The B2B Revenue Executive Experience
The B2B Revenue Executive Experience

Episode · 4 years ago

Brian Burns on 5 Things That Make a Great Comp Plan

ABOUT THIS EPISODE

It’s the beginning of the year and companies are beginning to roll out new comp plans. For salespeople, especially ultra high performers, comp plans are one of the primary motivators for structuring out the year and harnessing focus.

We sat down with Brian Burns, host of The Brutal Truth About Sales & Selling to discuss five things to consider when evaluating your comp plan.

You're listening to the BB revenue executiveexperience, a podcast dedicated to helping the executives train their sales and marketing teamsto optimize growth. Whether you're looking for techniques and strategies or tools and resources, you've come to the right place. Let's accelerate your growth in three,two, one. Welcome everyone to the BB revenue executive experience. I'm yourhost, Chad Sanderson. Today we're talking about COMP plans. Beginning of theyear, everybody's getting new ones rolled out. The question we often ask ourselves iswhat really makes a great comp plan? complants are the motivators for sales people, or at least one of the primary motivators. I don't want tosay that we're all just money motivated. We do get motivated by other things. However. The complan is kind of how we structure our year, howwe work backwards into our activity levels. That our focus. It structures theunderpinnings for how our years going to unfold, what financial rewards or gains we mightbe able to achieve, things of that nature. Complaints is a extremelyimportant topic for many people in the world today, especially those that are lookingto achieve the ultra high performer status. So Brian Burns and I sat downand started to go through the things that we believe make a great complan.Hey, Chad, let's talk about complaints. It's that time of year, isit? It, and everybody's getting ready to figure out what next yearis going to look like. Yeah, well, I'm sure you've had alot of experience with complaints. You know what's the most important thing for you. Well, so, if I'm looking at it for myself, one ofthe first things that I look at and one of the things I always tryto do for my teams is make sure that it's stable. Right. I'veworked for a lot of organizations where every quarter, based on performance, theywant to tweak the Complan, they want to change something, and all thatdoes is create distraction. Right. So I think it's really important for executive, sales executive especially, to make sure that they're actually taking the time tothink through the complant make sure they understand what their goals are. They haveto be able to articulate that clearly to the sales team and then structure thecomplaint in such a way that it's going to stay stable for twelve months.Give people time to work inside of whatever that structure is and quit changing therules as an individual contribute. That always irritated the crap out of me.Yeah, and I think it's gotten more and more complex, you know,certainly once you start doing the division of labor and you know we're now movingto smaller upfront deals with, you know, monthly recurring and you know, Iremember when I got started it was pretty simple. You had a basecommission, right, and I'm listening to all kinds of people because it wasa report that came out that only fifty three percent of the sales reps manyquota. Yeah, and all there's all kinds of interpretations of that, youknow, because most people are like, Oh, well, that you know, that's because they're not good salespeople. That's one interpretation. Yeah, that'sexecutives favorite interpretation, it seems like, and I've also noticed that there's kindof almost three or four numbers. Is the board number, you know,what the board is being told that they'll do and that they'll build expenses offof an investment off of, and then there's the executive number, which thewill, the executive will get comped off of, and then there's the therep number and each time there's a little bit of a padding added to there'sdefinitely a padding effect. What's interesting to me, and I I've always Idon't know that I've necessarily run into it, all, I've seen it a lot, is that as you translate those numbers down from the board to theexact to the rep, it's amazing the fuzziness right that starts to happen.It seems to me. You know,...

