QuotaPath’s Kelly O’Halloran hosts panelists Pablo Dominguez, Operating Partner, Sales and Customer Success at Insight Partners, Celine Grey, Sales Enablement Director, Normative.io, and Applecart’s VP of Finance Sergey Golosinskiy.
- Identify where the disconnect between Finance, RevOps, and Sales Leadership occurs
- Explore the challenges faced by organizations during the compensation plan design process
- Uncover the biggest holes when managing commissions
- Receive guidance for success in 2024
Read the webinar recording transcript
Alright. Everyone, thank you for your patience while we work through that. We have our amazing panelists here, and we have a great agenda for the day. We’re gonna start with some introductions so you can meet everyone here. We’ll go through the background of the report, and then we’ll highlight some statistics around quota attainment and motivation.
Planned simplicity, alignment to metrics, and a Q and A. If you do have questions or comments, please feel free To add to the chat, our lines are open as is the Q and A. We’ll also try to address these questions as they come up, and we’ll also provide time at the end for any lingering questions.
We’ll be watching that chat.
I might not be able to see it, but hopefully, someone here can see it.
Any members from the QuotaPath team, feel free to slack me. I am able to see that right now. So wonderful.
Hello, I’m your host, Kelly.
I’m here out of lovely Austin, Texas.
At “QuotaPath”, I oversee our content strategy and write all the time about all things sales common session, including today’s talk of discussion, and our 2024 compensation report. If you are unfamiliar with “QuotaPath”, May I encourage you to please familiarize yourself? We’re pretty awesome. We help make your sales conversation processes more efficient, through expert guidance and user-friendly technology.
You can check us out on “QuotaPath” dot com or learn more or experience it firsthand by signing up for a free trial where you can actually sync that CRM of yours, invite your team, and set up commission tracking. That’s enough about me. More importantly, I’m joined today by these incredible speakers. Would love for each of you to introduce yourself where you’re located, your role, and who you work for.
And something about you that we can’t learn from your LinkedIn page. Pablo, I’ll kick it off to you first.
Thank you so much, Kelly. Thanks for having us. Pabloominguez. I’m an operating partner with Insight Partners.
Venture capital and private equity firm based in New York City.
I focus on supporting our portfolio companies on, sales and customer success, helping them scale as they you know, for an inception to insight to exit, basically helping them scale. And, a fun fact about me, grew up in Texas and went to school in Austin, so I’m not close to you right now, Kelly, but, I love to smoke, meat, and barbecue. It’s one of my hobbies. So, we’ll be doing that this weekend.
Awesome. And Celine, will you please go next?
Hi. Celine Gray. I, lead sales enablement effort at Nomative. It is a Swedish company that enables companies to calculate their carbon footprint.
So eventually helping them on their pass to net zero I’m based in London.
A fun fact is that I moved house twenty-seven times, lived in four countries. So have a lot of cultural awareness, and I’m not quite sure whether these houses, the final answer, whether there’s going to be a house twenty-eight, we’ll see. But if you need any tips on packing, then I’m your woman. Oh my gosh. Saline, that’s amazing. What’s the what are some of the other countries you’ve lived in?
I lived in the UAE.
In the UK, in France, and I worked all across, North America, EMEA, and Asia. So, the only two continent I’ve not done is West Africa and Latin America. So, you know, I’ve got another twenty years to go in order to explore those. So Yeah.
Awesome. Wonderful. Thanks for sharing that. And last but not least, Surier.
Hi, everyone. My name is Sergigail Wosinski. I’m VP of Finance at AppleCard. We’re a marketing technology firm that, empowers executives to reach their most important and hard-to-reach decision-makers at scale.
Previously had a few different finance roles at other “RevOps”, started, my career in investment banking at Associate Dijin Raul, and, a financial advisor at PwC.
Based here in New York, in the fun fact, I’ve been training Brazilian Jiu-jitsu for about fifteen years. So when I’m not spending time in front of spreadsheets or with my working kids.
Awesome. Sergei, how many kids do you have? I have two kids. How old are they?
Two little girls. Three and six. I have two little girls. Three and five. Such a handful.
Oh my goodness. Yeah. That’s why I after dropping them off until I already had an eight-hour work day, even though it was only eleven AMF. That is absolutely relatable.
I feel for you. We’ll have to talk more about that offline. But that’s not why we’re here today to talk about our kids. We are here today to discuss the results.
Of this report. Before we get into those, I want to share some background about this year’s. For the past three years, “QuotaPath” has published an annual report covering sales compensation trends, patterns, and challenges, things like how often teams use accelerators what the standard commission rate is, and who’s responsible for running commissions. Well, those are all really valuable.
We’ve covered it at length, and we do cover those throughout the year in content and other webinars workshops, and things like that. So this year’s report, we wanted to focus exclusively on the challenges amongst leadership to draw attention to the friction between revenue, finance, and sales leaders when it comes to sales compensation.
And more importantly, how those challenges actually impact performance and retention. So in partnership with the company Global Surveyz, we surveyed leaders toward the end of the first half of twenty twenty-three, which some of you may recall was pretty tough for many of us in tech. As it turns out, the hundreds of revenue leaders we surveyed, shared some similar experiences.
