SalesGlobe’s Mark Donnolo and Michelle Seger recently hosted a LIVE Q&A on Sales Compensation. Listen in as they answer your most pressing Sales Comp questions. If you missed the webcast, or your question didn’t get answered, you can still submit it here and we’ll reach out directly. (As the old saying goes, the only stupid question is the one that goes unasked!)
Mark Donnolo: Well, good morning, good afternoon, everybody. Depending on where you’re dialing in from. It’s great to have you. This is Mark Donnolo, Managing Partner of SalesGlobe, and I am here with Michelle Seger.
Michelle Seger: Hey, good morning, everyone. Welcome!
MD: So today is our Q&A session. And we’re going to be taking the questions that you’ve sent in on sales compensation from our last webinar and giving you some answers to those and it’s stump the chump’s day, Michelle. Let’s see if they can stump us on some of these hard questions. I’m kind of excited to see what comes up.
MS: Yeah, that’s right, Mark.
MD: And we’ve previewed a few of them. But some of them we left kind of open. So, we’re going to be on our toes so I’m excited to do this for a little bit of background, SalesGlobe is a sales innovation firm and what that means, basically, is that we solve sales problems. So, we use problem solving techniques we use left brain, right brain thinking and creative approaches to solve sales problems around areas like sales strategy, which is charting your action plan for growth sales organization design. So how you’re going to market. And of course, sales compensation and quota, which is kind of what we’re going to be concentrating on today. And you can see we have a few books out and will reference them as we go along. Our newest book is called Quotas! with an exclamation point, because
MS: People are always screaming it!
MD: You’re always yelling Quota! So, Quotas! Design Thinking to Solve Your Biggest Sales Challenge. So, that’s the new one that just came out I think you’ll enjoy that you can get that on Amazon. And it will be referring to some concepts, also from the book What Your CEO Needs to Know About Sales Compensation, which is about connecting strategy to the front line.
MS: Right, just a little logistics, Mark. So, as you noted, we have questions that people have sent into us. Thank you very much for that. A couple of them we have previewed and some we have not. We’re also taking live questions, so please feel free to submit them and Tricia, our client experience manager, will send them over to us.
So, with that, what we thought we could do is open up by giving everyone a little context. And what we know is that companies that are successful and do things right there are really four big areas that they do things where they do things well. And that starts with the Insights on their business. And that’s looking at things like your voice of customer and what your competitors are doing. And then what’s going on in the macro environment, and we’ll discuss a little bit of that we talk about quotas, because I believe there was a question about that, Mark, earlier. And then the Insights actually informs your Sales Strategy, then that’s when you look at your customers that you’re going to serve segmentation and targeting, Approach to market the products and services that you are offering, which informs then your Customer Coverage model. And the coverage model is where we spend an awful lot of time with our clients on strategy and coverage. Coverage looks at things like your sales roles, the sales process, rules of engagement between the different roles and then your sales channels. And finally, that informs Enablement. And that’s really the crux of what we’re going to be talking about today. And that’s things like, the incentive compensation plan and quotas, training and development, and then, of course, tools and technology, recruiting and retention. And the whole point of showing you this is that when we think about incentive compensation, what you want to make sure that you’re considering any changes and what’s going on with Insights, Strategy and the Coverage model. And when there’s a change in one or the other, like the Sales Strategy or the Coverage model, for example, and you haven’t taken that into consideration the plan. What, what do you get? You end up with misalignment.
MD: Right, I think this is a great reference model and a good you know home base for us here, Michelle, because so many of the questions that come up as you said around sales compensation are not actually sales compensation questions proper, right? So, they’re things that have to do with other misalignment points I think back on, You know what happens in industries, for example, I think everybody understands the copier industry. So that’s changed a lot over the years, but there was a point years ago where all the big copier companies are coming to us saying, you know, “our sales comp plans are broken, our sales comp plans are broken”. And what we found was actually what happened was they were going from analog copiers to digital copier so if you go up to the sales strategy layer their product and their value proposition which changing and what that meant is the product got more complex. So, you had to have different roles go the customer coverage layer. So, you have to have sales engineers. The sales process slowed down. And so, the old sales comp plans didn’t work anymore, but everybody thought it was a sales comp problem. So, it’s important to have big context in terms of how all these things fit together.
MS: Right. So that’s a great thing. And I think will be referencing the Revenue Roadmap throughout.
