"People will do what they get paid to do" Its a basic tenant of sales compensation design but one we need to continually revisit due to its enormous importance.
Recently I happened upon a video where a panel of sales pro's got together on a panel discussion and one of the more fundamental questions in sales compensation was asked, "How do you incentivize (is that even a word??) sales reps with sales commissions."
The comments, and more importantly the anecdotes they use to highlight them, point to the power of a well designed sales incentive compensation plan. The panel included Andrew Quinn & Mark Roberge of Hubspot and Greg Coleman of Huffington Post.
Mark Roberge shared how specific types of plan changes drove business results.
Challenge |
Plan Design Concept |
Results |
| During start-up, capture market share | Pay reps up front based on Annual Contract Value | Allowed us to capture a ton of market share up front |
| Overcome customer quality & churn issues | Pay based on the lifetime value of customer base | Churn rate skyrocketed down, it was awesome. |
| Contract Length | Pay accelerators for longer term contracts | Crazy long term contract lengths |
Advise;
- No doubt about it, "Money drives behavior"
- Plan design can be dependent on the companies stage of development.
- Re-evaluate your plans frequently, at least every year.
- Can be a ton of work, get everyone involved
- When you nail it, it will have a huge impact on the company performance.
- Keep the plan simple; should be able to fit on one slide, 6 bullets max. It has to be that simple.
Greg Coleman had some timely advice for new plans; test them thoroughly. Make sure you create a situation where successful reps who are crushing thier comp plan are actually helping the business crush its goals.
We encourage you to invest several minutes to view this instructive video.
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