As business owners’ part of our planning for the future is typically setting targets/goals for the business to pursue in the coming year. One of those goals is typically a financial objective. Dollars to realize as a result of sales and marketing efforts. When setting these targets, a variety of things are taken into consideration such as past performance, competition, economy, product offering etc. Once these metrics have been analyzed and targets established, the various compensation plans in the organization need to be aligned to these objectives.
Too frequently the leadership gets together for their business review and planning to set objectives for the coming year and then disperse to their various parts of the organization to get back to the daily grind. The expectation is that each leader representing particular areas will translate their portion of the next year’s goals into a subset of goals and targets to meet with the company’s plan.
These plans tend to focus on very tangible pieces. Systems, processes, tasks, and any other number of elements which when collectively executed should deliver the end result. The steps to get to the outcome get a lot of attention. The people also get some attention as to where they plug into the plan of tasks and how their capabilities match up with the demands. As part of the planning process, budgets get a piece of the leadership’s time, but it is more about what is the minimum adjustments to keep the talent secured at the company.
In today’s talent demanding environment this part of the planning meeting needs additional attention. It is no longer about what is the minimum but what are the factors which will engage talent to achieve their best contribution. Financial compensation plans are one ingredient to assist in this effort. Compensation plans are generally associated to “Sales” related roles in organizations. Compensation plans need to be aligned across the organization and in some cases be multi-level and integrated. For example, there should be a component the individuals must attend to for contribution. Another portion may be team or group-based incentive while still another level is based on the company’s overall performance. This helps tie the individual’s engagement not just to satisfy their personal needs but the needs of the team and organization.
The old saying – “Nothing happens till the sale happens” is a good way to look at compensation plans. It requires a transfer of goods/services for a fee in order for a for profit business to exist. To align compensation for the sale to only part of the organization removed the understanding that each and every person in the organization is attached to the success of the sales team. Some functions are more removed such as the accounting areas but in the long run individuals in that area are as dependent on successful sales as the salesperson is. The difference is in their specific talents they inject into the company’s systems, processes, and tasks.
As we approach the end of 2023 and start to align for our success in 2024, take some time to review and make sure that your compensation plans are in fact achieving the alignment and motivation to achieve your targets. If your compensation plans are promoting one direction while your marketing is promoting another, then the gap between the two is the shortfall in financial objectives. If your sales team is not motivated or understand the plan objectives, then another gap in finances can be present. When your support segments of your organization don’t understand or appreciate let alone align with solid compensation structures then another gap in engagement starts and then the financial impact begins to show up in other parts of the business.
Having a cohesive set of targets and the talent compensation plans which enable their outcomes is critical in both growing the profitability of your business and retaining the best talent you have for the future. Looking for insights on your compensation approach? – Give JKL Associates a call at MI (313) 527-7945 or FL (407) 984-7246.
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