Mature building products manufacturer had a gone through a sustained period of stagnant sales. Recent business reevaluation resulted in a decrease in the breath of the product line. Go-forward market strategy had been revised to focus on sustainable profitable growth. The current sales compensation plan was designed to reward solely for top-line growth; whereas, the desire was for a redesign of the sales incentive plans to reward for a multiple of performance metrics.
We worked closely with Sales Leadership to identify possible performance measurements of profitability. Further, we work with the financial reporting team to assure the organization’s ability to track and measure the desired performance metrics. We redesigned the sales incentive plans that 1) modified top-line sales measures to include minimum levels of performance versus quota, and 2) included a second performance element that represented margin dollars achieved. With the addition of the new metrics into the sales incentive plans, we performed detailed financial modeling in order to quantify the risk liability.
During the first year under the revised plan, a considerable effort went into continuing education of the sales organization in order to communicate the different profitability of the different product offerings. The second year under the redesign, the organization achieved their top-line sales forecast and was very close to their profitability goals.