Today's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.
If your company hasn’t been making its numbers and your employees seem disengaged, it’s time to examine how to incent them uniquely and appropriately.
A big part of building a successful sales team is building a comp plan to suit your team members’ individual needs. Let’s look at the specialized roles that round out your team and how to optimally incent your team members.
A hunter is your “traditional” salesperson; he or she probably cold-called you to get the job and followed up persistently. Hunters are bold and thrive in the field, where they can hunt new business. Their main task is to nurture leads and close deals. To incent hunters properly, make sure that a large portion of their target salary comes from variable pay. Among Xactly users (more than 500 emerging to enterprise companies) the average hunter pay mix is 50 percent fixed and 50 percent variable.
A recent PR Newswire article, “Motivating Your Sales Force: Do Bonuses or Commissions Work Better?” cited an AMA study that compared bonus-at-target plans to commission-beyond-target plans and found that “sales improved by 24% when the sales reps were switched to the commissions scheme.” Why? The key to optimally incenting hunters is to break down any barriers to performance. A common barrier that companies set up for hunters is a capped commission plan. The organization may believe it’s protecting the budget, but the reward isn’t worth taking away the motivation for hunters to knock it out of the park.
While hunters stay hot on the trail of new business, farmers harvest deals by nurturing existing clients, keeping customers happy, and cross-selling. You’re guaranteed a lower churn rate when you have talented farmers focused on consulting and renewals. To reward farmers properly, you want to motivate them to up-sell – without taking advantage of the customer with unnecessary up-selling. This can be tricky. With the optimal pay mix, you can avoid both overeager farmers trying to sell nonessential products and complacent farmers so satisfied with the annuity stream from their patch that they forget about growth. Farmers’ incentive compensation plan should have a 60/40 mix of growth and annuity reward.
Without consistent leads streaming through your pipeline, deals (and therefore cash flow) are sapped. This leaves reps vulnerable to falling short of quota. The prospector’s job is to ensure a plethora of qualified leads so that hunters can focus on doing what they do best – closing deals. To inspire the best performance from your prospectors, you need a plan that incents them to always find new leads. You don’t want to pay for just leads; that’s a prospector trap. You want to pay for closed business. Construct your plan to reflect this need with a healthy 60/40 mix between leads and revenue. Worried certain prospectors will score a few high-revenue deals and put their feet up for the rest of the quarter? Add a control, or threshold, on credit for big deals.
This sales-support role is absolutely critical. You don’t want a rep getting tongue-tied because the demo and sale are too complex. Back your reps with specialists to help answer industry-specific questions and address technical challenges. When it comes to incenting the role that some have referred to as the “brains” of the team, pay should be primarily base. Specialists need to provide the best advice possible to the rep and the customer. To fulfill their purpose as the trusted advisors, they can’t have too much variable pay, or you won’t be motivating desired behavior, you’ll be turning your specialists into hunters. To incent the specialist, measure the quality of closed business, and compliment with a measure of the intrinsic value of a deal to the customer.
Depending on the size of your organization, you’ll need multiple captains to keep the team aligned and working toward company objectives. Just as all football teams need a coach, every sales force needs a captain. This person’s tasked with looking at the team holistically, discovering outlier reps, and keeping them focused on the deals and goals that matter most. When it comes to compensating captains, their quota should be less than the sum of all their reps’ quotas combined. Adjust your captains’ quotas for new hires and open slots; you don’t want a captain to be so fearful about not making quota that he or she will keep poorly performing reps on the payroll or hire inept candidates just to fill a seat. With an opportunity-based quota for managers, you incent them to build their “A” team, not to just build a team.
Incent according to these personality types, and you’ll be ready to hit the ground running going into the next quarter.
Check out our featured guide, “Bring Your A-Game,” for a more detailed study of building your best sales team.