Team selling: getting incentive

compensation right

T
By Michael B. he incentive compensation plan is one of product sales to broader solution selling and
the most important factors in determining cross-selling. These sales models can enable
Moorman
the success of team-based selling initiatives. coordinated strategy and contact, increased
managing principal
Executives pursuing team-based sales strategies cross-selling and broader customer solutions.
ZS Associates Inc.
must ensure that their compensation plan In the right situations team-based sales models
motivates effective collaboration and resource provide the role specialization and cross-line-of-
and Chad Albrecht allocation while recognizing individual business coordination required for maximum sales
associate principal contributions and managing cost of sales. They effectiveness and profitable growth. On the other
ZS Associates Inc. must also address the other critical drivers hand, when poorly designed or implemented,
of team-selling effectiveness with which the these models can result in dramatically inflated
plan is interdependent. Even the best team cost of sales, destructive conflict between team
compensation plan will be successful only when members, weakened accountability for results
sales force structure, sales process and sales and high levels of customer confusion. In essence,
force deployment are well-designed and work in while team selling can create unprecedented
concert with the plan. value for the buyer and seller, team selling can
just as easily destroy it.
In this article we share current insights on
challenges and key success factors for designing An effective incentive compensation plan is
team-based incentive compensation plans. We essential to successful team selling. However,
also provide an overview of the sales model many executives are over-reliant on their
drivers and interdependencies management must compensation plans to achieve team-selling
consider when designing and assessing plans. objectives. They assume if they get the plan
The article is derived from ZS Associates Inc.’s right, everything else will automatically fall into
experience developing place. And when their team selling fails to work,
The incentive compensation plan is more than 700 sales force
compensation plans in the
many of these same executives quickly point to
the plan as the primary source of the problem.
one of the most important factors past decade and conducting While incentive compensation matters, cost-
more than 300 sales force effective team-based selling can be achieved
in determining the success of design studies each year. only with the right combination of several other
team-based selling initiatives. It’s not just the
factors, including sales force structure, sales
processes and resource deployment strategies.
compensation plan
Since every one of these factors has a unique
Developing and role in driving successful team selling, they
implementing compensation must all be leveraged appropriately and work
plans that cost-effectively in tandem. The true power of team-oriented
motivate team selling is a sales models derives from multiple specialists
priority for many of today’s carefully collaborating to maximize value and
sales and human resources profitable sales in the right accounts, at the right
executives. Team-based time and with the right resources. The figure on
sales models have become Page 34 summarizes four critical conditions for
increasingly prevalent as successful team selling.
sales organizations have The sales force structure forms the foundation
moved from individual for effective team selling. Leadership’s challenge

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is determining how best to specialize how structure is being used to enable members. Imagine a football team that
different sales roles around specific effective team selling, many companies does not outline the role of every player
activities, products, customer types and have created an account manager role or spell out individual actions for plays.
geographies. The most effective team responsible for overall relationship The resulting disorganization would
structures break down these roles into and opportunity identification—and be similar to that experienced by some
a set of tasks at which a single person supported by product specialists who sales teams that lack a well-defined sales
can excel while simultaneously aligning then own the opportunity throughout process.
with customer-buying preferences, the remainder of the sales process. The deployment strategy dictates
enabling coordination efficiency and The objective of this structure is where and how sales resources will
ensuring clear responsibilities and to guarantee there is an individual be allocated to geographies, accounts
accountabilities. on the team, the account manager, and opportunities. Deployment is a
In too many cases, executives falsely who is focused on identifying and powerful driver of sales force return on
assume that effective compensation will coordinating cross-selling and solution investment. An optimized deployment
override any inherent ambiguities or opportunities in addition to individual strategy will allocate the right level
weaknesses in structure. In other words, product opportunities within important and type of sales resources to the right
executives expect that shared objectives accounts. In some cases structures such opportunities at the right time. In
and rewards will result in team members as this also help ensure that the sales team-selling situations, the deployment
either “finding a way to work well force pursues more difficult, large-scale strategy can be leveraged to significantly
together” or “working it out among solution opportunities besides chasing improve team coordination and shared
themselves.” Unfortunately, when roles easier, faster transactional sales. accountability. Executives can set up
are unclear or poorly conceived, the An effectively designed and multiple strategies to maximize team-
compensation plan typically cannot operationalized sales process takes the selling effectiveness. One strategy is to
make up for the dysfunction created roles conceived in structure down to dedicate a set of sales representatives
in the team. Tension regarding what is the execution level. Processes define to an account or a small number of
the right customer solution, who has and sequence the critical activities accounts. This can be a viable strategy,
decision authority and who should be the sales force must accomplish for however, only when both the value of
involved in a given opportunity often consistent success. Process metrics say the account and associated workload
leads to poor outcomes for the customer, with certainty where a customer is in justify this dedicated resource.
company and individual team members. the buying process so all team members Another deployment strategy is to
Team structure is also a more powerful can be on the same page. The process “mirror” territories of reps who then work
lever than sales compensation for also specifies the salespeople involved together as a team. Mirroring creates a
controlling sales effort allocation and in each activity and defines the nature group of accounts or a geography that a
focus. Creating roles that have a specific of their involvement. Not having a clear small number of salespeople in different
set of responsibilities ensures that process that team members understand roles jointly own. For instance, this could
individuals clearly understand and own and adopt often results in conflicting, mean one-to-one territory alignments
the accountability for their part in the counterproductive actions from between two reps or three-to-one
sales process. Conversely,
while compensation
plans can be weighted Critical conditions for team selling and primary drivers
to influence the degree
of attention one pays to
a given task, salespeople Critical conditions Primary drivers Consequences when insufficient
will ultimately spend
Clear and effective roles, responsibilities, • S tructure • U nrealistic expectations of certain roles, role
their time in a way that
accountabilities and authorities • S ales process confusion, destructive team conflict
helps maximize their
individual earnings. Efficient coordination requirements • S tructure • Too many coordination requirements, high
When effort allocation • S ales process complexity, lost sales efficiency
control is left to the •D  eployment
plan alone, salesperson Ability to optimize sales resource allocation • S tructure • P oor market coverage, too many or few
decisions often do not •D  eployment resources allocated against critical
align with the company’s • Incentives opportunities
objectives. Motivation to collaborate • Incentives • Individual rejection of the strategy, internal
As an example of team conflict, customer frustration