MD: So, if you virtually double click on that little box on incentive compensation and quotas, you would see something like this and other great reference point. Which is what we fondly refer to as the Sales Compensation Diamond. And when you think about how sales compensation plans work, a lot of times, the first thing that comes out in those early conversations in the conference room, when we started the comp plan is we pull out our calculators and we started working on the mechanics…
MD: Working on the numbers, so, you know, going to change the accelerators are we going to change the Commission rates, what have you and that’s step number seven, and the process here. So, we have a lot of work to do foundationally to develop a great compensation plan and it really starts in that middle with what we call the C-level goals which are the big priorities around the business. And the sales roles, which are the roles are going to be executing from that coverage layer executing on the sales process. And when you have those established well, then you’ve got a great foundation And then you can start to build the plan or actually what we do is we evaluate it one time around this and then we build it one time around this. So, evaluating, building, looking at your major plan components, what we call framing the plan. So, what’s your target pay going to be in your payments and your upside potential and the threshold for when you start to pay on the plan. You’ve got linking pain performance, which is connecting your, your performance to quota or performance around revenue to how you’re going to be paid. So, what kind of measures are we using and the levels and timing of those measures and then finally we get to the mechanics. So how do we connect those two pieces together and then we can get into how the plans, a line across the team, objectives and quotas. So, setting the goals and then finally operating the plans are getting into governance and operating and evaluating and then preparing for next year. So there’s a whole Methodology a whole process that goes around effective sales comp plan design so I think it’s important that we tee up these couple of ideas here as we get started because a lot of what we’re going to be talking about will refer some of these concepts.
MS: Yep, that’s right, Mark. So, with that, let’s get to our first question. All right, the first question that we have is. Hmm, how do you know whether you should have a cap on earnings in your plan?
MD: Hmm. If you want to start a good fight in a sales compensation meeting bring up the cap right and I think that’s a great question because I think some of its philosophical. Some of it is that we want to have a cap, because we want to prevent excessive earnings, but a lot of it I think is practical and psychological. So, what happens, I think, is when we have a cap people feel like they’re being held back. They feel like there’s some limitation on their earnings and I always ask the question, well, in interviews, when do you know when was the last time somebody hit the CAP? And you’ll get an answer like well you know what happened a couple years ago and it will, how many people have actually hit the cap. Well, there was one person and so we had to, you know, deal with that situation, but it doesn’t happen very often. Now, you know, my bad analogy on that is kind of like free-range chickens. Right? There’s always a fence. There’s always a cage out there somewhere, right? You just don’t want it to close it and so they’re probably not going to wander too far off the rage. So, I think motivationally, it’s important not to have a cap on the plan. So, how do we manage that. Well, we can manage that through having certain, well, first of all, costing the plan and making sure that if we have really high performance that your cost of sales is going to support that. And we’re going to be okay with that. And especially as the whole organization performs so you don’t necessarily want to look at Your cost of sales just on an incremental basis for one person. So, for looking at the entire performance of the organization. If you have a few people that are hitting really high-performance levels. The entire program should pay for that. But the value of it should be that it’s driving performance. And then there are other alternative, of course, conditions around, you know, high payments. So, we reserve the right to review payments that are, you know, more than double or more than triple target that type of thing. But you don’t necessarily have to have a cap on plan mechanically.
MS: I would agree, Mark. And so, one of the things that we’ve often recommended in us. We call it a bluebird, or a windfall clause in the plan. And it’s surprising how many companies aren’t aware that that is something you can put in the plan. And what that means is that for an exceptionally high, which is the only reason that this goes in play, deal that’s made, where maybe the level of effort is not equal to the sale and what the earnings would be out on that. And then, in some cases, I had one company one time in all these years that I’ve been consulting in this space, that said, “wow, we lost so much money and it was actually a hardship the next year”. If you just have the windfall/bluebird clause, what it says is, we reserve the right to review it and will determine through, and it’s done in a very fair manner, determine what the actual payout is for that. So, when you explain that to salespeople, they get it and they understand it. What they prefer is no cap in the plan, understanding how to get there. And everybody understands that you can’t have earnings that would just go on into perpetuity. Right?