Here’s a bit more about who we surveyed. We collected data from over four hundred and fifty finance “RevOps” and sales leaders primarily from those in the VP level roles and above and at companies with a hundred plus employees. These are leaders from SaaS and tech-related fields including insurance and manufacturing and from organization organizations within the US and the United Kingdom.
Our objectives for the report were to identify where this disconnect exists between finance “RevOps” and sales leadership.
During the design and execution process, explore the challenges faced during the conversation plan design process, uncover the biggest holes when managing commissions and, of course, offer guidance to set up success in twenty twenty-four. So if you go ahead and read that report, you’ll notice after every report section, we do offer best practices and tips on how to overcome those.
Alright. For the good stuff, on to the results, our first stat today, we will talk about quota.
Quota Attainment Challenges
Ninety-one percent of teams are missing quota payment rates right now of eighty percent and above, meaning their collective team attainment is less than eighty percent.
That’s a lot.
Here’s why they’re missing. The market obviously a reason here, that came in tied at first at thirty-six percent with sales historically having a high turnover rate, especially on the heels of the mass excess of twenty twenty-two. The lack of experience or skill for reps coming in at thirty percent, excuse me, thirty-six percent didn’t surprise me. But what did grab my attention is thirty-five percent citing missed quota due to misaligned sales activities. In fact, the reasons here, relate to compensation plans, misaligned sales activities, lack of motivation, new hire ramp-up periods, an unrealistic quota and sales, which goes back to those market conditions. Pablo, I wanna start with you. What other challenges are you seeing outside of these listed?
Yeah. One of the things we see, and it’s predominantly in the tech sector is companies have overhired “RevOps”. Right? So if you have too many reps, you don’t have enough opportunities, or enough leads coming in. Therefore, you know, if you have ten reps and maybe you should only have six, a quarter of attainment is down. So a lot of companies are rightsizing to make sure they have the right number of people.
But also on misaligning the sales activities we talk about in a lot of our portfolio companies. Sometimes they’re wondering why they’re missing expansion goals and, and or new goals. And so depending on how you design your compensation plan, so I’m glad you guys have this. If you’re not incenting for the behaviors you want, reps will do what’s easiest for them and focus on that. So it’s good to see it as one of the top three things because that’s something also we’re seeing.
Yeah. And it’s it’s something that can be fixed Seline, what are some of the things you’re seeing, or would like to comment on some of these trends that are happening right now?
Yeah. To echo Pablo, there’s been a lot of growth at all costs. This has led to people over-hiring and taking a quota and just multiplying the quota without truly looking at the market.
On top of that, I think as well, when you create that scarcity in time in terms of company, reps are gonna panic, and they’re going to try to focus there for absolutely everywhere rather than focus on the ICP, ideal customer profile, and the ideal business persona, where they can truly make the money, And what I do find from an enablement perspective when it coming into those companies, they don’t tend to really have a plan to market that enables every single person in that company to go eighty percent. So it leads to that erratic, and then after they just do a restructure, Yes, Lynn. You mentioned a really good point about ICP that I know I’ve written at length about the importance of it this year. What advice do you have for teams who maybe haven’t fully developed that yet on how to go about unpacking and discovering what their ICP is and why that’s so important?
Yeah. Run analysis in terms of business. It depends on the maturity of the company, obviously, right, and the product roadmap and where you are, but developing an analysis of your best of your wins and you lose, is going to really help understand where’s your Swiss really think not in terms of feature. I’m working with a company right now in parallel that’s really focusing on transforming themselves.
Because the service is becoming redundant, and then purely focusing on what they can do rather than the customer challenges. And so what is it that you solve and who do you solve it for? And who do you solve it for best? And who how is it a must-have for these people?
So there needs to be a complete three-sixty alignment with marketing, sales, product, finance, and really channel, if you have a channel, and really gather everybody around that focus area. And that comes then in terms of sales leaders going into territory planning. And account planning and tiering between your SDR, your AE, your enterprise AE, all of this needs to be permeated everywhere. And have the marketing language, the customer stories, and everything else to back it up.
And you can get constituencies to help you if you do not have the knowledge internally to do it. It’s really definitely a good investment.
Yeah. For sure. I’m sorry. I just got totally distracted, Pablo. When did you change your name to Johnny Cash?
Has that been like this this whole time? Well, when I dialed in late, you’re like, you’re Celine. I was like, well, let me change it to something different.
Perfect. Nailed it.
Alright. Back to the topic at hand, Sergei. What would you like to add to this? Have you noticed anything that your team or other teams you work with, are experiencing around QuotaPath.
Yeah. I would say that one thing that really jumps out is, especially in rapidly growing firms, there can be many changes to the product, the features, the the pricing model. And that those changes can happen, you know, several times throughout the year. It takes sometime for all stakeholders internally to get up to speed and understand how the new features actually work, how they benefit the clients, a new pricing model works, how that benefits the clients and actually be able to, externalize that infected with sell it, But then on the back end, the complaint also needs to reflect those changes.
And, you know, usually, we try to avoid changing complaints mid mid mid mid-way through the year. So you can have a misalignment of the comp plan versus what you’re actually selling.
And, you know, the challenge without approach is that you need to take into account. Well, does it make sense for us to take a pause and remand the sales plan and the commission plan halfway through the year just due to the drastic changes to the product, or do we wait until, you know, the next annual planning cycle and make those changes there. So I think that that’s, I’ve definitely seen that especially as I mentioned in in very rapidly growing businesses.
