The debate about whether Sales Ops should be on a sales comp plan can be quite lively. On one hand, sales operations can mean different things to different organizations and be the root of some deeply rooted opinions. Some Sales Ops roles may greatly influence sales results and outputs (i.e. setting quota’s or deal level opportunity identification) while others may have more of a focus on activities such as training or sales compensation administration. In short, it can get a bit confusing about what is the best way to approach this question. Simplifying this complex issue and adding some context and definition to the issue is the first step in making the right decision.
When you look at something that seems too complex, referencing frameworks that help break down these systems into simple, easy to understand, models can help tremendously. The number of different perspectives and opinions that sales managers have related to the best way to structure sales compensation for the Sales Operations role had me harkening back to a model used in engineering that we used to call the process flow diagram to bring everything into its proper context. Below in its simplest form you’ll see the fundamental elements of just about every system you’ll ever encounter;
It is a simple representation of a system which defines a process which converts an input into an output. For example, if you look at controlling the temperature of your home through this model; the input is the current room temperature, “the process” to what you do to adjust the temperature such as adjusting the thermostat, “the output” is higher temperature, feedback would be a thermometer in the room allowing you to judge if the adjustments are working to your satisfaction.
Applying this same model to the world of Sales Ops helps put some context around the issue of how best to structure sales compensation plan for the Sales Ops role. Sales Operations can mean different things to different people and organizations. Referencing a definition of Sales Ops that I came across recently that was clear and logical was “to enable sales with processes and tools so they can hit their targets” and applying that definition to our model yields a process flow diagram that looks something like the following;
Now if we overlay the responsibilities of sales operations in these buckets, a picture starts to emerge which highlights the dominant focus of Sales Ops Analysts on Process & Tools (Activities).
The following helps us understand what this all means, and more importantly, what we should do about it?
Sales Operations roles that are focused on Process and/or Feedback require a plan that aligns with their responsibilities. Yes - it makes sense that a portion of their pay be tied to a performance based incentive plan, but here the type of plan is very important. Due to the qualitative nature of measuring performance with these processes a variable incentive plan component such as an MBO is often the best fit. The pay structure best suited for this type of role is to have a fairly small portion of pay ‘at risk’, a pay mix (Base/Variable) in the 90/10 range is common.
Sales Operations roles that directly influence the purchasing decision (Output focused), a plan with a sales based variable component may be considered. These plans may occasionally have multiple components to the variable plan such as both a MBO and a Bonus. The Bonus component often funded as a percentage of sales over forecast and tied to broader sales performance measures.
Note: for organizations which choose to have Sales Operations on a Sales Incentive plan, financial controls are critical and involving finance in the sales comp process is strongly recommended.