The Life-Changing Magic of Incentive Compensation
I know it is way more fun to operationalize intent data, or create new sequences for a new customer segment, but you need to make sure your team has a foundation that improves pipeline management and instills the mindset to succeed. That foundation is incentive compensation.
Let me tell you part of my story. I once took on the role as finance lead for a company that had nearly 10 people on the sales team. My first month there, that team sold just 3 small deals. The next month was about the same. The third month, we sold nothing.
Fast forward a year later, that team was closing over 40 deals each month.
That’s a 12x improvement in sales productivity with a better CAC.
How much money, trust, and sanity are you losing to get a tiny fraction of that result?
Where did we start to turn around our performance? You guessed it, incentive comp.
Incentive Comp to Measure Efficiency
The question I’ve seen Rev Ops ask when approaching productivity, is the question of efficiency:
“How does our sales team spend their effort?”
It’s where you get infamous stats, like “Sales people only get to spend 5% of their time selling! Argh! Why is Salesforce so complicated?!” (shaking fist)
We approached the problem the same way, and decided to add monthly quotas along the sales cycle to see where and why deals were falling apart. Note: this is an awesome way to improve the quality of pipeline data you get!
Interestingly, our team was busy. Most of their time was out selling and they were doing all the “right” things.
Incentive Comp to Measure Effectiveness
We realized that not all effort is created equally.
No one studies effectiveness because the studies are more complicated and the headlines are less click baity. Effectiveness is harder and more qualitative, but it is also the more foundational part of the productivity equation.
To start understanding effectiveness, we paid on wins and losses equally. Yes, we paid on losses. We believed that the rep fundamentally did the right behavior, so they should get paid for it, and at the same time we added exit criteria for wins or losses. Through this process, we learned we were talking to the wrong people at the wrong times.
That exit criteria helped us learn how to better refine our targeting and how to train up behaviors for losses we thought we should win.
Comp and quota are not the glamorous problems to solve, but they are incredibly powerful.
You don’t have to do everything I did to start seeing results, but you do need to give your team the foundation to succeed. You can start by implementing any (or all!) of these tips:
- Pay on the most impactful behaviors (with exit criteria!), not just closed deals.
- Set a pace: set multiple targets and give people more frequent reporting on how they are doing.
- Revisit you plans quarterly. Your business is evolving, your plans should too.
Book time with one of us to start commissioning smarter.