...and I guess this because back tothat whole point, is stable as like if a sales exact knows what hehas to deliver and you then have to divide it up across your team.You know, you've got to make sure that all the math works and I'veseen some complaints where, you know, because, like any said, anygood sales guy, I'm going to try and figure out to game the systemright. It's just the way I'm out to make as much money as PaulPossible. So I need to know what the rules of engagement are. Butthen when you just take a step back and you add it all back up, I'm you still can at times see it not achieving, if or exceeding, exact ordboard numbers, and that I think it lends itself to confusion andit lends itself to, you know, complaints that are not extremely clear.Yeah, and you know, my number one is that the quota is real, meaning that somebody actually put some thought into it, just didn't pull itout of the air. I've had I had one managery goes no, no, everyone gets the same quota and I'm like, does everybody have the sameterritory? Does everybody have the same support? Does everybody have the same you know, Account Base? He goes, well, it's too confusing. Ifit's different quotas, it's like it's math that can and it's not even complex. Matt, I mean we we're making it more complex as, like yousaid, divisional labor, right, so you'll have strs or bed our salesdevelopment reps, whatever they're calling them, that maybe setting appointments and they probablycalmed to differently. Then you know, your key account reps or your strategicaccount reps, whatever you want to whatever they're being called. And then whatends up happening when you get into that divisional labor is and the complaints aredifferent for each one, as they should be. Then you start to seea lot of friction between well, what's the handoff? What? Well,I qualified it as an str it's not my fault that the key account managercouldn't do anything with it. Well, Oh, all right, now you'reagain. You're creating a situation where, without clear rules of engagement, ina stable structure or something that is achievable for each of those roles, it'sgoing to create drag, it's going to great dragon the sales organization and dragon each of the reps and it probably could have some blowback culturally as well. Yeah, because you know, as Smart Rep will say, like,Oh God, I need, you know, another bedr St are, insight person, whatever you call it, and they're not thinking that if you dothat, that raises the cost of sale, which so it's so that means yourquote is going up. And I I'm shocked how many reps I talkto who do not understand complaints. I got into it on Linkedin this week. He goes, Oh, if it doesn't close in December, just closesin Januar where and everything's fine. I go yeah, except for you don'tget paid for it. An he goes yeah, I do, I gotno, you don't. You manager is going to add it to your quotabecause is a sure thing. Right. So all of a sudden people can'tunderstand simple division and that's why I at the end of the beginning of Qfor I do several podcasts on please listen to me on this. This ishow the game is played, because you what a reps do? They blowup their forecast and all of a sudden they go into que one and themanager gives them this huge quota and they go, I can't do that.Why is it? What is it in the CRM? Then? Well,it's amazing at you know the I think the other thing for me when youlook at a complant is making sure that your systems or your forecasting process supportsit right, enables it, mirrors it, not works against it, because ifthere's not a consistent you know, if language it's using the Complan isnot the same language that's used in forecasting, where the way you qualify, there'sa mismatch there and so you end up spending a lot of time debatingthis account versus that account rather than having something really clear right. So Ithink the complant has to not be, you know, a set aside fromwhat the sales team does. It needs to be a part of that DNA, a pillar of the way they act,...

...and it needs to provide that foundationalsupport across the entire sales organization and, quite frankly, even beyond the salesorganization. Yeah, I mean because today, if you can't put yourcomplan and a spreadsheet and you know, basically, you know, type inyour deals for that quarter and figure out how much are getting paid, becauseit used to be super simple and people. It used to be people wouldn't evengo with the difference between five and ten percent. No one would dosix or nine because they had to do it in their head. You know, it's like they didn't want to have to use a spreadsheet. But todayit's turning into a neural network and an AI APP to figure out how topay people. Well, and I've seen, you know, and this is atleast for me and reps that I had worked for me, you'd alwayssee him if the the first thing they do get given the Complan, yougo over it, you explain why the complant is structured the way it isand you show them the tools that you know. Maybe it's somehow it tiesinto your crm and this is how it's going to be calculated, but myselfand a lot of the reps that work for me, the first thing wedid was crack open excel and figure out, okay, here's my tracking like.I understand that the company may have, you know, ways that they're goingto track it, but I'm not a hundred percent sure I trust it. And then, quite frankly, and excel, I can then determine whereI need to put, you know, my focused am I getting higher compon net new business or is it is it higher comp because the company wantsus to expand existing accounts, or is it penetration into a new industry orvertical? And so how do I work those numbers backwards? And I seea lot of reps that don't take the time to understand, you know,not only the complant but what that means when they work backwards into their activityand focus levels. So a complaint that somehow I don't want to say istoo simple, because we've, I think we've made it more complex and itneeds to be, but one that that easily allows reps to back into anactivity in a focus level I think is critical as well. And that's itand I think a lot of times there's a mismatch. Certainly like on thequarterly goals of the manager, you know, who's probably comped on meeting quarterly goals, but the reps aren't. So you know they're putting the pressure onthe wrap to close it by the end of the quarter and the REP goeswell, it doesn't matter to me if next day. Yeah, you know, love to help you out, buddy, but yeah, I already know.Well, on exact comp is it's always interesting. There's always this notalways. Don't want to use absolute, but often you see the way exactcomp is structured doesn't mirror connect to the way they've broken down sales comp oreven marketing comp if they're getting variable comp for mql's or quality of mqls.There's this mismatch right. So that consistency of that compensation plan and how itties into what the business issues and objectives are for the exacts and the boardand the organization as a whole. It doesn't happen as often as I thinkit should. I think a lot of sales executives, are executives in general, do themselves a disservice by not spending the time to do that and thenwhat happens is the reps will try and just okay, I'm going to focuson my little area and it's not my problem if the exact screwed up thecomp plan and it doesn't really achieve what they needed to achieve. And Ithink that gets dangerous, right. It gets dangerous because it's a mismatch andmotivation. Yeah, it is. And you know, because this is thetime of year that you know, certainly you know. I think most companiesget them out in January. I've been at companies where you didn't get intothe middle of February. It and and there's so much anxiety because everyone's jockeying, you know, the managers, you know they're they don't want to tellyou anything because they want to you know, reassigned territories. Reps have to like, you know, hold their cards close to their vest about the dealsthat are happening in q one. How...

