Business growth and compensation: whats the connection? By Andrew J. Birol, President, Birol Growth Consulting, Inc.
By Andrew J. Birol, President, Birol Growth Consulting
If I have heard one business owner, I have heard one hundred say, "Of course my people are focused on growing my business, that's why I pay them." But can the owner really prove he is paying for growth? How can a business go about this? Here are my thoughts.
While every employee can contribute to growing the top line of a company, three groups have primary responsibility for sales: These are sales, customer service, and marketing groups. To focus their efforts and their compensation on growth, let&s use the framework of the PACER Process.
- Sales Departments find new business and grow more sales by working with prospects and customers. Sales management means moving customers through the following acquisition funnel.
To pay sales managers and staff for growth, determine which stage of the funnel is the hardest and most critical hurdle in closing new customers. Learn which activities and which sales people move the most business through this step of the funnel and compensate them the most. For example, if developing a prospect is the hardest step in the sale (because a high proportion of them naturally become closed customers), then pay your people who develop prospects more than those who close business. Or if the same people do more jobs, then pay them separately for each prospect they develop and each one they close.
- Inside Sales and Service Groups typically focus most of their efforts on keeping and growing existing customers. These groups succeed when their retention and development efforts push their customers through these respective funnels.
For example, turning a reordering buyer into a stable customer is a key step. If it takes three reorders for a buyer to become a loyal customer, pay those reps more for getting those three sales in a row. Similarly, if an inside sales rep is excellent at cross selling, compensate him or her for specific success in that area.
- Marketing Teams have an opportunity to influence all three sales funnels when they develop new markets, products, and generate awareness of the company. So compensate them on how much impact the programs and tactics they develop have on growth.
For example, a referral program that generates the needed number of new customers and sales, means incentive compensation based on actual sales can be paid to the marketing staff. Another example is in the acquisition funnel. If a program to generate inquiries from prospects is working (turning them into qualified prospects), compensate your marketing department on hitting this goal.
In conclusion, there is a direct link between compensation and growth. And it is possible to pay anyone in sales, marketing or customer service on how his or her contribution actually translates into business growth. Doing this requires hard work. The first step is to understand how the business really finds, keep, and grows its customers. This is a challenging step requiring time and objectivity not available in most companies. So it is no surprise that few companies can go on to the next step and compensate their staff for their specific roles. If more companies did this, their owners could really say, "Of course my people are focused on growing my business, that's why I pay them."
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© Copyrighted by Andrew J. Birol, President of Birol Growth Consulting, who helps owners grow their businesses by growing their Best and Highest Use ®. Andy can be reached at (412) 973-2080, by email at email@example.com, or on the web at www.andybirol.com.