From Managesmarter.com’s Crystal Clear Communication:
To hear Scott Glatstein tell it, as much as three quarters of American companies “do not broadly communicate their sales strategy” to their sales teams. The result, not surprisingly, is a breakdown in the sales process.
Aligning the sales compensation plan with the desired business outcome is a critical component of sales management. One constant with salespeople – they will work the compensation plan to maximize their reward. The article contains a great example:
One giant food company Glatstein worked with had lost $20 million in a year because of out-of-date products. The solution from corporate executives was to motivate sellers to avoid food spoilage by pinning 40 percent of their bonuses on keeping food fresh. But that tactic compensated salespeople for a market condition, not their work. The result? The reps sold less product to make sure no food spoiled on the shelves, and the company’s revenue dropped 20 percent in the first four months after the plan was initiated.
Ouch – talk about misaligning your comp plan with your business goals. In a previous sales management role, I worked with an older plant manager who helped me out immensely. One of the nuggets of wisdom he shared with me – whenever he had a new job come into the shop, he put his laziest machinist on it. I asked him why and he told me that the lazy machinist would find the most efficient process for making the part (he wanted to do the least amount of work).
It would appear the salespeople in the above example made the most beneficial adjustment for the revised comp plan. You can’t blame them, they simply reacted to the reward structure that was placed before them. Select Metrix will be expanding our service offering soon to assist you in this endeavor. Look for more news about this topic in the next few weeks.