Yeah, for sure. We’re gonna talk, about alignment specifically and our third point later on. So I do have some questions about that, but you made such an excellent point about companies not wanting to change their comp plans. And in our 2022 study, we did find that the more times you change a comp plan, the less trust your sales reps will have in it, which, of course, you wanna have your sales reps trust, but these were unprecedented times. We gotta change these compliments y’all If they are the same ones at the beginning and the market has changed so much, my point of view absolutely changes it. I do wanna speak to some other quota issues here, the new hire ramp-up periods, what are some of your recommendations around compensation strategies that you can use to support new hire ramp periods?
Open to I don’t know. Johnny Cash, why don’t we start with you?
So two things.
I see a lot of people make the mistake that they’re gonna be the first ever to change ramp times. And I’ll I’ll admit I’m the first person who loves to challenge the status quo.
It is very hard to ramp a person that normally takes nine months work three months and reduce that by fifty percent. Right? So I think, setting unrealistic goals is it takes reps time to get acclimated with the company. Right? Understand the product. Understand the value prop get trained. Their territory build relationships depending on whether you’re SMB mid market or enterprise.
So be realistic in terms of your ramping, but when you’re ramping, rather than just giving a non recoverable draw, that’s guaranteed for nothing. Right?
Typically those are three to six months, depending on the business you’re in.
We’re seeing more companies set MBOs that manage it by objectives that say, okay, here’s your your non recoverable draw, but I expect you to start building x amount of pipeline, right, or complete your training by x date, or have at least eight discussions with you know, c level executives, etcetera. So being more targeted on what’s expected of them as they ramp, I think gets people a little bit more closer to being the knuckle.
I absolutely love that. Celine, in your role with sales enablement, do you have any suggestions around that as well?
Yeah. I think it starts with the hiring process. And that understanding of the compensation and part of a number of forum, both for sales enablement and sales. And we get a lot of questions from reps to go, this is my compliant, this is what it says.
I don’t understand it. And very often, they have taken those questions to, the recruiter, or they have taken the questions to their sales manager. They got an answer. Still don’t understand it.
So I find it slightly alarming that they actually go to external channel. And even before they start, or at the very, you know, the onboarding is like the honeymoon phase. You’ve changed job, you’re excited about the new company, about the new role. If already you don’t have clarity and transparency, this is only going to get worse.
So the first thing is during the hiring process, if you’re hiring for quota carrying people, explain the compensation, get them to have a conversation with self censorship so that it is clear for them they understand them at minima how they’re going to make money. During the onboarding process, compensation should be one of the first thing. If you think about what people need to be successful, they need to know what to do, which is your skills and competency, they need to do it, which is your activity in your mindset, and then you need to give them the tools and processes in order to be effective and efficient.
And so something like “QuotaPath” Pass fits into all of this. Right? So at the very beginning of the onboarding, understanding how they’re gonna get paid and the person I think Pablo explained that very, very well. What is it that they need to do?
You can’t force a client to sign. The signature of a contract is a series of events. So break it down for them so they understand where they are on their journey, they’re comfortable with it. And then they know that when they build the activity, eventually they’re going to have a finality in terms of quota and what it requires pair them with eight players, people that understand compensation, but people understand the activity and what is required in order to be successful.
And also link that compensation to the mission and the vision of the company. What is the no start? So you may have a vision at five years. But what is the vision twelve months is going to enable the company to go at five years?
And how is the salesperson or the hiring person, going to enable that through the activities. So it gives purpose to what they do because at the end of the day, it is a repetition and very repetitive. And every month, you go back at zero and record it, you go at zero. So you need to be able to focus people on the right thing, but also show them incremental progress.
And that works through data, visibility on the compensation, trust within the team and and all these elements.
Celine, thank you so much for the “QuotaPath” plug. If you were not going to do it, I certainly was. So I really appreciate that. I also wanna, add the importance of showing the math behind the comp plan so that new hires and your existing team really understand why the plan is built the way it is.
And so they can see, okay, if I hit this, this impacts this. And as we’re talking about tying these to north star metrics, they can actually see the longer impact across the business, not just on their commission check. For that. So just wanna add that.
Sergey, anything you’d like to add on this? Yeah. I would say that the point around North Star metrics is very critical because, Those can change for a company year over year. You know, one year, you might be more focused on JRR and NRR.
Another year, you might be more focused on growing your ARR or your bookings or your logos. So the sales reps need to really, understand what are we trying to achieve end up coming, an upcoming cycle. And then as Lee mentioned, like, tying that to their their comp, how are they getting compensated and bringing on those additional logos or driving that ARR? And then even taking a step back, why are those the key metrics for next year?
Like, there there is a reason why the the senior leadership and the board decided why know, maybe next year, we’ll focus more on NRR versus, ARR, for example. And having that more depth understanding, I think is also just helpful from, from a personal perspective to understand why why are we all rowing in the in this direction as opposed to different direction for the following twelve months?
We’re sure. Thank you. I want to add also our chat is now enabled because of course this webinar is filled with some technical difficulties. That is now live. Add your Q and A’s there or in our Q and A field there. We’ve we’ve got them up. We are ready to take questions.
I do have a question around motivating reps as that was the thirty two percent said lack of motivation was one of the reasons that their teams didn’t hit quota.