MD: Right, and I think that point about the windfall or the bluebird clause important one, we go into that in the book, What Your CEO Needs to Know About Sales Compensation and this one story of a company that didn’t have that, and really it was a situation where if deals come in that were not included in the quota or not included in the goal setting and their multiples larger than typical deals. What do you do with those situations? So, you should have some type of bluebird clause in your plan to protect yourself regardless, right? So, you should have something in there that says, okay, what happens is if a deal comes in and its x multiples above the quota, or maybe the average deal size or something like that? We reserve the right to review it, as we’ve been saying but also sometimes those get pulled out of the plan they get treated separately. So, you may have a sidecar thing that pays a separate commission rate for deals of certain size, so it doesn’t, you know, single deal doesn’t blow out the entire quota. And then you end up with somebody you know, on the beach for the rest of the year, because they’re just not interested in performing. So that’s a behavioral thing, you know, regardless of a cap, that’s a behavioral thing we have to be very careful of. Is that if one deal really blows the plan out and your mid-year you don’t want somebody walking away and just kind of taking the rest of the year off.
MS: That’s right. And speaking of sitting on the beach, here’s another question and this is interesting. It’s something that I’ve dealt with recently with one of our clients. What are some ways to pay new hires that we’re onboarding without just using a straight draw? Now on this one. This is really an interesting question. That’s posed in and what we’re hearing is that, especially in very highly competitive industries that you’ve got some sales people that I figured out how to gain the company, if you will, and how to game companies in this space so highly competitive, not a lot of reps out there. And what we’re finding is that or what we’re hearing from our clients is that you’ve got some subset of people that are getting hired by a company, they know that you’re one there’s typically a draw, as you know, you’re ramping up in this new Service and just as new person in that company and they don’t have to work as hard, So, they’re relying on the draw, they collect the incentive, this is what we’re hearing, and then at the end of the year after they’ve collected their incentive, they leave and they move on to the next company. Now I’m not going to say that this is all of salespeople that’s happening with because truly we know that that’s not the case, but it is becoming more of a concern with some of our, our clients, where they’re coming to us and saying, “hey, how do we deal with the draw? And how do we drive the right behaviors?” Well, this would be one occasion where we can say MBOs are actually not a bad idea. So, if you want to drive certain behaviors and you understand what’s expected out of that role. You can actually design the plan where they’ll get a portion of their incentive based on sales that they make. We still want to drive that behavior, of course. And additionally, to make them successful and ensure that they’re not just sitting on the beach if you will, you can have some of those MBO’s. So, maybe it is number of onsite visits you expect or the number of calls that you make. Whatever that is, align it to your business and you can add that into the plan. And this is just, again, helping people ramping them but it drives behavior and it helps them understand how they can become a successful seller at your organization.
MD: Yeah, so I think that that word behavior is a key one, as you mentioned, Michelle, which it’s not just about getting something from them, but it’s making sure that when they come off that ramp period they are they’re ready and they’ve been doing the right thing. So, you might ask the question “what does somebody need to do to be successful in that role once they come off of ramp” and those are the kinds of measures you might look at
MS: Here’s another good one. We have discord between our commission scheme and what’s important to the business. How can we get better alignment between the corporate objectives and the measurements in the plan? This goes a little back to the Revenue Roadmap, doesn’t it, Mark?
MD: Yeah, I think it does. And it also goes to this idea of C-level goals that we talked about on our last webinar, where we want to make sure that we’re being very clear about the objectives of the business and that’s being reflected in the plan. And if you recall the last webinar, we talked about this idea, and I talked about the example of the CEO that we had worked with where this originally came from. Where we’re looking at the whole Revenue Roadmap idea, because what was happening, is he was tearing up comp plans when they would comp plans would come back to him from the sales operations team. He would rip them up, because they didn’t make sense to him. So, we boiled the Revenue Roadmap down to five questions and we asked him, these questions, we asked him questions around what’s important from a customer perspective. And he said, well, you know, someone to pull full portfolio products is critical because we’ve got acquisitions that we’ve made. And so we want to make sure we’re selling high enough into the organization selling to the right buyers from a product perspective, we asked him the same questions, you know, Around one offers and it was around the full portfolio, as I had mentioned and making sure that we’re cross selling. Coverage was around having the sales model, the future, not selling, you know, the way we always have because we have to sell higher up in the organization and sell a more complete set of products. He talked about talent and having the right people to be able to fill those roles and he talked about financial priorities. So, whatever those answers are, we use this technique a lot where we get we get that guidance from the C-level executives and basically what we’re doing is coming back and designing the plan based on those guide those guideposts so this really becomes the the North Star, if you will, for the compensation plan. So if this defines what the strategy is are the big strategy points that need to be affected by sales compensation and we then design the sales compensation plan to match up to that, the plan will have a much better chance of aligning with the strategy, right?
