Case study

Redesigning a North American automotive parts OEM’s compensation plan to incentivize revenue and profit growth

Client

Leading Canadian after-market automotive parts manufacturer.

Impact

Increased sales funnel by 20% and revenue growth of 5% in first 6 months.

Issue

The client had a fixed compensation plan that did not incentivize their sales team to grow their existing customer base or acquire new customers. Furthermore, the sales team did not have any metrics tied to project profitability, and often were negotiating deals that were well below minimum margin requirements.

Approach

We first conducted market research to understand best-in-class compensation models that addressed strategic growth goals to both grow the existing customer base (share of wallet) and acquire new customers, as well as ensure that minimum margin requirements were met for each project. We designed a variable-based compensation plan that was unique to each functional sales area. Business development teams were rewarded on sales activity and funnel metrics, as well as new customer revenue targets. Key account managers were rewarded based on key account growth targets. All sales team members were measured on project gross margin targets. We also designed a variable payout plan that was clear and actionable by the organization.

Outcome

We transformed the organization’s existing compensation plan that was a fixed salary model to a variable-based plan that was measurable and truly incentivized the appropriate sales behaviour. The sales team had clarity on how their sales effort translated into financial reward, and we saw productivity and results soar in the first 6 months.