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 executive experience, a podcast dedicated to helping the executives train their sales and marketing teams to 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 your host, Chad Sanderson. Today we're talking about COMP plans. Beginning of the year, everybody's getting new ones rolled out. The question we often ask ourselves is what 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 to say 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, how we work backwards into our activity levels. That our focus. It structures the underpinnings for how our years going to unfold, what financial rewards or gains we might be able to achieve, things of that nature. Complaints is a extremely important topic for many people in the world today, especially those that are looking to achieve the ultra high performer status. So Brian Burns and I sat down and 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, is it? It, and everybody's getting ready to figure out what next year is going to look like. Yeah, well, I'm sure you've had a lot 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 of the first things that I look at and one of the things I always try to do for my teams is make sure that it's stable. Right. I've worked for a lot of organizations where every quarter, based on performance, they want to tweak the Complan, they want to change something, and all that does 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 to think through the complant make sure they understand what their goals are. They have to be able to articulate that clearly to the sales team and then structure the complaint 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 the rules 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 moving to smaller upfront deals with, you know, monthly recurring and you know, I remember when I got started it was pretty simple. You had a base commission, right, and I'm listening to all kinds of people because it was a report that came out that only fifty three percent of the sales reps many quota. Yeah, and all there's all kinds of interpretations of that, you know, because most people are like, Oh, well, that you know, that's because they're not good salespeople. That's one interpretation. Yeah, that's executives favorite interpretation, it seems like, and I've also noticed that there's kind of 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 off of an investment off of, and then there's the executive number, which the will, the executive will get comped off of, and then there's the the rep number and each time there's a little bit of a padding added to there's definitely a padding effect. What's interesting to me, and I I've always I don'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 the exact 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 to that whole point, is stable as like if a sales exact knows what he has 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've seen some complaints where, you know, because, like any said, any good sales guy, I'm going to try and figure out to game the system right. It's just the way I'm out to make as much money as Paul Possible. So I need to know what the rules of engagement are. But then 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 and it 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 it out 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 same territory? Does everybody have the same support? Does everybody have the same you know, Account Base? He goes, well, it's too confusing. If it'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 you said, divisional labor, right, so you'll have strs or bed our sales development reps, whatever they're calling them, that maybe setting appointments and they probably calmed to differently. Then you know, your key account reps or your strategic account reps, whatever you want to whatever they're being called. And then what ends up happening when you get into that divisional labor is and the complaints are different for each one, as they should be. Then you start to see a 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 manager couldn't do anything with it. Well, Oh, all right, now you're again. You're creating a situation where, without clear rules of engagement, in a stable structure or something that is achievable for each of those roles, it's going to create drag, it's going to great dragon the sales organization and drag on 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 do that, that raises the cost of sale, which so it's so that means your quote is going up. And I I'm shocked how many reps I talk to who do not understand complaints. I got into it on Linkedin this week. He goes, Oh, if it doesn't close in December, just closes in Januar where and everything's fine. I go yeah, except for you don't get paid for it. An he goes yeah, I do, I got no, you don't. You manager is going to add it to your quota because is a sure thing. Right. So all of a sudden people can't understand simple division and that's why I at the end of the beginning of Q for I do several podcasts on please listen to me on this. This is how the game is played, because you what a reps do? They blow up their forecast and all of a sudden they go into que one and the manager 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 you look at a complant is making sure that your systems or your forecasting process supports it right, enables it, mirrors it, not works against it, because if there's not a consistent you know, if language it's using the Complan is not the same language that's used in forecasting, where the way you qualify, there's a mismatch there and so you end up spending a lot of time debating this account versus that account rather than having something really clear right. So I think the complant has to not be, you know, a set aside from what 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 foundational support across the entire sales organization and, quite frankly, even beyond the sales organization. Yeah, I mean because today, if you can't put your complan and a spreadsheet and you know, basically, you know, type in your deals for that quarter and figure out how much are getting paid, because it used to be super simple and people. It used to be people wouldn't even go with the difference between five and ten percent. No one would do six 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 today it's turning into a neural network and an AI APP to figure out how to pay people. Well, and I've seen, you know, and this is at least for me and reps that I had worked for me, you'd always see him if the the first thing they do get given the Complan, you go over it, you explain why the complant is structured the way it is and you show them the tools that you know. Maybe it's somehow it ties into your crm and this is how it's going to be calculated, but myself and a lot of the reps that work for me, the first thing we did 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 going to track it, but I'm not a hundred percent sure I trust it. And then, quite frankly, and excel, I can then determine where I need to put, you know, my focused am I getting higher comp on net new business or is it is it higher comp because the company wants us to expand existing accounts, or is it penetration into a new industry or vertical? And so how do I work those numbers backwards? And I see a 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 activity and focus levels. So a complaint that somehow I don't want to say is too simple, because we've, I think we've made it more complex and it needs to be, but one that that easily allows reps to back into an activity in a focus level I think is critical as well. And that's it and I think a lot of times there's a mismatch. Certainly like on the quarterly 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 on the wrap to close it by the end of the quarter and the REP goes well, 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 not always. Don't want to use absolute, but often you see the way exact comp is structured doesn't mirror connect to the way they've broken down sales comp or even 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 it ties into what the business issues and objectives are for the exacts and the board and the organization as a whole. It doesn't happen as often as I think it 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 then what happens is the reps will try and just okay, I'm going to focus on my little area and it's not my problem if the exact screwed up the comp plan and it doesn't really achieve what they needed to achieve. And I think that gets dangerous, right. It gets dangerous because it's a mismatch and motivation. Yeah, it is. And you know, because this is the time of year that you know, certainly you know. I think most companies get them out in January. I've been at companies where you didn't get into the 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 tell you anything because they want to you know, reassigned territories. Reps have to like, you know, hold their cards close to their vest about the deals that are happening in q one. How...