MS: Yeah, and the other thing, Mark, for everyone listening, the C-level goals is also a great way to align your executives themselves, even before you get to plan design. So we love to go into a meeting when we do a sales compensation assessment or any type of go to market assessment, and one of the first things that we do is we gather around the senior team — so that would be finance – your CFO, your CEO, the president, maybe you’ve got a CSO there, a Chief Sales Officer, even IT is involved in marketing — and we sit around and we say, okay, from your perspective, what do you understand the priorities of the organization to be, around these five areas? And what’s really interesting Is how different some of those could be. Now, generally, we find that financial goals are fairly the same, but we start getting into these other areas, it’s really unbelievable how different they are. So, if you want to get that through that. We always hear about the sales finance clash and then even marketing is not my friend, right? We often hear that if the sales organization, they’re off doing their own thing. You want to get alignment. The one great way to do that is get everyone around the table and have a dialogue around this and we find it works very well.
MD: Hey, but it sounds pretty simple, but in my experience, Michelle, is when you do this, this is not always an easy meeting or…
MS: I’m usually sweating.
MD: Because really, we can just come in and you know we’re going to get aligned with the team. And this, this becomes a major discussion point and it can actually take a few meetings to get alignment, as we were the company recently a software company. And that was the case with first step was like, Okay, we’re going to make sure we know what the priorities are. We got the CEO, the CFO, CMO, CFO, etc. to talk about these things, and it took a couple of weeks for them to get through these conversations and we’re like, wow, okay. If you guys can agree on this right now, then what does that say about the overall strategy? We’re glad we brought this up right.
MS: That’s right. That’s right. Okay, so let’s move on to the next question. Here’s a good one. Oh, it shows, Mark, people are actually listening when we have our podcasts and webcasts. I subscribe to the idea of the canine model versus the hunter farmer model. But how do I know which people are right for those jobs? You might want to talk a little bit about the canine model first, Mark, before we dive into the answer to this.
MD: Right. I love the canine model, so it is kind of a sophisticated look at the hunter/farmer model and involving little bit further. But the whole idea is that you know, the hunter/farmer model is kind of binary can either be a hunter, or it can be a farmer, so you can go out and you can find new business or you can manage current accounts and, you know, there’s not a lot of granularity behind that. But, you know, maybe you could have a rancher, somebody that’s in between. Maybe it’s a hunter that gets kind of worn out and then retires and becomes a rancher, but the farmer model just seemed kind of black and white to us. So, we thought long, and we thought hard about what is it that describes salespeople in a more granular fashion. And we thought canines, right. And so, when you say that all of a sudden somebody their image pops into your mind and you go, oh, that person in that in that person’s actually a Doberman or that person is actually a lap dog or what have you. So, the canine model basically breaks it down into a few breeds and it basically says, you know, your Dobermans are kind of like your hunters. They’re the ones going out and they’re taking down a new account, right, and they’re very proactive and sometimes very energetic, right? Your retrievers are the ones that are going after current account business. So, they’re going out and retrieving what’s in current, current accounts kind of watching over their own backyards, if you will, and protecting their own backyards. And then you’ve got your collies, which are really the retention type of roles. The service delivery type of roles and they’re protecting right there, they’re holding on to what we have. And so those are some basic ones. And then we, you know, kind of joke about the idea that when you blend these all together. That’s when you end up getting kind of your jack Russell or your hybrid and that canines trying to run all over the place at the same time, and it’s how we built the business on that hybrid role, but the problem with that is it’s not focused so, you have a role that originally was acquiring new customers and as they acquire new customers, they became current customers and they had to manage those current customers and with that came a lot of service issues and operational issues and all sudden, they had no time to go after new customers again. So, when you blend those roles, they become less effective. So, there are myriad types of canine roles, but the point is they lay a good foundation for how we start the design of the sales compensation plan. So, you have to have your coverage model defined clearly. So, to the to the question that understanding the talent, so, Michelle, you may want to talk a bit about that in terms of how do you find the right people for those roles in terms of profiles and selection.
