Aligning Incentive Compensation Plans with Corporate Growth Strategy

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This blog post aligns with the themes of our Growth Evaluation; an intuitive tool which allows you to quickly uncover the areas of strength and weakness in your sales & marketing organizations. Click Here to learn more or take the Growth Evaluation. 


Contributed by: David Bienstock, Principal Consultant

The first step to building a growth strategy for any organization involves taking a critical look at the following:

  1. Strategic Alignment
  2. Leadership Competencies
  3. Organizational Design
  4. Metric Adoption
  5. Addressable Market
  6. Penetration and Competition
  7. Value Proposition & Sales Messaging
  8. Pricing
  9. Sales Pipeline and Tracking
  10. Compensation Strategy

Critical weak points always present themselves during the assessment process. For example:

  • The success or failure of any growth strategy can become easily unraveled if there is a lack of strategic alignment among the key stakeholders, or if the current leadership does not have the competencies required to move the organization forward.
  • The organization has targets, but no benchmarks or capability to measure activity.
  • The organizations current value proposition is outdated and does not adequately reflect the market or the competition.

“Whether it is a service or product-based organization, SaaS, Fintech, Martech, retail, or B2B – the compensation package drives behaviour and performance.”

One important consideration that often gets lost in building a growth strategy is the compensation strategy. As our experience and knowledge informs us from a wide range of companies, it’s clear. Whether it is a service or product-based organization, SaaS, Fintech, Martech, retail, or B2B – the compensation package drives behaviour and performance.

One of the first questions we ask clients is whether compensation is a sacred cow in their organization. It’s important to have this discussion up front because the answer will indicate how serious the organization is about building a strategic growth model. On the surface it sounds like an easy answer. Of course their leadership is open to making changes in the way they compensate their employees. However, making compensation changes is a very difficult process that involves change management, strong leadership, and a willingness to lose employees who are not willing to adapt and endure.

Incentive Management

“Only 13% of organizations align their performance management and compensation programs to their growth strategy This is clearly an opportunity for improvement.”

The Hay Group report, Strategic Performance Management interviewed more than 1,600 senior decision makers in global firms across thirty countries, looking for trends and gaps in performance management. The universal driver was that business leaders are demanding higher productivity from their employees as they increase targets and the market becomes more competitive. According to the report, organizations are increasingly rethinking their historic approach to performance management as a result.

In the Journal of Compensation and Benefits, the authors of the Hay Group report identified two dimensions to performance management that are critical to building a growth strategy. The first is to ensure alignment of the model to the culture of the organization. The second dimension of performance management is “aligning the organization performance model with the downstream performance management functions of individual performance planning and goal setting, coaching and feedback processes, performance assessment and linkage to reward systems”. The findings were that only 13% of organizations align their performance management and compensation programs to their growth strategy.  This is clearly an opportunity for improvement.

Every organization we have worked with has an aspirational number in mind for growth. In order to hit that goal in the desired timeframe, the organization needs to understand their sales capabilities. Understanding the team’s sales capabilities means realizing optimum activity benchmarks, funnel waterfall, deal sizes and sales velocity. Organizations have a view to some or all of this data but most don’t have reliable data to build a growth strategy. Patience will be required to take the time to critically evaluate the currently available data, before rolling out new processes for collecting sales data over a period of time in order to validate or realize new benchmarks. Once benchmarks are set, we are able to build a compensation strategy for the organization based on a known waterfall and reasonable activity goals aligned to the growth strategy. 

Compensation Plans for Leadership

Aligning compensation strategy to growth is not just about building compensation plans for your sales team. It is also about ensuring that compensation plans for sales leadership and sales support teams (including sales operations and training) are aligned with the organizations’ growth strategy. Each layer in the sales organization should have a compensation interdependence whenever possible, so that everyone is driving towards the same goal. Managerial alignment in a sales organization vis-a-vis compensation is critical to drive an effective growth strategy.

An effective compensation plan drives performance and accelerates sales. Ensuring that your organizations compensation program from leadership down to inside sales aligns with your growth strategy is essential for driving double digit growth. As a CEO, VP Sales, CFO or Sales Manager, ask yourself a simple question… “Are your sales organization’s compensation plans truly aligned with your company’s growth strategy and are the yields based on measurable and validated benchmarks?”


DAVID BIENSTOCK

David Bienstock, Principal Consultant

David is a results driven growth leader with an exceptional track record for regularly achieving revenue goals for businesses by building and managing rigorous tactical plans to optimize their sales professionals, managers, operations, tools, alliances, partnerships, and distribution.

 

This blog post aligns with the themes of our Growth Evaluation; an intuitive tool which allows you to quickly uncover the areas of strength and weakness in your sales & marketing organizations. Click Here to learn more or take the Growth Evaluation. 

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