Monday, March 31, 2008

7 Problems in Sales Compensation Management

On March 5th, Synygy hosted a live online expert panel discussion called "Ensuring Alignment of Strategy and Sales Compensation Plans: Assessing the Impact of Strategic Misalignment". I promised I would discuss about what I learned in the Webcast, so here it is at last!

Synygy identified 7 areas affecting sales compensation management:

  1. Strategic Misalignment
  2. Limited Modeling
  3. Misunderstood Plans
  4. Errors in Results
  5. Lack of Information
  6. Inability to Adapt
  7. Process Inconsistency

The focus of the Webcast was on the "Strategic Misalignment" aspect, with future Webcasts to cover the remaining six problem areas.

So what is the impact of Strategic Misalignment?

  • Poor sales force effectiveness
  • Inefficient resource use
  • Confusion
  • Low morale
  • Sales force turnover
  • Etc.

Some of the symptoms...

  • Poor line-of-sight to corporate objectives
  • Over-simplified plans
  • Top sales people underpaid or leaving
  • Increasing commission cost
  • Undesirable behaviors
  • Many contests / spiffs.

US Cellular:
US Cellular faced many of the problems above. They are the 6th largest US wireless provider with 6 million customers, 8100 associates, 32 billion dollars in annual revenues and an inventive budget of 200 million dollars.

Sales associates were dissatisfied for several reasons including targets that were too generalized, a lack of consideration to location potential, a soft sale environment, lack of accountability, inconsistent process, inconsistent quotas and inconsistent payouts.

By adopting an incentive compensation management solution, US Cellular was successful in aligning quotas with corporate goals.

The key challenges identified by US Cellular were to get a buy-in from executives, facing the 'fear of the unknown', and getting standardized data.

Some of the lessons learned include: understanding the objectives, understanding data, and getting support from executives from the very beginning.

Wyett (Pharmaceutical) has a sales force of 4000, with annual revenues of approximately 16 billion dollars.

Their old strategy involved having multiple specialists bothering the same physician. The strategy was driven from the HQ and the focus was on the market share.

The new strategy involved having an assigned specialist for a physician, and a focus on external competition instead of internal competition.

Their sales performance management solution was implemented in only 75 days and did a tremendous job at helping to better align the new strategy with objectives and improve sales force productivity and effectiveness.

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Ottawa, Ontario, Canada
Julien Dionne is a well-rounded consultant with global business management experience and outstanding technical, business and leadership skills. He earned a Bachelor of Applied Science in Software Engineering from the University of Ottawa, Canada, and he is a member of the Canadian Professional Sales Association. The views posted within this blog do not reflect the views of Julien’s current or previous employers and clients. Julien can be reached at