How to include Finance in sales comp planning
Sales representatives have the least confidence when Finance takes the lead on sales comp planning. Conversely, sales reps have the most confidence when Sales Leaders come up with the commission structure template.
That’s according to our “Sales Compensation Trends in 2023” survey.
We have a few hypotheses as to why, but we think the biggest cause stems from the misconception that Finance only looks out for the bottom line rather than considering what’s best for the rep.
“When the Finance team gets too involved, they tend to think about everything from just the cost perspective,” said Kevin McKeown, CRO at Beekeeper. “Comp planning usually goes sideways when someone without a sales mindset is driving the process.”
But that’s not the case here at QuotaPath.
Your comp design process starts with Sales.
Ryan and Jonathan both suggested inviting Finance into the conversation after Sales puts together a proposal.
“I prefer when Sales comes to us with options and pre-proposals,” Ryan said. “I don’t like starting from scratch. If you can come to me with some concepts that you think will motivate the team, then we can determine if it will break the bottom line.”
Bringing options and a blueprint gives Finance enough of a baseline to begin pressure testing different outcomes and edge cases.
For example, a VP of Sales presents Finance with an Account Manager compensation plan built to drive upsells and retention. However, the plan includes an upsell quota and retention target tied to net revenue retention.
See the issue?
There’s an overlap with a “double dipping” of earnings since the rep would get paid on upsells and again via net revenue retention, which has upsells included.
“In that case, I’d recommend changing net revenue retention to gross revenue retention,” Ryan said.
In doing so, this addresses what the business aims to solve for — more upsells and retention — without paying an AM twice for the same thing.
Secondly, leave it to Sales to collect Feedback.
Rep feedback plays a critical role in compensation plan design, but it’s on the Sales leaders to gather it from the reps — not Finance.
This will allow you to get a sense of how other reps perceive it or take advantage of it before you bring the proposal to Finance.
“Ask them, ‘if we made this change, how would you react?’” said Pablo Dominguez, Operating Partner, Sales and Customer Success at Insight Partners. “Your best reps always want what’s best for the company and themselves, so they’ll usually be honest and help you understand if the plan changes will resonate with the team.”
We recently went through this process here at QuotaPath.
After spinning up our first Business Development team and corresponding BDR/SDR compensation plan, we asked our rep about her compensation plan, which pays her out on demos set.
She shared that she’d also like to be incentivized by demos that go on to close with the sales rep. This introduces a quality component and encourages setting demos with higher chances of closing.
“We’ll take that feedback,” Ryan said. “We want to excite and motivate our reps, and we want a plan to incentivize our aligned interest.”
To help find a plan for 2023, check out our plan modeler, Compensation Hub
About Compensation Hub
QuotaPath’s newest free resource, Compensation Hub, invites Sales, RevOps, and Finance leaders to discover, compare, customize, and share compensation models. Run scenarios through 15 vetted compensation structures and strike the right balance between pay and performance.
QuotaPath provides commission tracking and sales compensation management for scaling revenue teams. With a simple UX and a highly technical backend, QuotaPath can handle even the most complex compensation plans for some of the largest sales organizations. We’re the only solution to get Sales, RevOps, and Finance all on the same page.