the vision: Start the evaluation process with a clear, shared strategic vision.  Compensation strategy must be grounded in the sales strategy. Unless both organizations are operating from the same foundation, the compensation strategy will not achieve its objectives.

Get help if you need it: To develop and implement strategies, leaders need to choose the right resources, methodologies, and experts. You may find some experts in-house, but a holistic solution may require specific expertise. Technology solutions can fill many gaps by automating processes and providing business intelligence.

Do your due diligence: The process of re-evaluation is complex and needs careful preparation and attention to detail. It entails scoping out the areas of improvement and gaps in processes, approach, tools and training – a due diligence of the comp plans and sales processes. Going through a due diligence process to assess needs and gaps will ensure that the comp plans are both relevant and effective.

2. Repeatedly communicate the changes in comp strategy

Find various mediums and ways to communicate comp plan changes to each stakeholder. It is never a good idea to spring changes on your sales team. If they are caught off guard, you will end up with a sales team that is fragmented and demotivated.

Keep communication channels accessible: It is important to keep all communication channels open at all times and keep communicating the expected changes and updated vision. It shows that the organization’s leaders are working to make the transition smooth.

Establish a feedback loop ahead of time: The best way to manage change is to know that it evolves with time, market conditions, client requirements, and feedback. Salespeople from both organizations might have relevant feedback about their comp plans. This would be a great time to record it and take some action based on it.

Manage expectations: While senior management has the whole picture, it is important to set the right expectation for each member of the sales force. When people find the new business needs and strategy sensible, the process becomes smoother.

3. Protect your top performers

The strongest reaction to change may come from the top and mid-level performers. They may feel left out of the loop and under-valued, or worse, cut off and disengaged. To hold their loyalty and confidence, sales leaders must act as a buffer to ensure that the message that reaches them is positive and encouraging.

Think ahead about training needs: It is important that the top salespeople continue to do their best without worrying about their future compensation. A good way to help them through the transition is through training, such as career development, professional coaching, team-building, managing change, and dealing with conflict.

Get them involved and keep them informed: It is the responsibility of all sales leaders to keep their top salespeople engaged and informed about the changing strategy from the start. Make sure top performers understand the gap between their current compensation plan and the new plan and discuss expectations. It ensures that your best people know that you care about their opinions and challenges.

Help them maintain the customer base: One of the biggest challenges of executing a successful merger or acquisition is to ensure that customers of the acquired organization do not feel insecure. Assuring the clients and transitioning their business requirements is everyone’s primary concern.

During a corporate restructuring, sales people find themselves under tremendous pressure. They have to achieve their existing goals, take care that their pipeline does not dry up, and retain existing clients. At the same time, they need to understand the impact of the transition and keep creating new opportunities.

Help your sales people deal with these challenges by uniting sales leadership, carefully evaluating the situation, and communicating effectively.

3 thoughts on “Best Practices for Managing Sales Compensation during Mergers and Acquisitions

  1. Pingback: Which Sales Compensation Plan is Right for You? - Blog

  2. Pingback: Best Practices for Managing Sales Compensation ...

  3. Pingback: Driving Sales Performance in the Face of Merger and Acquisition: 7 Steps for Success - Blog

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