“Make no little plans; they have no magic to stir men’s blood.”
— Daniel H. Burnham
The third of three key characteristics of successful sales organizations that we have been exploring in this blog series is that they: Measure (and compensate) sales performance appropriately.
With a strategic mix of sale performance metrics, the sales enterprise can link compensation to leading and lagging indicators across the entire company, including HR, Marketing, and Finance. By clearly connecting compensation to winning behavior, these organizations drive results faster.
In my experience, three factors contribute to compensation plans that help you win in the market:
1. The Fewer Metrics You Measure, the Better
The fewer metrics you measure, the more meaningful they become, and the more time your sellers will spend directly with customers. Too many metrics have the opposite effect. They prevent the right sales behavior in two ways:
- Sellers will spend less time with customers and more admin time ensuring their “scorecard” looks good to upper management. This isn’t productive behavior that leads wins market share or increases customer loyalty.
- More internal staff positions will be created to manage the internal scorecard. These resources are better allocated to direct customer engagement, which is needed to win.
2. Measure Both Leading and Lagging Indicators
Most companies only measure lagging indicators, such as quota achievement, win rate and customer satisfaction. These are important outcomes and should be measured. However, in addition to lagging indicators, top-performing companies measure leading indicators. In sales, leading indicators include behaviors such as:
- Sales manager’s ability to coach a sales methodology
- Seller’s ability to complete a meaningful sales plan, including relationship mapping and competitive strategy
3) Integrate Leading Indicators Across Sales, Marketing, Finance and HR That Link to Non-revenue Based Bonuses
A few examples of such leading indicators may include:
- Sales: Seller’s ability to complete quality sales plans
- Marketing: Marketer’s ability to supply sales team with relevant industry value messaging, that the seller can customize to specific customers
- HR: HR’s team use of behavior-based interview techniques to hire new sellers based on identified leading indicators
- Finance: Link bid and proposal funding to established qualification criteria in the sales methodology that justifies the cost of a sales pursuit.
Our top performing clients include at least two parts to their sales compensation plans:
- Revenue Based Commission: This is based on attained lagging indicators, such as quota achievement, win rate, account growth, and customer satisfaction.
- Corporate Based Commission: This is a meaningful bonus based on achieving a few powerful leading indicators, such as sales plan completion and deal review coaching.
Similarly, the Marketing, HR, and Finance teams are compensated in part on their ability to deliver leading indicators that advance the sales methodology.
Ryan Kubacki is President of Holden International, a global sales training and advisory firm. He is also co-author of The New Power Base Selling: Master the Politics, Create Unexpected Value & Higher Margins, and Outsmart the Competition. Pre-order your copy.