...have you positioned yourself to, youknow, make sure they're that Complan, as you know, advantageous to youand doesn't get, you know, overblown or undoable? Well, I've always, I learned, I guess, the hard way, right to be extremelyhonest with myself, and with, with any of the executives that I wasdealing with as an individual contributor or with reps that were part of the teamsthat I ran. Like I always wanted, I wanted to know whether I wasan individual contributor or not. I wanted to know what was the goalfor our business. So if essentially reverse engineering the way we sold and usingit on ourselves, so eating our own dog food, what is it we'retrying to accomplish? What are the metrics? Where the KPIS? And then,okay, how does that kind of work its way down into the organization? I can work accounts any way you want me to. I'm going tofocus on how I'm going to make the most money, because that's why Igot into sales. I mean no, not not to hurt anybody's feelings outthere. I'm not in sales it's create world peace. I want to solveproblems for businesses and I want to make money. That's what I'm here todo, but I also want to do it I am aware there's a culturalcomponent to a sales reps performance inside of an organization. Well, in orderto try and get over that. You know, sales is the devil mentalitythat you see a lot of times. There needs to be an awareness,a bigger awareness, of what's going on inside of the company. So forme it was always not just looking at my complan or making it sound likeI was just looking at it for myself, but I wanted to make sure thatI was being, you know, quote unquote, a good corporate citizen, as well as making sure that it was it was stable and fair andaccessible and going to help us all hit our goals, because there's nothing worsethan when the goals that are set up or the KPIS that are structured,they're skewed, they're screwed up, something happens in the market, maybe hadpolitical changes, who knows what it is. But when those are off and thenumbers aren't being hit in the revenues not coming in, then all ofa sudden the attention all the way down into the minutia of how many phonecalls did I make, how many emails did I send, how many facetofacemeetings? That was the last place in the world I ever wanted to be. So you what you want me to go do this, then help memake sure that I am educated and where and aligned with everything else that's goingon. So it was that kind of perspective of yeah, it's about me, but I understand I'm not playing alone here and I'm seeing a huge trend. And tell me if you're seeing it. Of You know, people moving tosixmonth complants. I think, man, I've seen that and I guess youknow. I guess I could see where it would make sense if it'sthe first tip of the speared deal is transactional, short sales cycle. Now, most of my life I'm used to be to be complex, you know, and twelve, eighteen, if hell in some cases twenty, four monthssales cycles for very large deals. So if you change it every six monthsand that's going to change my account strategy every six months, and that Idon't I don't see making a lot of sense. But as we're moving,the more of that, you know, str division of Labor type stuff,smaller get in the door types of accounts, I could see it potentially making sense. But I don't know, maybe I'm just too old, maybe Ijust don't move as fast as I used to. Six months to me goesbuy in a blink of an eye. I mean hell, a year goesby in the blink of an eye. Now, yeah, it does.I mean I bem when I was there through an acquisition. They moved toof it and you know, it's just clearly a red flag that they itwas a commission expense management thing as opposed to, you know, a strategicthing, because, you know what they if they had visibility into a hugedeal, they could move things around and you know, and a company likethat, you know, a blue bird can be a big blue bird,right, you know, but and I've also seen it in smaller companies andtypically when I go in, I asked, you know, what's the percentage ofthe reps making quota? And it's just shockingly low today. And thenI did the company make its number?...

