Sales Finds a Way
The Challenge
A compensation plan will make or break your growth strategy. A budding sales manager was tasked with building a two year sales initiative including new compensation plans that would change the sales team behavior from the inside out. This is the story about the lessons learned along the way that played a vital role in succeeding where 80% of other businesses failed.
Lesson 1 - Leaving Dangerous Holes in Your Compensation Plan
One year at SaaStr a Founder/CEO of a company with a $2 Billion dollar valuation was on stage for a fireside chat. This Founder told a very important story about his experience with sales reps, compensation plans, and the human behavior that follows. Note, this story has been paraphrased to distill the lessons.
The Founder said one day during the business quarter, the company CFO bursted into his office and exclaimed, “We have to stop selling immediately!” Obviously the Founder said, “well we aren’t going to stop selling, tell me what the problem is.” The CFO calmed down and explained to the Founder that the sales team had found a way to exploit the sales compensation plan in their favor, which would cost the company more money than management had anticipated. The CFO was right to bring this discovery to the attention of the Founder but the Founder had a different perspective. The Founder’s perspective was, “well, that’s what we hire salespeople to do. The best salespeople are like water. We hire salespeople to find the cracks in a business. That’s how the best salespeople build value and position a business case to their prospective customers and the results are massive revenue growth. It’s on us in management to build a compensation plan that drives the behavior we want to see in sales.”
What Happened Next? Psst. A New Compensation Plan Saved the Day.
The Company did not stop selling
The company did not stop selling. They alerted the sales team the compensation plan would be changing next quarter, and sat down to create a new competitive plan that would drive the sales behavior needed for the company while still being lucrative for all involved.
Lesson 2 - How Do You Account For Future Sales Behavior In Your Compensation Plan?
Accounting for future sales behavior can seem like an unwieldy task. You’re not a mystique that can see the future but you can make friends with sales following the easiest path possible in the reward system. Your sales people will be better at finding cracks than any other department. Human behavior is lazy, though not in a bad way, that’s part of our nature. If you don’t anticipate and plan for this behavior then you’ve already made the job as a people leader that much harder.
This is where effective, well researched compensation planning and system planning come into play that align with the business level goals to compensate (drive) the desired sales behavior from discovery call, to close, to sales hand-off, to renewal. Without taking this careful planning approach, many businesses put in system and compensation practices that actually behave as impedances to business growth.
The actual process described above looks like the following:
- Is there a product-line the business is trying to phase out? Difficulty: Easy. Drastically reduce commission on the specific product.
- Is there a new product-line the business is trying to upsell? Difficulty: Medium. New sales behaviors are required. Bring in Sales enablement. Heavily incentivize compensation on new product-line for a period of time to reinforce sales driving customer adoption and new sales behaviors.
- Is there a product-line that represents the core business revenue, that is required to keep the lights on, but ultimately the company needs to sunset said product-line and spin up revenue for a replacement? Difficulty: Extreme. In this scenario, new sales behaviors are required, new compensation on replacement product-line is necessary, while ensuring the core business revenue is not ignored. This is done by careful, tactical goal-setting based on deep data analysis, and compensation planning.
Yes. Bullet three is achievable.
Lesson 3 - Successfully Implementing A New Compensation Plan
Get comfortable with repeating yourself. Socialization is a key part of change management that is often overlooked. Why? Change management is hard enough on all parties involved. The teams bringing in new changes are temporarily taxed by doing two jobs, their current role to keep the business running, and the second role which is doing their part to help ensure the new changes bring minimal disruption to the day to day business functions. However, socialization with your key influencers is a vital step that when done correctly, can open up areas management overlooked during the planning process. If you genuinely ask your teams for input on future plans, they will raise problems that can be accounted for now and minimize the risks when new plans roll out. Socialization also lowers fears when done correctly. People fear the unknown, and would prefer to participate in change rather than be handed a new set of marching orders with compliance expectations. This is how companies can avoid unnecessarily power struggles that kill productivity.
The Outcome
100% sales team retention of existing staff. Quota attainment for the sales team floated between 103% – 108% during the change management period. Acquisition met all targets. The key was the achievable yet generous comp plan, and early socialization of the upcoming change management that had to occur as the next evolution in the company history. Sales management invested time to go through and identify gaps in the commission plan and carefully plug the gaps with positive behavior drivers (financial incentives), in addition to creating negative consequences for toxic behavior. Sales management introduced clear, transparent guidelines and, most importantly, remained consistent.
Thanks for reading this story, this one was fun to put on the scoreboard.
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