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alignments in which three salespeople salespeople involved in a deal and their and financial implications of alternative
with identical roles are aligned with the relative contributions are easy to define. compensation approaches. Designing a
territory of a fourth salesperson who has However, when these conditions do not team-based incentive plan also comes
a distinct role. Mirroring can increase exist, the plans can lead to team members with other challenges. To begin with,
team efficiency and effectiveness by “piling on” to deals and arguing about the very nature of team selling makes
reducing the number of people with respective shares of the winnings. This measuring and rewarding individual
whom a given salesperson must develop results in diminished sales effectiveness contributions difficult. Different team
relationships and coordinate. and efficiency. Furthermore, as with roles may warrant significantly different
Dedicated account team and account-level goals, when there are pay levels. The incentive plan needs to
mirroring strategies also can foster a many accounts and deals, commission- maintain cost-of-sales requirements. It
more effective compensation strategy. based plans can be highly complicated must represent the concerns of different
Incentive compensation is most powerful to administer. lines of business and make certain that
when tied to performance measures that sales activities and solutions guard the
The role of compensation
can be strongly felt at the individual interest of both the supplier and customer.
level. An incentive plan that pays out Sales force structure, sales process and Additional challenges heightened during
upon achieving a dedicated or mirrored deployment decisions have a dramatic compensation plan design for teams
account team’s performance goal, for impact on team-selling success. These include the following:
example, has far greater motivational determinations must be made before • Freeloader concern: Team incentives
impact than a plan that pays out designing the compensation plan. Only can sometimes allow one or more
against an entire district’s or region’s in this way can the plan be made to align members to unfairly ride on the
performance. In the first instance the with each individual’s role and provide
backs of teammates and receive
team can strongly affect the outcome, adequate motivation for the behaviors,
incentives without making necessary
while in the second much of the outcome activities and effort allocations defined
contributions to the team’s success.
is beyond the team’s control. by the sales strategy. Once the optimal
There also is a risk that the lack of
sales model has been determined, the
When companies can neither assign output by one member will hurt
development of an effective plan is
dedicated teams nor mirror territories, the team’s overall performance and
essential to effective team selling.
things become more complicated. earned incentives.
Ensuring that incentives are tied to Sales force incentives play a big role
• Local/global conflict: The objectives
measures that a given set of salespeople in reinforcing what is important, setting
of business lines, product teams and
actually drive is difficult when team a clear target for achievement and
geographic business units are often
members share only some accounts or continuously providing both motivation
not aligned with one another. Varying
geographies and any given salesperson and rewards for high levels of effort,
priorities can create destructive
is a member of many different teams. desired behaviors and outcomes. Like
conflict for team members as
Some organizations have attempted to most of us, salespeople will focus on
they attempt to balance different
overcome this complication by creating the activities that maximize their
constituents’ interests with their own.
account-level goals and paying the set rewards. Team compensation plans are
of salespeople who collectively own headed in the right direction if they • Import/export disparity: When one
that account based on its performance. create win-win scenarios for all team sales role has substantially more
Compensation plan administration members, ensure the best solutions for opportunity to assist another, there
can be difficult in this situation. This the customer and motivate the focus can be an imbalance in the mutual
approach also is fraught with the and behaviors sought by the supplier. benefit of the relationship. Likewise,
danger that certain team members will Conversely, compensation plans that when the average deal size of one
disengage from accounts and teams put a salesperson’s interests at odds role’s products is significantly larger,
that don’t represent the majority of the with those of his team members, the you run the risk that the smaller deal’s
members’ personal earning opportunities. customer or the supplier are destined to products will not receive necessary
This is true even when those accounts underperform. Similarly, a plan that is attention from the team.
are important to the company and its hard to understand, that is not focused • Earning disparities: Individual pay
earning goals. on measures the sales team affects and levels, including incentive pay, are
that does not provide an adequate
Commission-based plans are another usually established by comparing
effort-versus-return ratio will also fail to
option frequently employed when each role to the market and providing
achieve the supplier’s objectives.
dedicated teams or mirroring are not competitive pay for that role. This
feasible. These plans can work well An effective team-based compensation can result in very different incentive
when there are a small number of plan takes into account both the behavioral payouts for roles within the same team.

