Is your business all hat and no cattle? In other words, are you focusing on increasing revenue at the expense of profit?
When management start talking about increasing profitability, sales representatives start to worry. They know improving profitability usually means cutting commissions and eliminating expenses, possibly for marketing, administrative support or benefits they value. They are concerned the increased profitability will come at their expense.
But that's not the way CM Global Partners and CompensationMaster approach the situation.
CM Global Partner's CEO, David J. Cocks, has recently been interviewed by David Massover in an Ebook titled Your Front Line Sales Manager - Glorified Sales Rep or Driver of Growth.
Now you're about to close the books for the year, it's time to take a look at your results and see what changes – if any – need to be made for 2016.
Can applying a strength-based LEAN Six Sigma methodology augment and improve sales force compensation plan development? In short; YES.
Traditional LEAN Six Sigma
The traditional application of the LEAN Six Sigma method for sales force compensation begins by defining the pain, conflict, and waste in a company’s sales compensation strategy. But focusing on problems saps motivation and has negative effects on sales staff retention.
Instead of conducting a LEAN Six Sigma analysis with the hope of correcting a perceived problem and an ultimate return to the even-keel state of business mediocrity, a strength-based approach draws attention to the strengths of the company as well as the sales team, and subsequently initiates changes that encourage continuous improvement and growth of both the company and individual sales representatives.
Sales are regarded as a mysterious art where performance depends almost entirely on individual ability. Organizations tinker with compensation schemes and metrics, but never really look to solve problems or eliminate the waste in their processes.
Most sales processes are 85% PURE WASTE and add no value whatsoever to either the customer, profitability of the company, or the performance of the sales representative. The way to unlock this huge cost drain is to apply Strength Based LEAN improvements.
Too often companies are afraid of making improvements to their sales process because they do not want to stop what they are doing and start over EVEN if their processes are broken. When applying Strength Based LEAN you can identify what is being done correctly -- and build onto it.
The challenge of designing sales force compensation plans is to create an environment where sales people are motivated and a transparently business culture is created. It is vital as many obstacles as possible are removed from the process so sales people can maximize their results while ensuring the company’s greater goals are met. Those goals could include achieving profitability targets, increasing revenue, controlling expenses or recruiting and retaining a desired sales force.
From our experience spanning over 25 years, the below points are vital to enhance the process of successfully setting up LEAN to your sales force compensation plans.
You have closed the books for last year so now it's time to look at your results and see what changes, if any, need to be made for this year.
Obtain the following statistics for the past three years. If you don't already have them at your fingertips, they should be in the end-of-year information you get from your accountant:
•Sales representatives ranked by production
When compensation plans are structured correctly, it is possible to achieve all of your goals at the same time. Sales people can be paid the maximum possible while ensuring that corporate expenses are covered and profitability goals reached. Goals of the sales team and executive management can be aligned, with it being clearly in everyone’s interest to maximize revenue and control expenses.