MS: Yeah. So, what we like to do is we actually have a selection tool that we use, but there are many of them out there. And we like to look at a selection tool that would have behavioral, as well as the quantitative and qualitative aspects that you would expect in that job. Now why behavioral because When you’re talking about sales, it’s more than just can I run the calculation and figure out what my commission will be or how much this this product or services going to be but it’s how that person relates can relate and best relates to other people around them, because at the end of the day when we’re talking about face to face interaction, it is about the people. So, one of the things that you can do is run your own subset of your organization, which we like to call your top performers or 90th percentile, so the top 10% or so, through one of these assessments and see what it tells you and that alone won’t tell you everything right, but it gives you a good starting point and then talk to the managers and then we recommend just having a bit of a round table. And you can actually use by using some true data proof points sources of information. It’s less of a guessing game for your organization what works for each type of selling role and what it is you want them to do. Whether they’re retaining revenue, penetrating and looking for new buyers in an account, for example, or whether they’re going after brand new greenfield or new logo business for your organization. So even though there are certain attributes, we say, like, you want to get someone who’s hunting. That’s very comfortable with cold calling or doesn’t mind having a conversation with a stranger. There are probably other attributes that are very specific to your organization. So, one size doesn’t necessarily fit all, but having the assessment, using your alignment of the roles to the revenue, so, looking at the canine model, and then a lot so aligning your roles to your revenue, and then looking at an objective assessment tool and then having a little workshop internally will help you understand what it is you really need in that role.
MD: So, with that canine, the Doberman, in the canine role, have you seen situations where companies have tried to sort of come out with a new Doberman role? And it’s, okay, we need to staff that role and they start staffing it internally, but they maybe don’t select the right people.
MS: Yeah. And they fail and they can’t figure out why they fail. So, that’s really hard. Typically, what will happen, Mark, so I’ll give a really good example of a technology company that we deal with that had a fairly large customer success or inside sales team and they made an acquisition. So, they sold the hardware — this collaboration software and hardware. So, think about teleconferencing systems and then collaboration, something like we’re using right now. What they did, so one company was good in the hardware, it was done by Inside Sales Team, and then the software was being sold face to face. It was a little bit more sophisticated of a product sale. They took the top sellers that were inside, right, because they wanted to match these roles together have the salespeople sell, but they started to take top sellers and put them out in the field. And they were failing. It was the top sellers that really knew how to get down to what the need was up the customer, they were very, very good. They were hitting and exceeding their quotas. Every quarter because they were doing quarterly quotas and yet they were failing in the field. And it’s because they just didn’t have what it took to be the Doberman. So, to your point, Mark, that hunter/farmer isn’t just, it’s not really prescriptive enough. We can’t really change someone’s personality. We can teach them selling methods, but we really can’t teach them how to change their own personality.
MD: Right, right, which is why it makes a lot of sense and I’m thinking about what you’re describing in terms of the new roles and we’re working with a company right now that has put in, they call it a business developer, but it’s basically a Doberman roll and they piloted it with a handful of people. It worked out well because they were handpicked. And so, they were kind of the best of the best. And they said, hey, this is working really well. Let’s start to roll this out over the rest of the country. And as they did that, they started to select people for the additional markets, and it didn’t work so well. And so, what we found out is you actually had a combination of things. So, you had a combination of the market selection and targeting. So, picking the right accounts for those Dobermans, so it wasn’t just go out and find new accounts. But here, here are the prime accounts. And some of those accounts, they actually had relationships and some seed revenue in and then it was selection as we’ve been talking about. So how do we use a profiling tool and they’re, like you said, a number of them available. To pick the right people and then onboarding. So, what are the things that they need to do to be successful to get up and running. So how do they begin working with those accounts? How do the existing account managers or the retrievers transition those accounts to them? If they’re low revenue high potential accounts. So, how does that transition process work? What kind of training do they need to understand the products and services, etc.? There’s a whole string of events that goes together to make that successful with selection of course being, you know, one of the central components.
MS: All right. Well, here’s another question kind of related to caps, in a way, but it says, how do I determine whether I should have a threshold in my plan?
MD: So, let’s talk about what a threshold is.
