Mergers and Acquisition Series Part 2: Incentive Compensation Alignment

Understanding Role Differences

In the first part of this series, we talked about the importance of role definition and how roles that are seemingly the same on the surface, but when you get right down to it, can be very different from one company to another. In order to address incentive compensation, you first need to understand the role. The temptation is to look at the plans first. What’s the same, what’s different, what do “we” like and what don’t we like… okay, I’m oversimplifying a bit. But the truth remains that most companies, when looking at plan alignment, jump right to the plans and begin to evaluate them. What is it that they are solving for when they do this? When you have the same roles on the same plan, you’ve got something that is easier to administer, it scales, and gives you a good read on performance across your team. It also gives you a better way to manage cost of sales, plan upside, and you can run plan change scenarios to see the impact on pay-to-performance. This is simpler than trying to create scenarios across multiple plan types.

A well-designed sales compensation plan is a communication tool that will let your salespeople know their priorities, and where you want them to focus. It should align well with your sales strategy and considers your company’s C-Level goals. We find these typically include at least one and up to five of these areas: financial, customer, product, role, and coverage model priorities. When you force the same plan across “seemingly similar or the same” sales roles, you can create massive confusion and not get the expected outcomes. For more on role definition, see the first blog in this series.

Let’s take a look at a model we use here at SalesGlobe, the Sales Compensation Diamond, to illustrate this in a way that’s easy to understand and demonstrates why the role (and therefore role alignment) is your starting point before beginning any plan design work.

Once you understand what the different sales roles are from each company and what each one is expected to do (this is best done by creating a role matrix), the sales leader along with her team will determine if the current role structure will meet the needs of a newly merged organization. This will ensure that you communicate the behaviors you are looking for to the right role(s), and ensure you are building a plan that will support the outcomes you expect. So- until you’ve got the sales structure that you want moving forward in place, and role calibration has taken place across the companies – don’t integrate the plans! Don’t make assumptions by title, rather dig into the roles to understand the core attributes and expectations of each one before making dramatic changes that could have dramatic consequences you did not anticipate or expect.

Achieving Plan and Role Alignment

Once the role expectations are clear, the team will want to know what the plan looks like. Remember during M&A if you are not communicating from the top what will happen, the team will make assumptions and form opinions that are rarely favorable ones. You don’t need to have all the answers. Just let them know what you know. If plan changes are coming- let them know. You don’t have to tell them what the plan designs are, but you should be able to articulate the objectives of the new design and your pay philosophy. For example, if you want to be sure your plans are competitive with the market, differentiate payout across performance levels, or that they are simple to understand and administer. Whatever your objectives are for the new plans, let the team know. Remember they will formulate their own opinions from the water cooler to the virtual chatroom if you don’t manage the message.

Getting plan and role alignment is easy once you calibrate the roles, understand differences across them and validate and build your go-forward sales structure. The reason that companies struggle with the plan alignment is because they just haven’t taken the first step of understanding the roles.

If you build a plan that aligns with the behaviors you expect, it aligns with the core job responsibilities and the outcomes that are within the control of the salesperson, and it is proven to be a plan that is fair, achievable and easy to understand- you will get the alignment, support and outcomes that you expect.

Part 3 of this series will focus on Pay Levels and Total Target Compensation.

Sales Compensation Programs and Practices Survey Results

WorldatWork, in partnership with SalesGlobe, conducted a survey to gather information on sales compensation plan structures and practices to reward for sales success and drive performance to the goals of the business. Click here and complete the form to receive your copy of the full survey results.

SalesGlobe is a leading sales effectiveness and data-driven creative problem-solving firm. We specialize in helping Global 1000 companies solve their toughest growth challenges and helping them think in new ways to develop more effective solutions in the areas of sales strategy, sales organization, sales process, sales compensation, and quotas. We wrote the books on sales innovation with The Innovative Sale, What Your CEO Needs to Know About Sales Compensation, and Quotas! Design Thinking to Solve Your Biggest Sales Challenge.