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 In some cases these compensation 1. A
 nticipate compensation issues and 8. C
 arefully model and simulate financial
level differences can strain member feasibility during sales force structure, payouts of plans under consideration.
relationships. sales process and deployment design. At the end of the day, the plan needs
• Stacking: Many constituents may All these elements must work together each role to hit target payouts at
try to claim a piece of the pie when as a system to enable effective outlined performance levels with an
payouts are determined on a per- teaming. appropriate upside and downside
deal basis. This can cause either a 2. I dentify no more than three priorities based on performance relative to
high cost of sale or the sharing of a to reward through the compensation expectations.
fixed payout with people who did plan. Including more will typically 9. A
 lign incentives all the way to the
not contribute much to the deal. It result in unnecessary complexity. top. Conflict between sales force and
might also encourage individuals to 3. E
 nsure that salespeople can directly executive incentives usually leads to
spend more time looking for deals affect the compensation measures the organization losing as a whole.
to become attached to and less time that determine payouts. Tying
driving new sales. (One company Conclusion
payouts to measures salespeople do
termed this “Siebel surfing” in not have a strong influence on has Team-based selling models can provide
reference to reps searching their negative motivational value. coordinated strategy and contact,
customer relationship management achieve greater cross-selling and deliver
system for such opportunities.) In a 4. S
 et goals at the lowest level possible.
Regional- and national-level goals better solutions to customers. While
variation on this practice, salespeople suppliers can realize great benefits from
may conspire to attach each other to rarely motivate individual salespeople
or teams. these models, companies also need
their deals so the other can receive a to account for the associated risks of
complimentary payout. inflated cost of sales, internal conflict
• Complexity: Compensation plans that Team-based selling models and customer frustration. Successful
encompass multiple products and team-based selling requires careful
business lines can become complex can provide coordinated navigation of the many compensation
since it is difficult to ensure that all strategy and contact, challenges introduced by this sales
stakeholders are – and believe they approach. No plan is perfect. When
are – supported well by the plan. It achieve greater cross- correctly designed, however, the best
is equally important to make the plans work in conjunction with well-
plan simple to understand. When the selling and deliver better designed sales force structure, sales
sales force is not clear about how
solutions to customers. processes and deployment to drive
its activities affect its incentives, it both individual and team accountability
tends to ignore the plan and do as it in a way that optimizes the alignment
sees fit. of customer, supplier and salespeople
5. C
 onsider both a team and an individual objectives.
Developing a team-based plan that component to payouts. This will help
addresses all of the above risks while ensure teamwork while continuing to
aligning with the business’s objectives reward individual success.
can be a challenge. And no one plan Managing Principal Michael B. Moorman
offers the right answer for all firms. The 6. T
 reat “pie allocation” and “commission and Associate Principal Chad Albrecht of the
override” plans with caution since consultancy ZS Associates Inc. (www.zsassociates.
correct answer is inevitably situation- com) will give presentations – including
specific and can change as the company’s they can easily lead to inflated cost about compensation – at SAMA’s 44th Annual
portfolio, customers, competitive of sales and internal bickering. These Conference in May in Dallas. Moorman can be
strategies require tightly defined reached at mike.moorman@zsassociates.com or
environment and business life cycle (312) 233-4804. Albrecht can be reached at chad.
evolve. Successfully addressing these business rules and line of sight for albrecht@zsassociates.com or (847) 492-3651.
issues requires knowledge in both the fair, equitable payouts.
Additional resources
behavioral and financial elements of 7. M
 ake sure cross-sell and solution For more information on this subject in SAMA’s
team-based compensation plan design. incentives don’t motivate product library, the editors recommend: ZS Associates
While it is beyond this article’s scope specialists to become salespeople Inc. and Strategic Account Management
to address situation-specific intricacies, Association, 2008 Survey of Strategic Account
for another product group. If they
Management Compensation Practices, May 19, 2008,
we have observed a number of universal earn significantly more for referring www.strategicaccounts.org; and Eric J. Maurer,
success factors for team compensation or selling products from another “SAM compensation in 2007: challenges and
plan design. Here is a selection of some division, they may altogether stop solutions,” Velocity®, Vol. 9, No. 3, Summer 2007,
of the most important ones: selling their own products. www.strategicaccounts.org.

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