Another sap from the report showed that thirty percent point blank said that their plans do not motivate “RevOps”, which if you ask me that is a core function of a comp plan. So, johnny cash slash Pablo, I’ll start with you what plan component have you put into place or have you seen put in place that that motivate reps what’s worked and and what hasn’t worked?
And I’m glad to wrap that up because as a sales rep, right, you wanna wake up hungry, excited to hit your number because you’re gonna make money. Right? Because you went into sales, you were, like, talking to people, like selling a product, but ultimately, some people want to make a lot of money. Right?
And so what I’ve seen work the best is one is the compensation plan simple, to Saline’s earlier point. Right? I don’t wanna be taking out my calculus book from high school to figure out did I make money today. Right?
Am I gonna achieve my quote? I wanna understand if I sell x, I get paid y.
And ultimately as a business, I think it’s important to reward for over achievement. Right? And significantly over for a reward for overachievement. So I think having very lucrative accelerators for overachieving the target that finance the board your sales leader is set is probably the most motivating thing.
But there’s also gonna be some downside. Right? If you don’t achieve you should be paid less. But my solution has always been to overpay for over achievement because that’s what the primary role of the sales rep is to hit the target and overachieve.
Agreed a hundred percent.
We just received a question. Thank you, Alyssa.
You would like to know recommendations for comp plan components that will keep reps for the long term. They have a long sales cycle about six plus months so they need to put in place intermediate rewards to keep them working till they sell a big deal.
Any recommendations there team Maybe I can take this one.
Again, it starts with the hiring phase. So you need to make sure that your higher cells people that are cut for that length of cell cycle.
Because some people prefer transnational volume, and some people not. So that’s super, super important.
Clarity as well, as Journey mentioned, what can happen is when you have a six months or nine months, so sometimes even longer sales cycle, managing your forecast and your pipeline as a sales leader is also very, very important. So what are some of the behavior that you need to see intermittently so that you don’t end up in months, nine months, eighteen months down the line, having missed Target just because things were knocked on nine months ago. So those intermediary, incentive should be really based on the behavior that need to happen in order for that for those deals to close at that time.
The other thing I’m going to mention is employee engagement of that team is very, very important in terms of team culture and how people feel recognize and everybody’s motivation is going to be different. So do they want the recognition, do they want, professional development? Do they want learning? So really for the leadership to understand that team and what drives that team on the long term is also going to be important. So It is touching compensation, and it is touching as well, additional aspect of it. I’m sure Pablo will have also opinion on this.
Yeah. I mean, one one thought that comes to mind is for such long sales cycles, it might be interesting, to evaluate using, longer term quota, like an annual quota as opposed to quarterly or monthly.
Because then, reps are incentivized, like, if you have a, kind of, payout curve with accelerators, then effectively, you need to stay for, you know, most at least the full year to maximize your payout if getting closer to your your full “QuotaPath” likely towards the end of the year. And, from my experience, that usually tends to work better for those larger enterprise types of sales that last six months or longer.
Awesome. Thank you. We have a few more questions rolling in. Keep them coming, guys. I’m gonna start with This next one recommendations on what to do if a leadership team is not explaining comp plans thoroughly. Onboarding ramping was not clear and trans parent, “QuotaPath” all over the place and unrealistic without a lot of explanation.
That’s a loaded one, who who wants to take that one.
Question is recommendations on what to do if leadership team is not explaining comp plans thoroughly.
I’ll take that one.
Some of those rolled out comp plans at two public companies.
If your leaders are not rolling out the comp plans and you have bigger issues, right, because your role, assuming those of you that are on the call, could be sales leaders, could be heads of ops, could be running sales compensation with in ops.
Your role is to help enable the sales leader to communicate the plan, why there’s changes, why we’re motivating extra, why or not something else. Right?
And if you have that gap, your roles to get them to make sure they do communicate that because that’s not technically the burdens are not full on you. Right? Then the leaders are not taking accountability to the job they have to manage their teams.
If your leaders not doing that, you can’t get them to, then I’d say you’re in a difficult situation, but that should be rolled out by leadership.
Yep. And I will also add on that point the importance of getting your reps feedback on their comp plans regularly throughout the year and especially as you’re about to go beginning to design next year’s.
Pull them. What what motivates them? What do they like about their compliments currently? What would they like to see different? What didn’t they like from last year’s?
That way you build a plan that hopefully motivates them and and they understand it better. Another question, and then we’ll move on to our next stat, and I do see these popping up. I will make sure we get to all of these. The next one though is should OTE be directly correlated to quota? For example, OTE should be thirty percent of quota If so, how is base as a percentage of OTE impacted as quota scales from SMB to mid market to enterprise?
Let’s start with this also. I think we’re con so I think we’re completing two things here on your second point around base as a percent of OTE.
Maybe you meant OT. So the mix of base and variables, a percentage of OT. Right? So whether it’s fifty, fifty, sixty, forty, seventy, thirty, really is only predicated by how much risk do you want in the plan and how much upside do you want to reward someone, which is why when you see people on fifty percent base, fifty percent OT, variable, you’re basically saying this is a high risk high reward plan, right, versus sales engineers, specialists, people that are a little bit further away from the role will be on seventy, thirty day mixes. So that’s sort of a latter part of that question. The beginning part is It’s really more of a function of what can the business paid remain profitable.
