Background: Global food company develops company-wide sales compensation guidelines to drive consistency across siloed business units
This global food company recently created a new business unit out of restructuring. The Total Rewards COE Leader was tasked with creating company-wide sales compensation guidelines to support the new business unit and eventually all others in evolving their plan designs. The company wanted to develop and share sales compensation best practices to standardize and streamline processes in a historically siloed organization.
Given the size of the organization and the complexity resulting from multiple business units, developing a cohesive framework would be a significant undertaking. The company chose Alexander Group because of Alexander Group’s expertise in helping global organizations develop sales compensation plans that drive performance.
Approach: Platform jobs, comp framework development and application
Step 1: Align job titles to platform jobs
A platform job methodology approach can bring clarity to varying sales jobs/titles based on what the role is responsible for executing in the field – their role mandate. This approach clarifies the job expectations and guarantees that all incumbents with the same mandate are grouped together under the same platform job. Platform job assignment is becoming increasingly popular, helping leading firms improve sales performance by clarifying roles, expectations and competencies, and requires:
- Gathering information to understand job content. Assessing targeted customer segments and messaging, products and services offered, and sales coverage responsibilities, defining unique sales roles’ mandates and setting the groundwork for sales alignment.
- Determining key job attributes. Each job attribute reflects specific drivers, including customer segment focus, target offerings, sales strategy, sales process activities, deployment and management responsibility.
Alexander Group tailored this approach by creating job skill categories that included job focus (hunters, farmers and hunter/farmers), customer assignment, internal teaming, customer contact approach, scope, organization, sales support focus, selling team dynamics, management levels, channel and expertise area. These drivers laid the foundation for grouping platform jobs and created designations for each specific role.
PLATFORM JOB EXAMPLES
- A “Territory Rep – Hunter” fell into the “Direct Sales” discipline, with a “Hunter” sales process orientation. The future role deployment classification was “Territory Sales (Field).”
- An Account Manager – Hunter/Farmer” fell into the “Direct Sales” discipline, with a “Hunter/Farmer” process orientation. The future role deployment classification was “Named Accounts (Field).”
By grouping roles that perform similar duties based on specific attributes, Alexander Group created a job role framework that served as a foundation for sales compensation design. Companies can clarify their job roles by including a decision tree that further breaks down the job’s role and responsibilities, making it easier to define platform job titles.
Step 2: Develop a cohesive sales compensation framework
Effective sales compensation programs connect the company’s growth strategy with its pay philosophy using proven sales compensation design principles. For this reason, developing a cohesive sales compensation framework requires a thorough review and alignment of the following:
- Strategic goals. What are the company’s overarching strategic objectives and how do they intertwine with its revenue growth objectives? What behaviors do plans need to promote for each platform job, and which results should be rewarded?
- Pay philosophy. How competitive is the company in the labor market? What type of sales talent does it want to attract? How much pay at-risk should it offer relative to the market? How much variable pay differentiation should exist between low and high performers? How much consistency is expected across BUs and sales teams to support career movement and progression?
- Design principles. Which compensation plan design options offer appropriate alternatives for the different job platforms? What design elements should be consistent company-wide and which ones should be dictated by specific business unit or regional needs?
Alexander Group facilitated multiple design sessions with a client cross-functional design team to gain alignment in these factors and ultimately develop the client’s sales compensation framework and guidelines. The proposed guidelines established guardrails for all core plan design elements: pay level competitiveness, pay mix, leverage, metrics, payout mechanics, caps, performance periods and payout frequency. Combined, these guidelines created a framework that could serve as the foundation for the client to design consistent sales compensation plans across the entire company while still allowing for some BU and regional flexibility, where applicable.
Step 3: Apply the framework
By starting with the newly created business unit, the client could test the framework and get some early wins before rolling it out to the rest of the organization. After introducing the framework to the business unit management team, Alexander Group redesigned its sales compensation plans by:
- Slotting incumbents. In the platform job methodology, once the organization defines its platform jobs’ roles and responsibilities, it maps existing job roles to the new platform jobs. However, because job titles were not harmonized in the business unit, Alexander Group built a playbook to help managers directly slot their individual sellers to the platform jobs.
- Updating the sales compensation plans. With job roles clearly identified, the client could now update their sales compensation program to reflect clarified roles and responsibilities and drive behaviors that supported strategic objectives. Alexander Group helped the business unit management team design new sales compensation plans for all unique job roles identified in the prior step adhering to the established guardrails.
Key findings: manage complexity
During the initial assessment, Alexander Group cataloged more than 100 different compensation plans across the multiple BUs. In addition, one person determined sales compensation governance for thousands of sellers but was at a loss about approaching such complexity. The lack of a consistent approach to classifying sales roles led to the proliferation of plans across the organization. However, defining platform jobs, establishing a cohesive sales compensation plan, and applying a consistent framework for incumbents served to streamline their sales team’s efforts, driving them toward strategic objectives.
Recommendations and outcomes: “We have more in common than we thought.”
The initial business unit that spearheaded the change is progressing in its new job role alignment while setting the stage for other areas to adopt this approach. Primary perceived benefits include:
- More effective plans with increased alignment to corporate strategy and job role mandate.
- Reduced risk and administration effort due to fewer plans.
- More transparent career progression opportunities driven by harmonized roles and standardized job titles.
- Increased sense of belonging and cooperation among business unit leaders stemming from the multiple similarities identified during the project. One leader summarized it well in the project’s final approval meeting by noting, “We have more in common than we thought.”
Maximizing return on sales comp dollars
Lack of clarity on sales roles expectations, the company’s pay philosophy or plan design best practices can result in wasted compensation dollars. Alexander Group has the expertise needed to develop a global sales compensation framework that will help business units and geos design cohesive plans that truly reward performance.