In the world of sales, it’s often said that “what gets measured, gets managed.” Incentives, bonuses, and performance reviews are powerful tools for driving behavior, but misaligning these levers can have devastating effects on your sales line. Not only can poorly aligned incentives detract from brand plans and consumer experiences, but they can also steer the entire company away from its overarching strategy. At Sales Capability Forensics, we understand the critical importance of aligning commercial strategy with sales execution. Here’s how a forensic approach can help.
The Importance of Alignment
Have you aligned your behaviour drivers to your company strategy? Often, the goals that trickle down to individual or team levels are either zero-based, top-down targets or bottom-up projections from the sales team. This dichotomy—between the art of the impossible and the art of the possible—rarely aligns with the broader strategy unless you meticulously review and synchronize the drivers behind your incentives and performance management criteria.
Consider a scenario where your company aims to be the number one supplier of premium products within three years. Marketing plans to position Products A and B into the super-premium category, while sales teams focus on promoting Product C to boost volume and meet factory utilization targets. Such misalignment can derail strategic goals, highlighting the necessity for coherent strategy execution across all departments.
The Role of Output KPIs
Traditionally, sales teams are motivated by output KPIs like bonuses and commissions, which can form significant portions of their overall compensation. For bonuses to be effective, they need to be substantial enough to motivate extra effort. A 5% bonus only translates to a 3% increase after taxes, equating that to a 3% increase in effort is about 60 extra minutes in a 35-hour week. Can the target be reached with this increase in effort? Compare the reward to the effort required to achieve it.
Commissions, on the other hand, often constitute a larger part of a salesperson’s earnings and reward repeated sales efforts. However, these must be carefully structured to avoid rewarding effortless sales and instead focus on growth-driving behaviors. The key is ensuring that individuals or teams can influence the outcomes they are rewarded for.
At Sales Capability Forensics, we emphasize that the choice of output KPI is as crucial as the motivation it instills. If your strategy aims for specific in-store achievements, such as planogram compliance or chilled dispense, incentives must reflect these goals. Misaligned incentives, like focusing on cash collection or unique weekly orders, can derail your efforts to enhance the brand experience and service delivery.
Leveraging Input KPIs and Leading Indicators
Leading indicators or input KPIs are the activities that precede sales growth. For instance, if you believe placing your beer on the last tap of the T-bar increases market share, you should measure and incentivize tap relocations, not just beer sales. This approach drives the desired behavior and ensures the correct outcomes.
Measuring leading indicators provides deeper insights into why sales are performing a certain way and how growth is being achieved. It also demonstrates the competency of both individuals and the organization. By understanding whether salespeople can execute the trade marketing plan and whether the plan itself is effective, you gain a forensic diagnosis of your execution at the point of purchase. This enables better decision-making regarding your commercial effectiveness.
Conclusion
Aligning commercial strategy with sales execution requires a deep understanding of both the “how” and “why” behind sales activities. At Sales Capability Forensics, we specialize in uncovering the blocks that prevent your brand and strategy from thriving in the market. By aligning incentives and KPIs with your strategic goals, we help ensure that your commercial plans are executed effectively, driving both efficiency and effectiveness in your sales operations.