Right? A rule of thumb that we all see in the market is the ratio between quota and OTE should be twenty percent. Right? So if you divide your OTE by the quota, you should get to, you know, it should be one bit as a rule of thumb.
As you’re starting out as an early stage company, though, that number may be thirty percent, forty percent, fifty percent. However, we do see that number increase significantly once you start getting an enterprise sale multi million dollar deals, you may be paying reps three hundred k four hundred k at Target. They’re bringing in ten million dollars. Right?
Because they’re selling a five million dollar deal, two five million dollar deal. So it’s really more about profitability, that number can’t be too low. Otherwise, the business cannot make money and pay you. Right?
But there is no there is no it has to be x, but you should be shooting for twenty percent.
Oh, great. Thank you. Some of the questions we are getting are very, very specific. So we’re keeping track of these on the “QuotaPath” pass side, we will reach out to you directly, as they are getting very specific, which we love.
But let’s move on to our next stat which is around
Maintaining Plan Simplicity
maintaining plan simplicity. We asked what is your biggest difficult when it comes to designing sales compensation plans. And I do wanna add some context around this. We gave leaders the chance to mark no challenges.
And out of five hundred leaders, not one person selected that.
So unanimously, people are struggling with this. Here’s the breakdown. Thirty percent maintaining simplicity as their biggest hurdle. Getting that team alignment was second at twenty-six percent. Twenty-four percent reported lack of experience designing plans as an issue and getting rep buy-in came in at twenty percent. So we’ll start with that simplicity.
That’s came up a few times already. Everyone knows the importance of it yet it continues to be a huge problem.
Why is it so hard to build a simple yet effective comp plan. Who would like to take that one, Sergei, can we start with you maybe?
Yeah. I mean, we we already talked about the importance of the north star metrics. And, you know, these are the key, KPI, the most important KPI is the company is looking to achieve in the following, that year. And frequently, what I’ve seen happen is we started with, one KPI that we’re solving for.
Let’s see. Bookings. And then we started layering on, well, we also need sure that we retain NRR and GRR. And on top of that, we, you know, bring out additional logos.
And then you start adding more metrics and sometimes they can be, in conflict with each other. And that that starts adding more and more complexity to the plan. And what I’ve seen work fairly well as just focusing on one or two key metrics and letting go over the rest and really making sure that the plan helps us achieve those one or two metrics. And the rest, if needed to adjust, you can add a spiff throughout the year maybe you were missing on logos, we can add a, spiv that incentivizes more logos.
But at the end of the day, if if we want to achieve bookings, everything should be driving over all the reps to achieve that bookings goal. And I I think that allows you to remove some of the additional components that could change the, the comp plan from a one pager to, like, a five pager, and then that requires, as, as Paul pointed out, a calculus book to figure out how how to how to navigate that?
Pablo, anything you’d like to add here.
I’ll add one point. I think there was a question in here also. Someone asked Should you get rep input or feedback on the plan which sites that rep buy in?
Absolutely. You know, I don’t think you need to go out and get everybody’s feedback, but it’s important to always have a close, you know, your ear to the ground or your key reps, the test, hey, here’s some changes we’re making. What do you think? How is this gonna impact you?
Is it gonna motivate motivate other “RevOps”? And it might seem counterintuitive that that reps will be not inclined to help, but I found at least when I’ve done that, The best reps have the best interest for the company, right, because they’re also carrying equity and they wanna win as a team. And yes, they wanna make the most money, but wanna make sure the rest of the organization also does well. So definitely always get rep buy in, before and after because if the reps believe in the good plan, when people push back, they they will be advocates for the plan also.
Right? You cannot ask everybody to be happy about the changes you roll out, whether you’re the manager or not, but having reps that support you is very critical.
I’m going to add one thing from an enabling perspective in terms of what we did in terms of that practice. We’re looking finance as a number of company where finance would be the one presenting the compensation and not the sales leader, because that required alignment prior.
So Basically, it weaved a lot of barrier by the time the compensation plan go to salespeople.
The other thing is using a lot of visuals. So, calculators, examples, and really making sure that whatever your learning style is, you understand the compensation plan, in the way that is suited to you and also linking it to the territory plan and the account plan. So we work backwards if you want with a sales rep. In order to do that.
Great. Thank you. Simon, I see your question in the chat regarding when to comp commissions? Is it on payment, cash collection versus the booking of the deal?
Two years ago, the more widely practice was to pay on the booking. That has since shifted where now we are seeing, early stage companies paying more frequently on the actual cash collection.
I would, I mean, my perspective is whatever makes most sense for your business, but, the trend is starting to shift that if you’re an earlier stage company, we are starting commissions paid on that on that booking versus or I’m sorry, the payment versus the booking. Anything to add there, guys?
Yeah. I mean, from my experience, I’ve I’ve seen both. I would say the advantage of, paying on cash collections, of course, that it incentivizes the, rep to work with a client to pay, pay us as quickly as possible.
The other benefit is then it it avoids, reps offering very flexible payment terms. Right? The they would then they would if they’re need to collect cash as soon as possible, they are more likely to push for an upfront payment rather than quarterly or monthly invoicing.
That’s a load that’s a loaded question for surveys and this is in finance. Not fair.
