Every fiscal year, companies spend millions of dollars ensuring that their sales departments function smoothly. Sales leaders design compensation plans, assign territories and quotas, invest in training, and, if the budget permits, review technology solutions to help make selling and other related activities easier for everyone. As the time nears for sales operations personnel to add final touches to compensation plans, territory and quota assignments, customer lists, and other reports, it’s useful to review a few of 2016’s most important lessons.
Lesson 1. Before implementing changes to your sales compensation plan, consider the effect upon your reps.
Sales compensation plans are established at the start of the year, and salespeople, having set their sights on earning the maximum commission, design their selling model and pipeline-building efforts accordingly.
When circumstances beyond the control of the organization — e.g., mergers and acquisitions, customer demand, shifts in market trends – necessitate changes to the compensation plans before the close of the fiscal year, it’s crucial to avoid undermining the sales structures your reps have built. After all, change is disruptive. And for sales reps, disruption can lead to confusion, uncertainty, and lack of faith in the very people they rely on for stability.
What doesn’t work: A shock to the system. Sudden changes to sales compensation, or to other processes, can weaken your sales team’s motivation; for some reps, it will be crippling.
As with compensation, so with quotas. It’s not unusual for sales leaders to raise the quota bar when they see that their sales teams are on track or ahead of the curve to achieve their numbers. The intention, on the part of leaders, is to ensure the team remains motivated and diligent, and to discourage reps from wandering off to graze on their successes. But no organization wins points for this type of slippery conduct.
Unforeseen change, of course, also complicates the lives of the messengers. Sales operations staff and sales leaders will inevitably spend lots of time clarifying policy questions and providing reps with the explanations they both need and deserve.
What can help: Don’t make unexpected adjustments to compensation; if changes cannot be avoided, don’t go about making them abruptly. Regardless of possible financial gains, leaders would be better off honoring the sales compensation plan they committed themselves and their reps to at the start of the year.
Scenario: Halfway into the year, an organization decided to compensate salespeople based on a flat percentage of their sales margin instead of varying it, as they had since the year’s beginning, by type of sale, product, customer or geography. An email was sent to reps announcing the change.
How it unfolded: Though sales operations reduced costs related to complex plan calculations, they had to spend a great deal of time explaining the financial benefits of the adjustment to salespeople, who initially felt both demoralized and convinced that their earnings would decrease.
The lesson: The change caused more problems than it solved. A more gradual approach would have been better received and caused less stress for the sales operations staff.
Lesson 2. Any redistribution or resizing of territories and customer accounts should be backed by solid reasoning and presented along with an execution plan.
Sales reps plan and execute a sales strategy for every fiscal year. Sales leaders keep an eye on quotas and territories to determine if resizing, redistributing, or reassigning them will bring in more revenue.
Certain scenarios do deserve a reassessment. For example, a saturated territory may benefit from the addition of a new product or a minor geographic redistribution, leading to an increase in revenue.
Similarly, a seasoned rep who has been covering a territory that’s spread across a wide area for years might thrive on a change to narrower location, while a new rep might embrace the responsibility and travel involved.
But any change brings challenges in implementation.
What doesn’t work: Heavily redistributing territories and reallocating customer accounts adds to expenses. New relationships must be formed with existing customers. Customers who have grown accustomed to working with “their” reps may resent the change to the equation. Their relationship with the company may be compromised.
What can help:
- Assess each rep’s role in the sales process and replace the lead rep with someone who is either as good or better suited.
- Base territory realignments on customers, not only reps, and assess potential when moving accounts or territories between reps.
- Reassess quotas based on an opportunity from a territory or a customer and then factor in the rep. Handle pushback from the field by identifying and publishing rules about quota relief in advance.
- Reallocate accounts gradually rather than in one fell swoop.
Scenario: An organization’s sales leaders, concerned about flat numbers and recognizing that some account executives had held the same accounts for many years, decided to redistribute accounts to increase productivity.
How it unfolded: In one territory, the organization successfully introduced a new product, but only after replacing an account executive with three product specialists. The executive was sorely missed by customers, who didn’t appreciate the lack of information. No significant increase in productivity was reported.
The lesson: Many sales reps, preoccupied with setting up their new territory, neglect to inform their customer that somebody else will be taking over. Sales leaders need to be more sensitive to their customers’ expectations and set up protocols to inform them of the change. Nothing says “we don’t care about you” like an out-of-the-blue phone call from a rep the customer has never met and who has little insight into the customer’s needs and history.
Lesson 3. When choosing a new technological tool, assess its effectiveness and identify adoption barriers in advance.
In the case of new technology, adoption challenges are always present. These may include changing the mindsets of stakeholders or decision makers, dealing with budgets constraints, or training IT staff. The effort required to overcome these hurdles and “sell” the technology internally adds unnecessary time costs and delays.
What doesn’t work: Introducing new technology without adequately teaching reps how to use it and explaining the ways in which they’ll personally benefit. Any new technology that adds one more task for reps to perform, in addition to their regular selling activities, will face resistance in adoption. Therefore, it is necessary to choose a technology enhancement that has proven its usefulness.
What can help: Set clear objectives and goals as part of the adoption process. Create a value proposition for the technology. Describe how it will help salespeople sell more effectively, easily, or faster. Continuously assess the effectiveness of the new technology to keep the competitive advantage you gain by acquiring it.
Scenario: A sales organization understood that its sales strategy was only as good as the insights gleaned from its data. To ensure that solid, clean, and up-to-date data was available for analysis, a new CRM system was introduced by the sales operations team. An announcement was sent out, underscoring the importance of correct CRM data to company objectives.
How it unfolded: The sales operations team faced a major adoption challenge because the field resented what they perceived as an additional responsibility. They feared that the data entry process would take up precious selling time. Only after leaders linked compensation to CRM did the quality of data improve and the adoption prove successful.
The lesson: Though the intentions were good, the execution was flawed. The organization eventually achieved the outcome it was looking for, but the cost of adoption shot up. Had sales leaders planned better for the possibility of a negative response, additional expenses could have been avoided.
Sales operations is all about helping sales become more effective and productive. By keeping these lessons and scenarios in mind, you can design a sales strategy that is fair as well as flexible. Though one way of doing things is never cast in stone, changing course mid-current can take a toll on everyone involved.
Aberdeen Research – Best-in-Class Approaches to SPM
Best-in-class players not only automate incentive compensation, territory and quota management, but also embrace emerging trends and technologies.