As a manager in our private equity practice, I frequently engage with clients who are going through an exciting growth transformation. New roles are being created and large numbers of reps need to be hired to meet the new ownership’s aggressive growth goals.
However, rapid shifts in roles and headcount increases create a slew of issues for sales and compensation leadership to consider:
- One or more selling roles may require a stronger hunting effort, causing an increase in pay and more pay at risk. (Alternatively, they split the role into separate hunters and farmers.)
- In this tight labor market, newly hired reps are likely to command significant premiums vs. the legacy sales organization’s compensation.
- Reps may be shifted among roles, as the monolithic account manager role is bifurcated into field and inside sales roles to maximize effectiveness and efficiency.
If not addressed, this situation can quickly turn into lost motivation and attrition. While there’s no silver bullet, here are a few ways to address these challenges:
- Match roles to benchmarks thoughtfully. The responsibilities associated with any title vary by organization and comp benchmark. Make sure you feel confident in the benchmark’s responsibilities relative to the designed goals of the role. Consider that the pay level and mix may need to shift for existing roles, and thought must be given to those levels relative to the new roles. Leverage two benchmark sources to ensure accuracy.
- Have a committed agreement on how to apply benchmarks. Set clear rules and fight the urge to allow exceptions (for example: “All reps will be paid +/- 20% of the midpoint of their role match’s total cash compensation”). Give raises to those who need to be brought to the floor and have some hard conversations with those who will make less. If you’ve done your benchmarking correctly, they can go elsewhere, but they can’t make more money. We usually recommend a six-month bridge to soften the blow for those affected.
- Take regional costs of living into account and tell your team that there are cost of living considerations in how the firm chooses to pay. Make sure the team knows why reps in San Francisco and New York make more than those in Topeka for the same work.
- Focus on change management. As plans change and reps move to new roles, make sure they understand how they will beat their plan in their new role and what it will be worth to them by offering example payouts, payout calculators and plan brochures. New roles and new hires mean growth, and they should be excited at this possibility if they understand the rules of the game.
Restructuring for growth doesn’t have to mean lower sales force motivation. A clear plan can go a long way in reducing some of the confusion that comes with growing pains.