It becomes a little bit freaky is when you do multi year agreement and you have a yearly invoicing system. So you need to sure that your compensation, I mean, encouraging multi year agreement is a good thing for this company, but then you need to incentivize a salesperson to be able to do them. There’s different mechanism as well to do that. Yeah.
Actually, Celine, there is a question in the Q and A specifically around paying out multiyear deals. So let’s address that for Doug. What is the best way to pay out a rep for multi year deals that are annual payments? For example, a three year deal with annual payments.
Serge, wanna wanna take that one?
Yeah. I mean, one once again, I’ve seen different types of structures. In in some cases, you, you know, if if you’re doing an on cash collection, you would pay some type of an accelerator when that cash comes in. So let’s say you pay an additional three percent if if it’s a multiyear deal, and then that extra three percent will be paid out.
Once the cash hits in in year two and once the cash hits in year three, I mean, if if the business can afford it, you can also you know, pay that upfront at at the time of the booking. Of course, from a rep’s perspective, that’s, the more lucrative. So I think it really it’s important for the business to evaluate the potential cash impact. And, what are they trying to achieve if, you know, as was mentioned in the the quarter about the quarter, if you’re trying to drive retention and multiyear deals are a key, to solve that, then maybe at least for the near term, you you pay out the reps upfront to really incentivize those types of deals.
Wonderful. Thanks. Alright. Other carrots that can motivate your team that are not comp related. Celine, on our prep call, you had some wild ones what have you all seen work that are not specifically commission related to help to help motivate your teams?
So various ideas. Right?
I’ve seen sales leaders doing crazy things like washing the cars of the people who offer achieving the months, so they take an afternoon to wash the car, or another one is the team can choose a fancy dress for the leader to wear at work for one day. It usually gather its effort that gets the the whole team very often to fix one standalone issue, right, whether it’s top of the final issue or win rate, things like that. What I’ve seen working well as well is stand up coming tonight and depending of the level of a very achievement, one or more leaders just joining in and having to do an improve. So it really getting people out of their comfort zone, but it’s also a win win, for the team. There’s things like, you know, lottery tickets that you can actually give for specific activity days.
The sea level club breakfast that work really well So that means that if you ever achieve you part of an exclusive group, and then you’re going to have breakfast with one of the sea level.
It’s also sometimes involving the partner, the family, the friends, so having restaurant vouchers or for two or a master class subscription for two or experience back for two leaderboards and gamification work quite well as well. And recently, what we’ve seen is technology as well that comes in, and ask each individual person to put in an individual goal. And when they hit certain milestone, with their quota, the company participates, it’s a bit like a crowd funding your dream if you want, which then keeps people motivated on personal motivation. This is some of the incentives that we’ve seen.
Sergey does Applecart offer anything to motivate the teams outside of the commission plans? Well, we we we actually do not but, in my prior firm, we had, we had a few different structures. We did a Raffle one quarter where, for each logo that you bring on, you get an just you get a rack ticket and at the end of the quarter, you wanna prize another quarter we had, for the top achieving sales rep, they received an Airbnb voucher and a flight to a location of their choice in the US for them and their significant other.
So I think that one was pretty exciting for the team.
And usually, anytime we rolled out a spiff, there would be some type of more interesting prize, like, along the lines of some of the things that Salid mentioned as well.
Great. Thank you. You just mentioned SPIFF, which is a question in the Q and A, should spiffs be used to incentivize or push test reps to overachieve beyond standard packages? Are spiffs meant to be realistic and achievable.
Pablo. It looks like you might have some thoughts there. Yeah.
Be careful with spiffs. Right? If you have too many spiffs, then you’ve designed the wrong comp plan. Because the comp plan is the reason I wake up. It’s clear. We’re supposed to be clear.
On what my job is. The purpose of a SPIFF is paying for or launching new products. We wanna make sure there’s visibility into it. We don’t wanna a comp plan. So pay whatever. Just making it up, right, a thousand dollars for every unit sold with a new product.
The difficult part with spiffs is that you don’t you don’t clearly communicate to reps that the spiff is designed for the product introduction or orders lights. We wanna push extra extra deals, etcetera, then people get addicted to spips, and then they’re expecting, like, well, what’s the next step? Now I’m not gonna sell until I hear what what comes out. Right? So just be cautious that you don’t over engineer it to replace what the confidence intend to do.
Addicted to spiffs is gonna be my next band name, I think. So thank you for the idea.
There’s another question too that kinda correlates to this I’ve seen. Evan asked, on the topic of paying commissions, do you have best practices to share on how to dis on to share on how discounts should be incorporated into commissions? I know I’ve seen spiffs used for if you sell a full price deal. No discounts. There’s a spiff, and see if that did impact selling behaviors, that potentially that’s built into the comp plan the next time, as a permanent fixture. What are your thoughts on discounting?
Sergei, I’ll start with you.
Specifically at at Applecard, we normally don’t offer discounts. So if there’s a request by a sales rep to offer some type of discount and gets escalated to our deal review panel, and then depending on, declined relationship and what’s what’s being asked, then we’ll evaluate it. And, Historically, I’ve seen also some structures where, you know, by default, the rep can offer maybe up to five percent as or anything greater than that that needs to be escalated to VP of sales, for example.
And usually any any type of discount that gets effectively deduct it from from your commission. So you you know, let’s say you have a five percent discount, you would get paid on ninety five percent of the deal as opposed to a hundred percent value of the deal.