MD: The threshold is basically the entry point into the plan where somebody starts to get paid incentive compensation and, you know, your traditional plan would say that you would just get a commission from, you know, the first pound, first euro, first dollar of sales and then you would go from there. But what happens is that as you have different types of rules or you’re talking about the canine model here, you have different thresholds in the plan because there are different levels of performance expected and the base salary is basically covering some of that performance. So, let me just kind of illustrate this verbally for a moment here. If I have a retriever, and it’s a say a 70/30 paymix – so 70% base salary, 30% incentive. That 70% base salary is actually paying for something and that’s usually some minimum level of performance and some core job responsibilities. And that minimum level of performance means that I don’t want to double pay meaning. I don’t want to pay commission or incentive pay for that same level of performance. The Doberman, in contrast, might have a more aggressive payment. So, it might be a 50/50 mix — 50% base salary 50% incentive, or a 40/60 — 40% based on attendance. So, do you can see that the base salary actually pays for less. Performance, you’re going to have more in the incentive pay. So that said, the way we look at a threshold is we asked a very simple question, which is, and this is kind of a crass analogy, but if the rep got hit by a bus and didn’t come back tomorrow or the next day, or for the rest of the year. How much of the revenue would still come in? And you think, you know, okay, that’s kind of an odd question, but it kind of kind of gives you an indication. So, if he said well you know about 80% of that revenue would come in because that’s an account manager, that that’s a retriever, and we have a lot of existing relationships we have a whole team involved. So, you know, a good portion of that revenue is going to come in. Well, the incremental revenue that we’re expecting from that person is probably not going to be covered, we’re probably not going to pay for the full, you know, full base revenue to cover that. So, the threshold is probably going to be higher. It might be something in an 80%/70% range of quota. So, we might start to pay the incentive at 70% or 80% of quota the incentive pay might start to kick in and the rest is covered with base salary. And then a Doberman or a hunter, by contrast, you would say, well, how much of that revenue would come in if that if that went away. Well, probably none of it because they didn’t go out and sell any new accounts. Nothing new came in. So, we’re probably going to have a very low threshold, because that first dollar that first pound that first year of sales is actually highly influenced by that doctrine. So, we’re going to have a much lower threshold. So that’s kind of the bus protocol. And then the other two angles I take at it are looking at 10th percentile. So, usually the threshold will be at the 10th percentile of performance somewhere in that range of that particular role or my other way of looking at is what I call fired, which is or sacked, which is what level of repeated performance over several quarters with somebody get the sack or be fired. And if you triangulate on those three methods you know that the bus protocol and the 10th percentile and the in the sector fired, you’re probably going to come something close to what that threshold should be for the plan.
MS: Yeah, that’s right. Okay, great. Here’s one that just came in. It’s about quotas! The performance of our organization to quota has been lagging. What’s a good way to determine whether we have a quota issue or a performance issue? That’s a big one.
MD: That’s right. And isn’t that the mystery for a lot of doing here around compensation and quota is trying to determine whether it’s really a compensation issue or a quote issue or a sales effectiveness issue. So, the first thing that you’ll tend to do with quotas is you’ll look at a performance distribution. So, you might look at the classic histogram of performance. So, you might look at, you know, what percentage or what, how many reps are attaining quota in different buckets of performance. You might look at 10% buckets of performance. So, if you can picture in your mind an x, y graph and across the bottom the histogram. You’ve got 10% buckets of performance from zero to 10, 11 to 20, etc. And so, you’re basically looking at the number of reps in each of those. So, you look at a distribution or histogram to see what kind of what kind of performance we have. And so, what you’ll want to see is usually about 50% to 70% of people at or above quota in a given year. What will tend to see is across organizations is the flat average, it would be about maybe 40-ish percent of reps at or above quota. But the companies that are having quota issues they may see something less than that they may see, you know, 20% or 30% of reps at or above quota. And that’s where you start to go, wow, okay, we’ve got a quota problem. And then what we, what do we do, we started working on the quarter problem and trying to fix that. And we may be fixing the wrong problem. So, what we want to start to do is looking at looking at different angles. So, you might look at absolute performance or you might look at year over year performance to quota. So, picture another graphic of looking at performance your quota attainment year one versus quota attainment year two, and what the scatter plot that would produce and what kind of relationship that we have there. And then remove quarter from the equation. That’s one way to tell if it’s actually potentially a quote issue. So, if you remove quota from the equation and you see that, wow, we actually have more consistent revenue performance year over a year, rep by rep, then perhaps we do performance to quotas. That’s telling you that what’s changing year to year is the quotas, not necessarily the performance. So, we typically see that we see that a lot which is consistent year over year performance from a revenue standpoint, but those same reps and you look at performance quota. It’s much more erratic or sporadic. So that’s one of the first indicators that hey, maybe there’s a there’s a sales effectiveness issue or something else going on here. So, what I like to do is basically start taking those analytics and starting to desegregate that problem, look at different angles of it and you can start to separate out whether you have quota, or you have a sales effectiveness problem.