...have you positioned yourself to, you know, make sure they're that Complan, as you know, advantageous to you and doesn't get, you know, overblown or undoable? Well, I've always, I learned, I guess, the hard way, right to be extremely honest with myself, and with, with any of the executives that I was dealing with as an individual contributor or with reps that were part of the teams that I ran. Like I always wanted, I wanted to know whether I was an individual contributor or not. I wanted to know what was the goal for our business. So if essentially reverse engineering the way we sold and using it on ourselves, so eating our own dog food, what is it we're trying 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 to focus on how I'm going to make the most money, because that's why I got into sales. I mean no, not not to hurt anybody's feelings out there. I'm not in sales it's create world peace. I want to solve problems for businesses and I want to make money. That's what I'm here to do, but I also want to do it I am aware there's a cultural component to a sales reps performance inside of an organization. Well, in order to try and get over that. You know, sales is the devil mentality that 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 for me it was always not just looking at my complan or making it sound like I was just looking at it for myself, but I wanted to make sure that I was being, you know, quote unquote, a good corporate citizen, as well as making sure that it was it was stable and fair and accessible and going to help us all hit our goals, because there's nothing worse than 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 had political changes, who knows what it is. But when those are off and the numbers aren't being hit in the revenues not coming in, then all of a sudden the attention all the way down into the minutia of how many phone calls did I make, how many emails did I send, how many facetoface meetings? 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 me make sure that I am educated and where and aligned with everything else that's going on. 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 to sixmonth complants. I think, man, I've seen that and I guess you know. I guess I could see where it would make sense if it's the 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 months sales cycles for very large deals. So if you change it every six months and that's going to change my account strategy every six months, and that I don'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 I just don't move as fast as I used to. Six months to me goes buy in a blink of an eye. I mean hell, a year goes by in the blink of an eye. Now, yeah, it does. I mean I bem when I was there through an acquisition. They moved to of it and you know, it's just clearly a red flag that they it was a commission expense management thing as opposed to, you know, a strategic thing, because, you know what they if they had visibility into a huge deal, they could move things around and you know, and a company like that, you know, a blue bird can be a big blue bird, right, you know, but and I've also seen it in smaller companies and typically when I go in, I asked, you know, what's the percentage of the reps making quota? And it's just shockingly low today. And then I did the company make its number?...

Oh yeah, I go, how's that possible? We were away. So the company hit it, but less than half of your sales reps at their target. So we're back to the twenty rule. Right, twenty percent of your reps are generating eighty percent of your income. That's one interpretation and it gets. Yeah, I mean it gets. 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 question would 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 that I look for and complaints, and I think is important in complaints depending on the length of the sale cycle, is whether or not, like if you start working a deal, let's say middle of the year, and you're working it and your you've chosen to focus on that account because, based on your complan that as it stands today, you're going to achieve x and then all of a sudden, halfway through the game, the rules change and they come back and say, oh well, we're going to change a complant or it's a new complant this year, and that x you thought you were going to get you really only going to see about a third of that, and that is soul crushing when you've put your you know, you've put the effort into a complex sale, thinking that if you can get this pulled off, there's going 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 risk of keeping your sales people from being able to focus the way you want them to 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. Forty percent, meaning that, you say, the company wanted to do ten million, they assigned fourteen million of quota. Yeah, that which it is not uncommon today. And and I go, why did you do that? All, we wanted to make sure we were okay and I could go to level below that. And I go, so you feel that people will sell more when 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 of quota, sometimes it's deliberate. I was always good and I've seen it actually be accidental. I caught I won't I won't name the company I was working for, but I caught one of the divisions I was working for. This is going back ten eleven years. I just did the math, adjusted the math on just the team that I was a part of. There were other other elements in the sales or position and just working backwards, they had they had almost oversigned twenty four percent more in quota and then in the same breath would complain that their turnover costs on the sales team because you know, if you lose them then you got to bring people in and ramp up caust's time and 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 making sure that it's not looked at in a silo. But you gotta understand there are impacts across the organization. Culturally. You're going to you could take hits on cost of sales or, you know head counter overhead, things like that. And I think most sales executives have a tendency, most executive have a tendency look at it in a silo, right in this protected little perfect lab environment, and labs, lab environments, not paying my bills right. And I think people have to manage to like a sports franchise team versus, you know, 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 product into a large enterprise account? Oh, without a doubt. Right. So you have you get the right picture, the right catch or the right left fieldman, and all of a sudden you...

