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Anti-Strategy – How Sales Compensation Can Accelerate It – Part V

Anti-Strategy – How Sales Compensation Can Accelerate It – Part V

By: Jim Gitney   |     May 29, 2015

canstockphoto27397099The Group50® series on Anti-Strategy, characterizes situations wherein talented, driven and well-intentioned employees unintentionally act against their company’s best interests. Anti-Strategy often occurs when strategy is unclear or information is lacking. Is there another cause that feeds Anti-Strategy? Is it possible, to have Anti-Strategy designed into the company’s own processes or policies? Absolutely! Let’s consider how this can happen in sales compensation systems.

A few years ago I was on a 3-person team to integrate and turn around two recently merged companies. Both were losing money and market share. As I dug into their Market Effectiveness activities it became clear that two business processes were at odds with each other. Their manufacturing processes required lengthy setups and long production runs to compete, whereas their Sales incentive scheme featured low base pay with 90% of potential compensation coming from straight sales commission. Their rational and earnings-oriented Sales people were motivated by the compensation scheme to chase any order they could get—typically lots of “cats and dogs”—simply to feed their families. The typical orders they “won” were complex, small volume specialties that competitors didn’t want, completely opposite to what their plants could manufacture economically. The compensation system encouraged Sales to act in ways opposing the company’s interests and thereby deepened its profitability problems. We overhauled the sales compensation system and began the work to make their manufacturing processes more responsive and cost effective. Of course, one size does not fit all when it comes to the Sales compensation system best suited to a company’s circumstances—strategy must dictate what scheme makes most sense. E.g. a company in an emerging, high-growth potential market might offer a higher commission or added sales bonus opportunity for sales growth. A business targeting growth via innovation might increase commissions for new product sales, or a company seeking growth thru share gains might incent these at higher levels than for sustained volume. A firm looking to harvest mature business may emphasize margin improvements and spending reductions as results it rewards most. Note that incentive systems unintentionally promoting Anti-Strategy aren’t unique to the Sales function. A leading industrial products manufacturer paid production line workers a supplemental “output bonus” for achieving demanding production goals. This brand leader learned that such a system created a culture of output and service at the expense of product quality and sometimes even employee safety. The company subsequently refined the system with incentives linked to quality performance and offsetting penalties for quality problems or safety violations.

Most companies feel the effects of Anti-Strategy in one area or another. Be sure that your critical business processes and policies aren’t part of the problem. Group50® offers a series of assessments that will give you more insight to these issues. Consider doing a:

We offer a variety of operational and organizational of tools and workshops as part of our Company Physical®, as means to ensure your company’s methods and processes serve your strategy.

If you want to find out how you can eliminate Anti-Strategy in your company, you can reach us at (909) 949-9083 or send a note to info@group50.com or request more information here.

The following articles provide more insight on the impact of Anti-Strategy at the functional level.

  1. HOW CAN ANTI-STRATEGY KILL YOUR ORGANIZATION? – PART II
  2. “ANTI-STRATEGY”:  A DEATH KNELL TO THE SUPPLY CHAIN – PART III
  3. THE IMPACT OF ANTI-STRATEGY ON MARKET EFFECTIVENESS – PART IV
  4. ANTI-STRATEGY – HOW SALES COMPENSATION CAN ACCELERATE IT – PART V
  5. FROM “ANTI-STRATEGY” TO ACTIONABLE STRATEGY – PART VI
  6. ANTI-STRATEGY AND INFORMATION GAPS – PART VII
  7. “ANTI-STRATEGY” AND THE COMMUNICATION CONUNDRUM – PART VIII
  8. INOCULATING INFORMATION TECHNOLOGY AGAINST ANTI-STRATEGY – PART IX

Feel free to share this link to the Anti-Strategy series with colleagues who might find this of value to them and their organization.

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About the Author:  Jim Gitney, CEO and Founder, started Group50® Consulting in 2004 with the focus of working with companies to significantly improve their performance by leveraging peopleprocess and technology as part of developing a company’s strategic plan 5.0.  In 2013, he created Group50’s Business Hierarchy of Needs® change management framework, a fundamental strategic planning and strategic execution guide to senior leadership teams, and was granted a trademark in 2015. This framework eliminates the existence of Anti-Strategy.

Jim has held C-suite and Board positions in large and small companies (GE, Black & Decker, Sunbeam, Rain Bird, Pankl Aerospace and others) both privately and publicly held. He is considered a subject matter expert in strategic planning, strategic execution, operations, supply chain and restructuring.  He has taken best practices from around the world, worked closely with clients and other Group50® consultants to create Group50’s full suite of strategic planning and execution tools. Group50® consulting consists of consultants from every functional discipline who have spent their careers in corporate America developing strategic plans and rolling up their shirt sleeves to get it done.

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This entry was posted in Anti-Strategy, Market Effectiveness, Weekend Thought, on May 29, 2015
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