MS: Yeah, this is when analytics really do support and help you tell the story now. Okay, now we’re going to talk about communication, something that I really liked. So, as a sales operations organization, someone from sales ops sent this in, our communication scores on the sales comp program to the organization are low, we announced the plan at the beginning of the year. And give materials to the sales managers to communicate to their teams. What else should we think about? Yeah, this is a this is a big one. Communicating the incentive compensation plan. Well, one of the first things that we know is that once, twice, or even three times just doesn’t seem to be enough. So, we like to take, we have we’ve actually stolen a concept from the advertising industry, and we create what is called a communications campaign. So, when we set up this communication campaign and we’d like for you to think about every year What is the most important thing that your sales reps are going to hear about? They want to hear about their incentive compensation plan. So, what is it you want them to do, and how is it that you want them to do it? So, creating a campaign around this and starting early and really preparing. We do not believe you can do too much.
So, think about a campaign first and then set it up into these certain areas that you want to consider, and we do have more information on this at SalesGlobe.com. But first thing is you want to think about what are the messages that you want to convey. So, what is it that we want people to understand? Have you had change in the plan from last year? What is the good news that you want to tell people? So, we had another technology company that I’ll bring up and we were changing their plan they had some pretty onerous things in the plan. New sales leader came in and said, I want to take these certain things out. So, the one thing we’re taking out is they had not one, Mark, but two quotas. Two quotas! One for each product and then on top of it to any accelerator in any plan, you had to hit both quotas for each products set before any accelerators would come into play well. What they found happened was that midway through the year, no one was getting any accelerators, even though they were blowing out one of the quota numbers in either one side or the other of the product set. And typically, it was the products that that they were familiar with. So, one of the big news that we wanted to communicate was one quota and all sales count. So, that was a big huge win. So, you want to bring out this good news, and then you want to make sure that you’re explaining, very clearly, just think about like the top three things. So, what are your messages? Secondly, you want to think about, or your different audiences. So, the person who sent this question in said that they send a communication out to the sales management team that can then be disseminated out into the front line sellers and what we’re encouraging you to think about and make sure that you do consider is that the messages are not necessarily the same. So, instead of having a one size fit all communication plan, what you want is to think about your sales leader, what type of messages he or she needs to be giving to the sales management team, and then, what message to he or she needs to be giving out to their individual sellers and then who else is going to be impacted by that plan design and what messages that that they need to hear. So, you’re going to be looking at more than one message. Which leads to the next thing of more than one medium. So, what we like to think about is in lieu of just communicating through presentation of PowerPoint. They can be really whiz, bang and they can have a lot of music around them and a lot of fanfare, especially when we release them at the annual sales meeting, but that’s a little bit short lived. And what we know is that the best way that people really understand is through face to face communication. So, we know that that can be a lot of work, which is why your work as sales ops or wherever it is that the plans are owned and distributed out that you make sure you have done a really great job of communicating to your sales managers, the points that they need to be making to each individual seller. So, you want to make sure that they can do that person to person, communication, we always do recommend that you have when you’ve got your written communication. You have things in there like proof sources. So, what’s a proof source? A proof source is, how do I actually earn commission? And one way to do that is to take a deal and run it through right so plain calculators are a great way to help salespeople really demonstrate that, because everyone learns in different ways. Some by doing, some by seeing, some by learning from others. So, we just encourage you to mix it up and put multiple mediums out there. And then what’s really also very important is you want to make sure that you’ve got cadence and a calendar that everyone has agreed to. So, in that calendar you want to be able to identify who’s going to deliver the message. because you’re not delivering all of them. What is it, they’re communicating, how, and then the timing of when?
MD: So, I think that’s a great way to describe it, Michelle, and you know that’s the reason why at the holidays, we see that that commercial with the car with a red bow on top. And we see it over and over and over, because it works. There’s repetition. We have to communicate that message enough times for people to be able to get that. So, and that’s a lot of I think effective technique in terms of problem solving is just look at, as you said, parallels – things that you can take from other places that maybe are different industries are different business models.
MS: Right, so I’m going to do just two more questions. One, really is, it doesn’t have anything to do directly with the incentive compensation plan. The first one is: Our sales leaders want to include everything in the plan. We have, we have between five and 10 measures in our plan. And this has become difficult for the sales team to understand and very hard for us to administer. So how can we get them to back off of having so much packed into the plan?
