Aligning Business Strategy and Sales Rewards

CEOs’ contact with the nitty-gritty operations of the field sales force is usually minimal, mostly limited to cashing the big annual bonus checks they receive thanks to those front line salespeople’s hard work. But as a recent article published by the CEO Forum Group (www.ceoforum.com.au) points out, it’s the CEO’s responsibility to understand the dynamics of the business and to drive strategies that will produce bottom-line results. According to the article’s authors, HR experts David Heazlett and Keith Briscoe, one critical element of this task involves taking responsibility to make sure sales rewards are aligned with sales strategy.

The authors suggest that at high performing companies the sales rewards programs typically meet six basic criteria:

1. They reinforce and drive behaviors that help meet management’s overall business objectives.

2. They provide motivating, meaningful, and cost-effective rewards to the “right” people for achieving the “right” results.

3. They align with clearly articulated sales management roles, prominence, and accountabilities.

4. They align with other key sales management programs and practices and reinforce the desired culture of the sales effort.

5. They ensure plans are simple and clearly communicated, understood, and reinforced.

6. They are managed properly to meet the changing needs of the business.

The problem, Heazlett and Briscoe argue, is that at many companies sales reward plans are developed with factors other than the business strategy in mind. Some factors contributing to misaligned rewards include long-standing and unchallenged traditional company practices, poor communication from the executive suites to the front line managers, and focusing exclusively on driving raw sales numbers instead of market share or profitability.

This breakdown often begins to develop as early as the sales hiring stages, say Heazlett and Briscoe. As an example of a typical disconnect between corporate strategy and the front line sales force, the authors cite the example of a company trying to launch and grow a presence in a new market, but where the salespeople have been recruited for their customer service and account management skills. In such an environment, they say, the likelihood of a successful implementation is slim. By contrast, a company focused on profitability by improving the retention of existing accounts has a much greater chance of success with this type of sales force.

The key, then, the authors emphasize, is for companies to recruit, hire, and then reward salespeople based not on what “everyone else is doing” or “the way we’ve always done it,” but rather on factors that are genuinely aligned with what the company is currently attempting to achieve. It sounds simple, but in practice can run into countless obstacles.

So if, for example, a company’s salespeople are expected to play a more “transactional” role where sales volume is paramount, then key salesperson traits include product and pricing knowledge, persistence, and the desire for instant gratification. Such reps should be rewarded based on revenue attainment or hitting specific account targets.

By contrast, this model would not work in a more consultative sales atmosphere. A company focusing on diagnosing client problems and providing targeted advice and solutions aligned with the company’s business strategy would do better to measure performance based on account profitability and delivery of packaged solutions. The reward plan should complement this approach.

The authors underscore that as business strategy evolves, so too must the approach to recruiting and rewarding salespeople evolve. As a company shifts from, for example, a new product or solution orientation and becomes more established in the marketplace, the company’s business strategy will change and salespeople will likely need to redirect their attention from raw sales to account penetration, increasing market share, and servicing existing accounts.

To successfully navigate through all of this, Heazlett and Briscoe argue, the CEO must constantly and consistently communicate the elements of the company’s business strategy and disseminate that ideology throughout the organization. That done, he or she must also follow up with those responsible for the sales compensation plans to guarantee alignment between rewards and business strategy.