...start you know, not all those players on that team get paid the same. Well, and that's it. Yeah, and that's another thing. Right. So you start. Have you seen organizations 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 you run into that? Not so much, but I've round running most of the time 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 they forced the person out the door. Now, if you use that on a sports team, let's say you have, you know, home run hitter. Okay, well, you know, we can't pay him more than the right fielder. Right, all right, no one put that. That logic just doesn't apply, right, and I sometimes I can't understand why, why people choose to look at it that way. I mean, have you seen impacts as a result of that? Well, yeah, yeah, they leave. That's the easy one. They come out. Yeah, I mean I can't tell you the number of times I look at the complan and they go and they go, Oh yeah, there's two people in that territory. You have your 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 revenue and starting over. And you got to give that account to that guy you hate over there. Should and could you spend three months teaching them what to do? And you're like no, thanks and no pass. That's the other thing about complants. That that has always made me kind of tilt my head like a confused puppy. So you know, the organizations, we've all we probably I'll do business with them or have talked to the cithern where you know every twelve months you're going to get a new list of accounts or you're going to have to give up. You know they're going to reshuffle it. Right and and apple was one of these when I was working with some of their Reps. I never worked for apple, but what working with their reps, if you would get into October, November, they yeah, we can't, we don't want to talk about those accounts. Anymore because that's probably not going to be my account at the first year. Okay. So well, what in essence just happened is you just lost three months of work on these accounts that could have produced revenue, could have produced return, because you've created a culture where you know the shuffle is going to be so great at the first of the year or at the end of the you know financial calendar, that people start to then make deliberate choices about where they're going to spend their time and that has a drastic impact on the amount of revenue they produce. And so that consistent shuffle of whether it be accounts or Oh, I love the realignment of territories, like, Oh, last last year I was Texas was part 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 consistently make such drastic changes. Occasionally, yes, but consistently. I can see that being a severe drag again on the on the teams and the efforts, and I think probably goes back to that whole stable point. Yeah, and I think what I've always talked to when I when I was a manager I would tell reps, I go this is your a territory. This I can guarantee you you're going to get next year. I have any any can troll over it now. You be territory. I understand is going to be be and that meaning it's going to be a lower priority. But I want you to work it and tell me if there's something that that's just not going to happen this year, and you can just tell me. I'll manage it and I 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 you put 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 a manager say, well, we don't hire a players, we rent them because they 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 than the other person. And I think we go in dangerously in this direction of hiring. You know, I like the str role and even having, you know, young junior people come in. But you know, I think once you 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 go into the division of Labor Gone Mad, which works, and a high velocity sale. Where's poll but not many companies have pole right at and if you're still in the push stage, that's a talent. That's a skill that does not come you know, they don't teach them in college and it takes a while 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 the maintaining of your team over time will generate better results. Right, I mean it just it's one of the reasons why one of the one of the best tools I've seen in complants is a team accelerator. So yes, everybody may have different complants because the players, like said, with the sports on with the baseball analogy, they do different things. So there might be, you know, different types of complants for them. However, much like a baseball team or football team, when you win the championship, everybody gets a really expensive ring and a nice bonus. Right. So in order to get over that, I in the past have used and I didn't come up with it, stole it from somebody else. But that team incent of that team accelerator 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's then there's another way to accelerate their individual comp now it usually is a multiplier on whatever their complan is, just to keep it, you know, fair across the board. But that type of layering, that one layer of like okay, you hit these stiff the entire team has these targets and everybody makes more money. You get to see you see people work together, they're more often and have a tendency to stick around a little bit longer because they don't feel 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 to the rap, you know, if one it's almost the opposite, right, because if one person is, you know, a hundred and fifty percent of the quota, all the rest of them have to push that person down, otherwise they look bad. And I remember this one start up. If you know, 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'd all look around and say, okay, who's not going to be on this bus trip next quarter? And it's sad, but you know, there's a lot of backbiting and and I think that a team boats would kind of pull people 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 incentive right. Well as if they share resources, well they are. That's where I was just going to go, especially today, when you see it how many people are involved in a sale. I mean we often talk about how many 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 on the buying side of it, but we're also seeing an increase in the number 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 lot of people working to develop. You know as much anymore you have. You see a lot more specialization, and so...

...now you've got more people involved in the sales process. Well, you want everybody working together. The only way to 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. All right, everyone, that does it. For this episode, I hope you enjoyed 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 ways that you can reevaluate your perception of your own complan as you move into making two thousand and eighteen stellar year for your sales performance. When I thank everybody for listening. As always, you like what we're hearing, what we're doing and what you're hearing. Drop US review on itunes. We were greatly appreciate it. Shoot us an email, let us know what other guests or topics you'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 the BB revenue executive experience. To ensure that you never miss an episode, subscribe to the show in Itunes for your favorite podcast player. Thank you so much for listening. Until next time.

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