Oh yeah, I go, how'sthat possible? We were away. So the company hit it, but lessthan half of your sales reps at their target. So we're back to thetwenty rule. Right, twenty percent of your reps are generating eighty percent ofyour income. That's one interpretation and it gets. Yeah, I mean itgets. The thing that I've if somebody came to me and said, Hey, I'm going to move us to a six month complant, my first questionwould be why? What is it we're trying to do? Is it?Do you really just want to manage commission expense? Because the other thing thatI look for and complaints, and I think is important in complaints depending onthe length of the sale cycle, is whether or not, like if youstart working a deal, let's say middle of the year, and you're workingit and your you've chosen to focus on that account because, based on yourcomplan that as it stands today, you're going to achieve x and then allof a sudden, halfway through the game, the rules change and they come backand say, oh well, we're going to change a complant or it'sa new complant this year, and that x you thought you were going toget you really only going to see about a third of that, and thatis soul crushing when you've put your you know, you've put the effort intoa complex sale, thinking that if you can get this pulled off, there'sgoing to be the return. Well, hell, if my fight know,my complaint is going to be that I would have totally done things differently.And so I think with six month plans there I think you run the riskof keeping your sales people from being able to focus the way you want themto to drive the results you're after. Yeah, I agree with you there. But my point about the fifty percent was that they overassigned quota. Fortypercent, meaning that, you say, the company wanted to do ten million, they assigned fourteen million of quota. Yeah, that which it is notuncommon today. And and I go, why did you do that? All, we wanted to make sure we were okay and I could go to levelbelow that. And I go, so you feel that people will sell morewhen they're under quota or over a quota. Well, I guess over quota.So why would you make quota so hard? To get that right?Right. Well, and you see that when you see that over assignment ofquota, sometimes it's deliberate. I was always good and I've seen it actuallybe accidental. I caught I won't I won't name the company I was workingfor, but I caught one of the divisions I was working for. Thisis going back ten eleven years. I just did the math, adjusted themath on just the team that I was a part of. There were otherother elements in the sales or position and just working backwards, they had theyhad almost oversigned twenty four percent more in quota and then in the same breathwould complain that their turnover costs on the sales team because you know, ifyou lose them then you got to bring people in and ramp up caust's timeand money. They'd complain about that but they didn't see the connection there,right. So it's that one of the things for Complix roomers always again makingsure that it's not looked at in a silo. But you gotta understand thereare impacts across the organization. Culturally. You're going to you could take hitson cost of sales or, you know head counter overhead, things like that. And I think most sales executives have a tendency, most executive have atendency look at it in a silo, right in this protected little perfect labenvironment, and labs, lab environments, not paying my bills right. AndI think people have to manage to like a sports franchise team versus, youknow, an assembly line, right, because okay, it might take,you know, a month to learn how to put a door on a car, but it's could take probably eighteen months to learn how to sell the productinto a large enterprise account? Oh, without a doubt. Right. Soyou have you get the right picture, the right catch or the right leftfieldman, and all of a sudden you...

...start you know, not all thoseplayers on that team get paid the same. Well, and that's it. Yeah, and that's another thing. Right. So you start. Have you seenorganizations where they've they've made the complants so different based on division of Labor, that it actually creates internal strife in the sales teams themselves? Have yourun into that? Not so much, but I've round running most of thetime is like when there's somebody who knocks it out of the park consistently.They keep coming up with new and new handicaps and what they do is theyforced the person out the door. Now, if you use that on a sportsteam, let's say you have, you know, home run hitter.Okay, well, you know, we can't pay him more than the rightfielder. Right, all right, no one put that. That logic justdoesn't apply, right, and I sometimes I can't understand why, why peoplechoose to look at it that way. I mean, have you seen impactsas a result of that? Well, yeah, yeah, they leave.That's the easy one. They come out. Yeah, I mean I can't tellyou the number of times I look at the complan and they go andthey go, Oh yeah, there's two people in that territory. You haveyour choice of either keeping these accounts that you build with this huge number,we're taking this brand new territory with this lower number, but there's no revenueand starting over. And you got to give that account to that guy youhate over there. Should and could you spend three months teaching them what todo? And you're like no, thanks and no pass. That's the otherthing about complants. That that has always made me kind of tilt my headlike a confused puppy. So you know, the organizations, we've all we probablyI'll do business with them or have talked to the cithern where you knowevery twelve months you're going to get a new list of accounts or you're goingto have to give up. You know they're going to reshuffle it. Rightand and apple was one of these when I was working with some of theirReps. I never worked for apple, but what working with their reps,if you would get into October, November, they yeah, we can't, wedon't want to talk about those accounts. Anymore because that's probably not going tobe my account at the first year. Okay. So well, what inessence just happened is you just lost three months of work on these accountsthat could have produced revenue, could have produced return, because you've created aculture where you know the shuffle is going to be so great at the firstof the year or at the end of the you know financial calendar, thatpeople start to then make deliberate choices about where they're going to spend their timeand that has a drastic impact on the amount of revenue they produce. Andso that consistent shuffle of whether it be accounts or Oh, I love therealignment of territories, like, Oh, last last year I was Texas waspart of my territory. Now I'm going to Michigan, like why would?Why would? Or I don't? I have never understood why organizations would consistentlymake such drastic changes. Occasionally, yes, but consistently. I can see thatbeing a severe drag again on the on the teams and the efforts,and I think probably goes back to that whole stable point. Yeah, andI think what I've always talked to when I when I was a manager Iwould tell reps, I go this is your a territory. This I canguarantee you you're going to get next year. I have any any can troll overit now. You be territory. I understand is going to be beand that meaning it's going to be a lower priority. But I want youto work it and tell me if there's something that that's just not going tohappen this year, and you can just tell me. I'll manage it andI understand completely. But I'll protect you, but you got to protect me.So you gotta, I think, manage like you're managing, you know, a sporting team and understand that you want these players. You know youput all this investment in them, and that came out of your box.You know your back and you don't want them leaving, because I heard amanager say, well, we don't hire a players, we rent them becausethey don't stay. I've never heard that...

