2761_Incentive_Evolution_in_Key_Account_Selling_Blog_ImageRecently, I was talking with a financial services leader about how his company’s large account sales process has evolved over the years. Among other things, his company sells investment and financial service offerings, such as U.S.-based 401(k) record-keeping, to very large companies where the buyer might be making a decision on behalf of tens of thousands of employees.

The short version of his story is as follows: A decade ago, sales were mostly driven by a key account sales executive who sourced the deal, had final say on the pricing and deal structure, and was likely the most influential person at the table during the final presentation when the buyer evaluated various bids. Since that time, buyers have become much more sophisticated and have hired consultants to advise them on choices. The offering has also grown in sophistication to the point where no single individual can represent it fully. So today, the buying decisions involve a multitude of stakeholders, and the sales accountability falls to an equally large group.

I sketched out an illustration of what this transition might look like from the perspective of the financial services firm:

table


This is hypothetical, but it nicely illustrates the evolution my client was describing. Now the interesting fact about this evolution is that while the sales contributions changed dramatically, the compensation plan has not changed at all in the past decade. In particular, the key account sales lead is the only individual who’s measured and paid directly on the sales outcome. All the other roles are on a version of the company’s corporate compensation plan, which, in theory, could recognize contributions to sales outcomes but in practice rarely does.


To gather some perspective on the compensation evolution (or lack thereof), I spoke with my colleague Chad Albrecht, who leads our incentive compensation practice at ZS.

Jason Brown: Chad, how common is this scenario?

Chad Albrecht: Key account selling is common in many industries, including financial services, as you have pointed out. Companies are getting larger and more diverse (both buyers and sellers), and as a result, the process of business-to-business selling—versus one-to-one selling—has become more complex, with many people involved. This typically requires multiple roles working in tandem to sell to another business: an account lead, product specialists, customer support and potentially other roles, depending on the industry. So, in short, it’s very common.

JB: How do you think about who should be paid on a sales incentive plan in the above scenario?

CA: In traditional sales compensation, we say that a role should spend at least half of the time selling to be on a sales compensation plan. And by selling, we mean interacting with customers and influencing the sale. Otherwise, they are on a management or corporate bonus plan. While all of the roles you mention influence the sale, only the key account sales lead spends more than half their time on pure selling activities, which is why the incentive model has largely stayed the same.

JB: What about the other roles, those not on incentives? How should they be recognized and rewarded?

CA: In your example, roles other than the key account sales lead have traditionally been on a management bonus plan. But as those roles continue to increase in importance, perhaps a case can be made to place them on a sales incentive plan or a hybrid plan that’s partially sales compensation, partially management bonus.

JB: For this particular client, there’s a feeling that the key account salespeople are unfairly advantaged—that they are being fully rewarded for something that they only partly drive. How would you respond to that, and how would you address those hard feelings?

CA: Perhaps there’s a way to better align incentives as I mentioned before. This could involve putting more of the non-salespeople on a sales-incentive-like plan or a hybrid plan: meaning, if their corporate bonus was targeted to pay 20% of salary, carving 10% of salary out of that plan and structuring it more like a sales compensation plan, while keeping a 10% corporate bonus. The final solution could also involve lowering the leverage of the key account sales lead and either putting less of their pay at risk, lowering the upside/downside of the plan, or both.

JB: You mentioned that this scenario is increasingly common, but that many companies haven’t addressed it through compensation. Why not? And how should they tackle it?

CA: The short answer is inertia. The cost of not changing has to exceed the cost of changing. As we hear more noise from the non-sales roles about their influence on the sale, if those feelings of inequity begin to lead to critical members leaving the company or becoming actively disengaged, it becomes time to get out in front of the issue.

 

As Chad suggests, there is a lot of inertia behind current key account compensation practices in financial services. That said, if the trend toward team selling continues, I expect that the need for change will overcome that inertia. And when it does, firms would do well to heed some of the advice Chad shared: Think about how much of the role is focused on selling and be willing to get creative with new approaches if the traditional model no longer fits the way your company sells to key accounts.

Topics: sales incentive plan, sales incentives, sales comp plan, sales comp design