Key takeaways from “Are your comp plans a home run?”
Mid-year sales compensation plan reviews are like the 7th-inning stretch of a baseball game.
Just like baseball teams adjust their game plan in the 7th inning — player substitutions, pitching changes, etc — revenue leaders use the summer for mid-year adjustments to their compensation strategy.
In both cases, the goal is to improve the chances of success.
For instance, in baseball, that means making the necessary changes to the game plan to score more runs and win the game. As this pertains to sales compensation, it means checking to see how well the plan is pushing the company toward achieving its key business metrics and making substitutions where deemed fit.
So, if you’re a Sales, RevOps, or Finance leader and your team is not on track to meet its goals, don’t be afraid to make mid-year adjustments to your compensation plan. Just like a baseball team, you might be surprised at how much of a difference it can make.
The Moneyball stats: What to look at to see comp plan effectiveness
If you want to see if your comp plan is working as it should, Graham said to look for the following indicators.
Wide range of attainment: Is half your team hitting above 150% of quota and the other half barely passing 20%? Strive for a normal curve. Most of your reps should be around 80%.
Lumpy attainment: Do you have any reps who hit 15% to quota one quarter, then blow it out of the park the next? Graham sees this happen when a team follows a monthly quota cycle but the average sales price is half the monthly quota. To remedy this, extend the quota period to a quarterly cycle. You could also offer consistency bonuses or add or remove decelerators.
Low attainment: How many people on your team are at 30-40% of the quota? If it’s the majority, you should review the quota and check your pipeline health. Do you have enough pipeline coverage to get your team to 100% attainment? If the answer is no, a lowered quota may be in order.
Low gross revenue retention (GRR): If your organization is struggling with GRR and renewals, consider looking at increasing the commission rates for new business with customers that have the highest chance of renewing. These are often customers that fall under your ideal customer profile (ICP). You can score accounts in your CRM based on how tightly they fit under your ICP, then reward higher commission rates on those types of deals.
High cost of sales: Look into your cost per sale. Sometimes you have too many people involved in the sales process (management, engineers, SDRs, marketing) Make sure you’re spending incentive pay in the right places.
Additional pre-game prep: Evaluating comp plan health
Questions to ask yourself:
Is your team hitting the metrics that you want them to? New biz. Renewal rates. Expansions. How is your team incentivized to hit those metrics? Do you offer SPIFs for large renewals, for example? Eliminate any disconnect between the performance of the business and the performance of your team.
Do your reps know that these are the metrics you’re trying to hit?
Are there any errors or red flags? Think: a blended 45% commission rate.
How to score a comp plan single, double, triple, and home run
Single: Make sure your team understands the drivers of the comp plan, such as new business, or larger accounts. What are you fundamentally focused on and how do you translate those metrics to individual sellers?
Double: Identify drivers of success for your top performers. Find out who is selling the most multi-year deals, who has the fastest close-win cycle, and who consistently sells full-priced contracts.
Triple: Then, replicate that success through peer-to-peer coaching. Leverage your recorded calls and pull key parts to share with the team so they can hear and see it in action.
Homerun: Do all 3!
7th inning adjustments: Where to make changes
Now it’s time to make some compensation adjustments.
Comp plan substitutions: Realign your compensation structures to align with metrics. Be intentional. Compensate your onboarding team with incentive pay. Reward your new biz team for full-price contracts. Have your AM team focus on early renewals using higher commission rates or bonuses.
Create SPIF opportunities to motivate behaviors: SPIF on outbound opportunities, for instance.
Re-train the team on comp plans: Explain the funnel. This is what we’re doing as a business, and this is what you can do to be successful. And when you do these things, we’ll pay you more, because ultimately the company is more successful.
Change up player positions: Make territory shifts. Look at close rates and segment data so that you can see what types of accounts or industries your reps have the most success in. If you have a rep who excels in smaller accounts with short sales cycles, have them strictly focus on those accounts. Put the right opportunities in front of the right people.
This might also mean a rep shifts to an AM or a solutions engineer, where their strengths will have the most impact.