...before. That's great, right,because true, often, too often true. Yeah, because it's too hard to, you know, convince the CFO that this person's really worth more thanthe other person. And I think we go in dangerously in this direction ofhiring. You know, I like the str role and even having, youknow, young junior people come in. But you know, I think onceyou get the accountants involved in it, because I see everybody is equal.It's a spreadshet view of the world at all, then they're going to gointo the division of Labor Gone Mad, which works, and a high velocitysale. Where's poll but not many companies have pole right at and if you'restill in the push stage, that's a talent. That's a skill that doesnot come you know, they don't teach them in college and it takes awhile to develop and it is a skill and once you built that skill,you don't want it walking up the door. Well May, and the main themaintaining of your team over time will generate better results. Right, Imean it just it's one of the reasons why one of the one of thebest tools I've seen in complants is a team accelerator. So yes, everybodymay have different complants because the players, like said, with the sports onwith the baseball analogy, they do different things. So there might be,you know, different types of complants for them. However, much like abaseball team or football team, when you win the championship, everybody gets areally expensive ring and a nice bonus. Right. So in order to getover that, I in the past have used and I didn't come up withit, stole it from somebody else. But that team incent of that teamaccelerator that if you know, for the quarter or the half or the year, whatever it is, if the entire team achieves the targets, then there'sthen there's another way to accelerate their individual comp now it usually is a multiplieron whatever their complan is, just to keep it, you know, fairacross the board. But that type of layering, that one layer of likeokay, you hit these stiff the entire team has these targets and everybody makesmore money. You get to see you see people work together, they're moreoften and have a tendency to stick around a little bit longer because they don'tfeel like you're just hanging out by themselves. And that brings up a great point, because most sales managers think of their team as a team, right, and in some ways they are to him, the manager, but tothe rap, you know, if one it's almost the opposite, right,because if one person is, you know, a hundred and fifty percent of thequota, all the rest of them have to push that person down,otherwise they look bad. And I remember this one start up. If youknow, we'd all meet at the air or be going back to the airport. We get in the rental bus and head back to the airport and we'dall look around and say, okay, who's not going to be on thisbus trip next quarter? And it's sad, but you know, there's a lotof backbiting and and I think that a team boats would kind of pullpeople together, because managers to tend to think, oh, they're might team, but there's no incentive to them helping each other. It's a D incentiveright. Well as if they share resources, well they are. That's where Iwas just going to go, especially today, when you see it howmany people are involved in a sale. I mean we often talk about howmany people are involved on the buyer side and I forget what the latest seven, eight, nine, ten, whatever. There's a lot of people typically onthe buying side of it, but we're also seeing an increase in thenumber people on the sales side of it. The days of the Lone Wolf.It still happens. I still know some that can pull it off,but that requires a command of a skill set that you don't see a lotof people working to develop. You know as much anymore you have. Yousee a lot more specialization, and so...

...now you've got more people involved inthe sales process. Well, you want everybody working together. The only wayto do that, if you're going to have different complants for the different players, is to give them some type of some type of team incentive. Allright, everyone, that does it. For this episode, I hope youenjoyed the conversation around complans, obviously a sensitive subject for many in sales today. Hopefully we provided some insight, some things to think about in some waysthat you can reevaluate your perception of your own complan as you move into makingtwo thousand and eighteen stellar year for your sales performance. When I thank everybodyfor listening. As always, you like what we're hearing, what we're doingand what you're hearing. Drop US review on itunes. We were greatly appreciateit. Shoot us an email, let us know what other guests or topicsyou'd like us to cover, and until next time, we value prime solutions, which you all nothing but the greatest success. You've been listening to theBB revenue executive experience. To ensure that you never miss an episode, subscribeto the show in Itunes for your favorite podcast player. Thank you so muchfor listening. Until next time.

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