MD: You know, and that’s one of the great ironies, I think of doing so much work about creating something like an incentive compensation plan or really any solution which is we put so much into it and then it becomes complex right? and we can we try to control everything through it so I think the danger in the incentive compensation plan is we you know we have a lot of things that we want the organization to do and we tried to create a remote control device for the incentive compensation plan because we want people to be able to hit the revenue numbers hit them in certain product categories. And maybe have profitability numbers. And hey, what about inventory turns. And so, we started throwing everything in there and a lot of the reason we do it is because we have really smart people, that are designing these programs and they can do it right. So, then when it gets out to the organization, it becomes confusing it becomes either like a buffet plan where they kind of go along and they pick what they want. They don’t pick the really important things and it also becomes it muddles the message and I think you know, I guess my thought on this is that the compensation plan at its core is a communications tool. So, what we really want to do is you want to make sure we get across a simple message because the more things that you try to communicate the more muddle the message becomes so I would say, you know, the idea is to get across to those leaders That there are some things that you want to have in the plan and the rest of the things you’re really going to need to manage to if we really want to have an impactful, effective plan.
MS: Alright, thanks, Mark. We really are out of time, but I do want to mention that someone asked us about the level of detail to be included in an effective solution vision. This gets to Sales Design Thinking.
MD: Right. Right. Yeah, that’s a good question. So last time we talked about Sales Design Thinking and starting out by redefining your problem or of redefining it into a good challenge question and the couple of steps in there are to understand the story, which we’re doing through interviews analytics. We’re trying to get the full perspective on what actually happened that brought us to this situation and then we want to spin it around and create what we call a solution vision which is looking ahead. How do we describe what great looks like? So, for me, when we create an effective solution vision, we want to get down to those big questions of what does it look like? who is who’s involved? Where does it happen? When does it happen? And the big important question of why? Right, because the why, you know, coming full circle, Michelle, back to the question on communications the why is the reason the organization is going to follow the lead? It’s the reason the organization is going to do this. So that’s all you really need in this solution vision is just to answer those questions very clearly about, you know, when we get to the other side of this, whether it’s 12 months out or 18 months out what is it going to look like in terms of these key questions? If you can do that in a few simple statements. I think that gives you a solid starting point.
MS: That’s great. Okay, so what we’d like to do is just summarize. To summarize, we’ve gone through some key questions. Thank you so much for everyone that’s joined us today. And what we’d love for you to do is connect with us at firstname.lastname@example.org and I’m Michelle and this with me is Mark Donnolo and we also want to acknowledge that Richard Higham is actually on the line today. So, Richard is our Executive Director of SalesGlobe Europe. If you write us at email@example.com, more than likely you’ll hear from Richard. The other thing we would like, we’ve got a call to action here. So, we have at SalesGlobe, what’s called a Sales Compensation Assessment. If you email us at firstname.lastname@example.org or go to SalesGlobe.com, you can actually conduct the assessment on your own, just like a report card, that tells you where you are in your journey. And your Sales Comp Assessment is something that we are happy to talk to you about on the phone. We can come into your location and hold a workshop. It can be held remotely, and we can completely assess where, Mark was discussing earlier, the Sales Compensation Diamond, we actually take your plan go all the way around all four sides of the diamond. And then we do that again when we do the recommendations. and then as you’re getting ready for 2020. We want to encourage you to order Quotas! with an exclamation point. Order that book today. It is now available at Amazon.com or BarnesandNoble.com. The book is on there. It is a great book. Mark, would you like to say anything about it.
MD: I think we’ve actually advanced, because you said it’s actually not a bad book. I think it’s his first book out on quota setting and it approaches it from the perspective of not just giving you the best practices but helping you to solve the problem. So that’s why we merged together the two components of design thinking, so how do you think about solving a problem and then getting into best practices around quota. So, a very action oriented. A lot of great interviews with really interesting sales, sales operations, and HR leaders. So, I think you’ll enjoy it.
MS: Yeah, and I should also let everyone know that we do have a couple of other workshops. One around sales design thinking. So, take you through and your team through, how do you solve and think about the problem differently that your clients may have. How do you think about problems differently from within your organization? And then we’ve got a quota setting workshop, as well. So, we would love to hear from you. And, you know, we’re always wanting to know what’s going on in the industry. So, we can we can share knowledge with each other. So, thank you so much for being with us today from the Michelle, Richard Higham in Europe, and…
MS: And Mark. Thanks so much. Have a great rest of your day.
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