Who is on that deal review panel? Is that several leaders from across different departments? Yeah. Yeah. It’s you know, it’s myself, our CEO, our, our VP of sales, our head of biz ops, and then our, head of client services as well. Nice.
Another question is there higher risk of rewarding via non cash SPIFF payments from a financial risk perspective and incentivization perspective. For instance, this person’s company has always scouraged anything like cash, gift card, trip, etcetera, type prizes with spiffs, and always push toward cash prizes.
Any type of higher risk of rewarding non cash fifth payments that you’ve noticed. I don’t I don’t I haven’t really thought about that. Don’t mean there’s risk. I think there’s a compliance issue where any gift is technically taxable income.
So if you’re getting out a watch, a TV, iPad, versus cash, there’s that issue, but I don’t know. There’s it’s a human element. Right? Sometimes reps are just like, just give me the cash so I can do whatever I want with it.
Right? However, there’s something to be said about a physical, yeah, that people remember. Right? People won’t remember the cash next year.
So part of your job in designing a right complement to drive behavior is You want people to have BMO next quarter next year when they see somebody with that thing you gave them, whether it’s a dinner, or something physical or walks or something and they go, oh, I want that. Right? To Saline’s point before, I wanna have dinner with the CEO. Right?
And if you just gave cash, you lose that element of of BOMO potentially. So it just depends what you’re trying to drive.
BOMO is a very real thing. That’s for sure.
Thank you. Let’s move
Aligning plans to KPIs
on to our last point here. We’ve got about thirteen minutes left. I do want to make sure we get through everything, and this was, I think, really alarming from from all of the stats pulled in this thirty four whopper thirty four page whopper report. We asked our revenue leaders to what extent do your plans align to your key business metrics?
One percent, just one percent of “RevOps” said their plans align meanwhile finance was much more confident at twelve percent, but that’s still only twelve percent.
I’ll start with Sergei. Why as a finance leader, why do you think finance leaders had more confidence in this alignment to key business metrics?
It will finance as frequently responsible for calculating and and tracking the key business metrics. And, I think as as part of the process for creating any, commission plan, I think finance is usually closely involved in we always keep those KPIs in the back of our head. So I think, generally, when we come out of out of any planning process, I feel that, you know, We identified our north star metrics for next year, and I think the plan pretty closely aligns with what we need to achieve.
Specialists, it’s usually finance, as kind of the the final sign off on on the plan as well.
And I I I think that was also the the feedback that we that I’ve read in the the “QuotaPath” report. So I I would definitely tend to agree with all all the the the the sentiment that’s outlined there.
Yeah. And, Salaine, we haven’t heard from you in a while.
What what can businesses do throughout the year to make sure their comp plans stay aligned as the market changes.
This I mean, there need to be a leadership alignments. I think Pablo mentioned that before.
I find that messy con plan very often, also messy vision, messy mission, messy, everything. Right? So there need to be some accountability from leadership to simplify and the and focus the effort of everybody that work in that organization.
In terms of the lack of alignment, we it’s about that cross collaboration and those working groups and making sure that when you work on a pump plan, everybody that needs to be involved is involved and it could be that you have a couple of senior sales people that can be involved in the conversation. It’s a matter because they can test versus the past year and what they’ve done, how that complaint would do, for example, or they can test versus their pipeline, how that complaint would do. And they’re very often because they’re on the field of very good echo. Sales leadership absolutely should be part of this, finance should be part of this, rev ops should be part of this.
Enablement should be part of it and part of the con compensation plan because we’re going to need to explain it. We also onboard people and make sure that this happen. The other thing is involving, sometimes when we have incentives, we involve those finance team and those “RevOps” teams into some of the the the nitty gritty even for a day of sales so that there is a feeling of connection and alignment. And sometimes we align them as well on so if we do an incentive for the sales team, we’re going to do kind of a fantasy league for some of the support team, and some of the support teams are going to be able to participate to this best by just creating their dream team.
So the the effort that you need is suddenly supporting about a vaster amount of people and you build that trust, that understanding, and this connection, that is leading to that alignment because there’s alignment on paper of numbers, but that never translates to behavior. And if you want that alignment in terms of behavior, you need to build trust and those critical conversation and the those human connection.
Thanks, Lane. Pablo, Sergey, anything you’d like to add on that?
Yeah. I mean, I I definitely agree on that. And I mean, I’m on my end, I always try to have, kind of, ongoing conversations with sales leadership, with, you know, a handful of sales reps on on the topic of compensation just to, we’re not blindsided by anything, that they’re not satisfied with when it comes to, you know, the the planning process. So that that way, by towards the end of the year, you know, as we’re in q four now, now we have some very clear in into what was working, what was not working, and, you know, tools like quote about it are also great for for tracking sales team engagement. So we can actually see how actively “RevOps” are logging in there and how many questions are they asking about what they’re seeing in quarter path, and that that also helps make sure that any feedback that comes from those conversations is incorporated into the next planning cycle.
Yes, sir. Okay. What do you look at to evaluate if something is working or not?
Well, what is direct feedback from the sales reps?
