One solution doesn’t fit all..
The same applies in the sales compensation world. Every company has different needs and different objectives, so copying compensation programs from others jeopardises the chances of running a successful program.
This also applies with companies that are in different phase of their growth cycle. Different motivation schemes apply to a startup compared to a company at a different growth or maturity stage. Each phase has its own objectives. As we said in many instances, a sales compensation plan shall be aligned to the plans and goals of the company.
A company at a startup phase has the challenge to stand at its feet, get the first couple of clients and start being recognised. In a growth phase organic cash flow is the main objective, the brand is somewhat recognised, the company is looking to expand rapidly. At a later stage when business is matured, customers are already landed, there is a matured brand recognised in the market, people trust the company.
Goals therefore in every above scenario are different and certain management objectives are required. Therefore, what goals are also given to the sales force and the achievement requested differ in each case. While in a startup the sales focus is new acquisition of clients and likely not the contract value, in a matured company on the contrary, retaining of customers might be the most critical aspect of business.
From the different elements described above it is shown that the sales team will play a different role altogether in each case. If we carefully watch what the company needs to do to move from one phase to another, we will understand that the sales team would also need to adjust accordingly.
Even before talking about the different sales compensation in place, we should begin the different type of sales roles we need for each case. Each sales role would have different characteristics and different responsibilities. For example, in the case of a company at its growth stage, the sales role is the one that needs to hunt for new business, having specific sales targets in a specific region to perform. When a company is at its maturity stage, priority given as mentioned above to retention as well as acquisition of clients; in that case account management is also introduced as a new sales role.
What changes in every aspect of the compensation plan design
Once we have all the prerequisites solved such as having the right people and roles to support the stage of the company, then one needs to think what different elements the system needs to have according to stage the company is. Some examples of elements of the sales compensation system that differ are:
- First element is the pay mix. In a startup environment for example, sales roles cannot have a 50/50 split between fixed and variable as sales people are required to perform more things and success does not depend only on them. On the contrary in a growth stage a 50/50 or even 40/60 split between fixed and variable is more appropriate.
- Leverage can also differ. In a startup environment that the company wants to move fast, more production can be compensated even more. So, paying more aggressively after 100% of target realisation can be considered.
- Measures is also something important to consider. Measures are the KPIs or targets/goals that are asked from sales people to achieve. A goal for sales people at a growth company is different to the one in a matured one. For example, in a matured company, cross selling and upselling is important, where in growth stage this may not matter that much.
From the above three examples, one can understand that indeed one system fits all cannot apply here. Different company stage means different goals. Sales people must adopt to the current situation and their required actions must be reflected in the sales compensation plan.