In the ever-competitive environment of today’s market, what can a COO do to build growth, drive sales and improve overall performance of the organisation? What do they do to make sure they have the best people on the bus, or are hiring the right ones, or motivating them to do their job the right way? One of the most impactful methods they can use is their ability to properly manage the organisation’s sales compensation plans. This involves everything from operationalising the plan(s), measuring the performance that they’re looking for and driving, and constantly employing iterative, incremental changes that can impact and optimise incentive plan strategy. As a COO, what should you be looking at?
Table of Contents
Operationalizing Sales Compensation Plans:
Measuring Performance:
Making Incremental Changes:
Frequently Asked Questions (FAQ):
Q1: What should COOs do to keep their sales compensation plans competitive given that the market changes so quickly?
Q2: What role does technology play in measuring the performance of sales compensation plans?
Q3: How frequently should COOs make changes to their sales compensation plans?
Operationalizing Sales Compensation Plans:
Operationalising a sales comp plan translates the strategic goals into tangible incentives that entice desired behaviours and outcomes. Here’s how the COO can operationalise their sales comp plan:
1. Driving Business Goals: First, let’s make sure that the sales compensation plan is in alignment with the greater business objectives. COOs need to work with other business partners to understand KPIs and strategic goals, such as new revenue targets, new growth in market share, or new influx of long-term contracts.
2.Achievable Goals: Once the objectives are defined, the COOs have to define the measurable metrics to achieve the objective. Each goal should be concrete (specific), within achievement (attainable), and related to a specific result (relevant). Sales revenue, customer acquisition or product penetration are good metrics.
3. Build compelling incentive structures: COOs must create structures of reward that inspire sales teams to act in the ways the business most desires, whether through monetary incentives, recognition programmes or career advancement opportunities. By better understanding the psychology of their salesforce, COOs can create incentives that make a bigger impact.
4.Communicate Well: For a sales compensation plan to work, the sales teams need to well understand the rationale behind the structure of the plan (that is, how their behaviours will align with intended outcomes) and how the firm will measure their performance. It is therefore the COO’s responsibility to communicate, update regularly and debrief carefully.
Measuring Performance:
Measuring performance of the plan ensures that the compensation plan is accomplishing the task defined for it and establishes areas that can be improved upon. This is one of my preferred methods for COO to measure performance.
1. Foundational metrics; define goals: Before beginning to change compensation structures for the sales team, it is crucial that COOs establish baseline metrics to determine current performance levels. Some KPIs to track include sales revenue, conversion rates, and customer satisfaction scores.
2. Embrace Data Analytics: COOs should use data analytics to gain insight into how the sales compensation recruitment plan is working. They need to use analytics tools to assess performance trends, identify top performers, and benchmark underperformers. On-going data analysis will give insights on the extent and pockets of non-performance in sales force performance, which could motivate taking steps to correct the under-performance trends.
3.Ask teams about it: Soliciting feedback from teams and other stakeholders is critical when it comes to understanding an organisation’s sales compensation plan. COOs should use regular surveys or feedback sessions to understand what is and isn’t working, and to identify modifications for future plan iterations.
Making Incremental Changes:
Carrying out these changes correctly is key, since designing and moving compensation plans midstream – even if it’s just as an experiment – can set off a chain of reactions. However, COOs should not hesitate to make lesser changes to move quickly and properly respond the changing market dynamics. Here are a few ways that COOs can make small but meaningful changes in their sales compensation efforts.
1)Track industry trends: COOs need to stay abreast of market trends that could influence the sales compensation plan such as competitor activity, product pricing, and industry changes. This will enable you to make tweaks to your incentives to stay competitive.
2. Measure performance regularly: By measuring performance regularly, potential issues can be identified and data-driven changes can be made to the sales compensation plan. COOs should review the plan periodically to assess its impact and effectiveness, be it through feedback received from sales teams or key stakeholders.
3.Test and Iterate: Make did recognise that with sales compensation, ‘trial and error is safe’. Peter F Drucker and Tony Myers, in Changing Seasons (1996), describe the shift to a test-and-learn approach, where aligning sales compensation with company strategy calls for a gradual and fully reverseable approach. That is, scale an incentive design down to a pilot, measuring the outcomes to see what works well, and then iterate.
Frequently Asked Questions (FAQ):
Q1: How can COOs keep their sales compensation plans from lagging behind changes in the market?
Ans: COOs can stay competitive by monitoring the market for changes, soliciting feedback from sales teams, and periodically reviewing their performance metrics. This is the preferred response, achieved by swiftly responding to market changes.
Q2: What role does technology play in measuring the performance of sales compensation plans?
Ans: Technology can help to measure the performance of sales compensation plans in real-time, by providing the necessary data analytics and performance monitoring of the implemented plans. With sales performance management software and other analytics tools, COOs can better understand the efficiency of their plans and the areas for improvement.
Q3: How often should sales incentive compensation plans be modified?
Ans: How frequently changes in sales compensation plans are required depends on external market conditions, internal organisational goals and feedback from the sales force. COOs should attempt to find the middle ground between stability and agility, making changes as necessary. This will keep the plan effective, as well as maintaining organisational continuity and consistency.
In summary, it is required to operationalise, measure performance and fine-tune sales compensation plans to yield desired results to drive business success in a highly competitive market. By adhering to these guidelines, utilising feedbacks, data analytics and technology, COOs can devise plans that encourage salespersons, motivate them, align with their business strategies and achieve sustainable growth.