I I think, especially once you in in in a small org, it’s much easier to develop, like, very personal relationships with, with other individuals where you can just casually grab a call through them and chat and say, well, how is it generally going, what do you think about the comp plan? Like, what are your thoughts of what we can do better. And usually they tend to be very transparent about it. And, you know, of course, sometimes they’ll flag things that, you know, are structurally in the plan that we can’t change, but other times, you’ll, realize that maybe we incorporated a component that not incentivizing the behavior that we actually want to incentivize.
So that’s something that will, take into consideration for the next planning cycle. And, you know, finance vertical has conversations with the sales team that biz ops, and the rev ops vertical has ongoing conversations with the sales team and then we come together and we kind of reevaluate all the feedback that we’ve heard, and then we that that’s how we go, about starting the planning process for the following year. Yeah. That’s great.
Thanks, Sergei. I pulled this from Mark Rivera’s LinkedIn post last week. I love what he says here on the importance of alignment aligning the sales compensation plan with the company’s high level strategy is one of the most powerful and scalable tools in the CEO’s tools chest to drive alignment.
It’s very true and it’s so often overlooked.
So let’s get into this. Are y’all defining next year’s targets right now? And if so, what are some compensation levers you’re mulling over to incentivize or de incentivize behaviors around those targets?
So in maybe?
I have a little mantra that I use on everything when I when I go work which is understand data focus on people, because your data is not going to change itself unless the behavior of the people is there to actually execute on it. So there’s an element for us, we receive we kind of receive the target and what we need to do. So the way I’m looking at it is really working backwards in terms what other behavior that our agency helped us get there and looking at all the incremental skills, competency, content, effort, tools, technology, whatever it is, mindset activity that are going to get us there.
And then when we look at this and we look at the north star, we extract the main elements, what is going to be the main behavior, what is going to be the main activity that is going to get us there that is basically going to trigger all of all of the rest, and that’s what we’re going to build the compensation plan on. We’re also looking at obviously product roadmap, and you know, any change in market. So I’ve done shift from SMB to enterprise in the number of companies, and it’s never as immediate as what people think. So It’s also looking at, looking at that compensation and how if we’re doing a massive shift in the market, how we need to compensate people to be able to ramp in that shift?
Do we need to put intermediary ramp to target? For example, do we need what is it tactically that we need to do order to enable that, and the compensation is an element of that in order to be able to complete your transformation shift or whatever it is. In the time that he wants.
Sergei, how about you? Are you guys working on these right now?
Right in the middle of the process. I was actually, pretty late last night working on on the initial iteration of our plan for next year. I mean, I’ll I’ll I’ll say that the main component that we’re trying to achieve is we’re we’re trying to simplify the plan that we have this year.
When we started process a year ago for twenty twenty three. Initially, I thought, oh, it’s a fairly simple plan. Once we actually put the pen, paper and we drafted everything and ended up being fairly complex, It was quite clear that one, it takes a while for reps to understand it. Nothing new there as we’ve heard in this discussion.
And two, certain behaviors are not were not properly incentivized. So now we need to analyze. As I mentioned, what what are the two, one or two key metrics that we need to achieve next year, and how do we make sure that everything in this plan is focused on optimizing those metrics. And, you know, I’m I’m sure it’s, not going to be too groundbreaking, but, like, retention is a very key component for a lot of tech focused businesses right now.
So we’re, you know, focused on growth and retention. Those are the the key metrics that we’re targeting.
Pablo, what are some compensation tools that would drive retention, for instance?
Perfect. No notes. Call it a day. Thanks, everyone.
I mean, it goes back to what Steven was talking about.
The compliance that caboose not the engine of the train. Right? The engine’s a strategy on a train, and your comp plan has to follow the strategy. And if you’re doing it the other way around, you’re not gonna achieve your goals. Right? So if GRR is important for a survey and the team, and there’s no GR component in the comp plan, Well, then don’t be surprised when you’re not hitting GRR.
Right? So you’ve gotta make sure if you’ve got issues with the car plans and sending for what you want the strategy to be.
We have just a few minutes left here.
And we have two questions that I think we can quickly address with our last two minutes here. The first one “QuotaPath”, our recommendation is eighty percent of your team is hitting “QuotaPath” I’m sorry, eight, yeah, eighty percent of your team is achieving quota. Is that what you guys recommend as well? Where do you guys stand on that?
Questions & Outros
on hundred percent of the team over eighty percent and eighty percent over one hundred percent. And I work towards firstly twenty percent over a hundred twenty percent. I totally followed that. Thank you.
Sergei, how about you?
Yeah. Generally, the benchmark that I’ve always worked with is that, across the board, you know, most of the reps are hitting seventy to eighty percent of their quota.
Somewhere in that range. And I I think it really depends on the team structure, the where in the growth cycle, the the businesses, how well developed are the how we’ll well develop is to go to market strategy and, you know, maybe in some cases, well, target somewhere closer to that seventy percent, but generally it’s in that that early narrow range of seventy to eighty percent.
Pablo, your thoughts? I’ll disagree a little bit. I think from what I’ve seen in every role I’ve had, best-in-class companies have sixty-five to a maximum of seventy percent over achieving “QuotaPath” because you have people ramping, you have people having a bad year don’t think it’s realistic to target higher number. I’ve never seen it, honestly.
If you have a few reps, sure you can.
But I actually see sixty-five seventy percent of the investing class above the level.
Great. Thank you.
Everyone, we are at time. That was a very fast power.
I’m going to drop in the chat to everyone.
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Thanks, everyone. Have a good one.