(847) 236-1208

Sales Compensation Implications in Mergers and Acquisitions

April 23, 2019  |   Compensation,Uncategorized   |     |   Comments Off on Sales Compensation Implications in Mergers and Acquisitions

BCR.jpgMergers and acquisitions (M&A) come with a lot of questions and uncertainty. Two different approaches to manage sales compensation in terms of design and execution, not to mention different CRMs and ERPs…yes, this won’t be easy. It’s a daunting task to think about how you’re going to figure out the best way to manage sales compensation going forward. Do you keep everything the same for the legacy companies? Do you align to one sales compensation strategy and execution process and if so, when is the right time to align? Here are a few key areas to consider as you begin your journey:

Sales Compensation Philosophy

It’s a good idea to develop the sales compensation philosophy for your newly formed organization soon after the new organization is formed. Many questions will arise from the sales organization and it helps to have alignment among the leadership team to help inform how each scenario will be addressed. It’s also a good idea to create a sales compensation committee made up of a cross-functional team of HR, Finance, and Sales Operations to assist with the design of the sales compensation plan and review all exception requests.

Sales Compensation Plan Design

Well-designed compensation plans include elements that have been carefully planned for a company’s culture and goals. Combining two companies and attempting to integrate sales compensation plans adds confusion and complexity. A substantial amount of planning will need to occur to ensure a smooth transition. So, how do you successfully navigate this process when going through a merger? And during which phase of the merger should the new sales compensation plans be implemented?

You will need to start with the design of the sales organization and specific roles needed for the new combined organization. It’s usually a good idea to keep existing sales compensation plans in place until this phase is completed. Conducting a thorough review of both company’s sales compensation plans that includes an analysis of the effectiveness of each sales compensation plan will help inform the sales compensation design process. Also, we suggest taking an inventory of what approaches have worked and haven’t worked in the past. Then use this information to help decide which parts of each plan will stay, and which parts will be removed. Sometimes it will make more sense to scrap all previous plans and start over with a new design that aligns better with the newly merged company’s vision and goals. No matter what is decided, it’s important to start designing your new sales compensation roles and structures early on in the M&A process.

Communication

Not much time will pass before your sales team will question their future. The two main areas of concern:
1. How secure is their current role?
2. Will there be any changes to their sales compensation plan?

Ambiguity regarding these topics can impact productivity and morale. Regular and transparent communication to the sales team leads itself to increased productivity. In the absence of clear communication, your sales teams will often assume the worst, which could lead to losing your sales talent.

Compensation Technology

Don’t forget about managing the process to determine the best solution to track and calculate your sales compensation payouts. One of the most important considerations during a merger is what to do with your existing incentive compensation technology (or technologies). Which technology should you use to facilitate the automation of your revised and combined compensation plans?

Contact Us

BCR has a great deal of experience in working on sales compensation matters specific to mergers and acquisitions. Successful sales compensation integration often leads to achieving improved results. Reach out to us and we can discuss how we can assist your organization with the do’s and don’ts that lead to a successful transition.

Written by: Erik Berman, BCR Consultant

BCR is a local, minority-owned firm with more than 25 years experience in serving non-profit, public, and privately held entities in the key areas of Benefits and Compensation Consulting, Performance Management, Human Resource Organization Development, and Human Resource Information Systems and Processes.

Share this post with your network…

Comments

comments