Commission Smarter, Not Harder: New Insights from the 2021 State of Sales Comp Benchmarks Webinar

Join us as we dive into the results of our 3rd Annual Commission Plan Benchmarking Report with Modern Sales Pros and walk you through the steps for how to combat employee burnout and create better comp plans in 2022.

Key Takeaways
-Reward Anticipation: Targets your team can meaningfully engage in
-Small Wins: Pay on activities to give a chemical jolt
-Habit Formation: Remove ambiguity over what to do next
-Clear Reporting: Don’t have your reps guess about their next paycheck
-Stop the Leaderboards (please!): Remove external, competitive stress

Commission Smarter, Not Harder: New Insights from the 2021 State of Sales Comp Benchmarks Transcript
Sanj Sanampudi (4:20):
Well, thank you, everyone, again for joining today. I am Sanj Sanampudi general manager of Varicent Concert.

So Varicent Concert, we are an incentive compensation management tool built to solve the pain of the math of commissions of just getting people paid on time. But what we also do and pride ourselves on is we have a solution to help you analyze your data in a new way to set smarter targets with an algorithm developed with neuroscientists and behavioral psychologists. And we also have functionality for reps to help them understand their pipeline in a new way and see more insights and visibility into their own performance.

So diving into our agenda today we’re going to go through the state of sales comp. This is a survey that we’ve run with the MSP team and with Hannah for the last three years. And now that we have the longer time series of data, it’s really been interesting to see some trends emerge. We’ll go through the SDR, AE, and CS benchmarks that we have put together so far for this year. And then we’ll share some of the insights of what can really be improved to tackle the challenges that are unique to this time in comp plans.

Sanj (6:31):
So we’re diving right in. Part of what we do whenever we’re putting together this state of sales comp report is we have to look at what is happening in the world. And for those of you in leadership positions, probably the biggest thing that is jumping out at everyone right now and is top of mind is The Great Resignation and specifically, strategies for retaining and recruiting new talent. Since April, four million people have quit their job each month. And there are statistics that show that these tend to be concentrated in higher-stress jobs. So of course, healthcare workers right now, have a very high attrition rate, but you also see that sales folks tend to have much higher attrition rates at this time.

Hannah White (7:39):
I’m going to go ahead and launch a poll right now. 

Sanj:
So part of it is the challenge of people leaving. In July, a little bit over four million people left, but at the same time, 10 million new jobs were posted. So the challenge of retention is even more important because recruiting is getting a lot harder. So happily many of you are not in this 50 plus percent of people leaving their company, but we’ll find you and console you. So what did the studies say? Why do you think people are leaving, Hannah?

Hannah:
I mean, not to allude to the rest of the content, but potential burnout?

Sanj (09:35):
Absolutely. It’s like you read my mind or my slides. Yes, we’re burned out. Any report that you look at showed that people are stressed at very unique levels because of the conditions caused by the pandemic. People are disengaged from the loose communities formed around offices. Like just seeing the same person in an elevator in a lot of ways, drove more engagement and community in people’s minds. And that it’s actually much harder to hit targets than it ever was before because there are still budget restrictions and challenges in selling. So when we talk about burnout, what are we actually talking about? What does it look like? It looks a lot like the picture that you see on the right. But the ways to identify it or what you would expect, you see low productivity, low output a team that is not particularly motivated or excited by new tasks.

A team that has a hard time just getting started. So one thing I know, and I could see the burnout in myself was after we got the survey results. It was really hard for me to think about like, okay, what do we need to do to get this report out? And the last is a lack of focus. So you feel like something needs to change, but again, you don’t know which way to direct your energy. And when we say that sales teams are feeling burned out, what we’re really saying here is that we can see it in the data. So part of what we ask in the survey is what percent of your team is going to reach 100% of quota. And year over year, across every role, we’ve seen that quota attainment or expectations of quota attainment has dropped.

Hannah (11:44):
Sanj, I think this is a really good place to talk about the fact and the why behind why we inserted this question into the report. How did teams approach that quota dropping?

Sanj:
Yeah. So this was one of Hannah’s adds to our survey this year where it was really like, did people approach a quota setting differently? And what we ask was, did you actively try to make quota more achievable as a result of COVID? And 42% of the people who filled out the survey said they actually tried to make quota more achievable. And even those people have lower attainment rates here over a year. So this is a really, really kind of staggering revelation that everyone probably would agree that quota attainment was a problem before, which is why the whole sales tech industry exists. But it’s dropping. This is a very serious problem. And what we’re going to talk through in recommendations is what we were doing before obviously isn’t working. So it’s time to re-approach these challenges in a new way.

Hannah (13:04):
Definitely Sanj, it looks like Laura submitted a question in the chat, how was more achievable defined, or was it appropriately adjusted for the conditions of the market shift?

Sanj:
I believe the actual question was, did you actively lower quota? Great question. So with that, we’re going to preview some of the benchmarks by roles. So first we’ll go into the SDR and BDR roles. We primarily triangulated our initial analysis around three or four areas. One is plan satisfaction. So plan satisfaction is really from the perspective of the person filling out the survey, how well do they think the plan is accomplishing their company’s goals? The second question we ask is around base/variable mix. So we want to understand, is the amount of compensation driving different behaviors or does that correlate to different levels of performance? The third set of questions that you’ll see up here at the top, are what are people actually being measured on in these roles? And these are not mutually exclusive so you’ll see them total more than a hundred percent. And the final piece is what does target attainment look like year over year. And what you can see in the SDR and BDR benchmarks when we publish the report next week is that very little actually changed. So satisfaction was roughly inline a little bit lower than it was last year. The base/variable mix is completely unchanged. And over the last three years, what’s interesting is the base/variable mix for all three of these roles has remained unchanged. The metrics that people are measured on for SDRs and BDRs is unchanged, but what has changed is attainment. So on the x-axis here, we see the percentage of quota and on the y-axis you see the percentage of the team attaining it. So the way to read these graphs is in 2020, 75% of SDRs we’re on track to hitting 75% of quota. And in 2021 that drops to 69% of SDRs are on track to hitting 75% of quota. So we see attainment is dropping across the board. For AEs again, satisfaction is a little bit higher than last year but not materially.

Sanj (16:19):
The base/variable mix is again the same at 50/50. The one thing that has stuck out here is that maybe like the zillion webinars we do on this are like crackin’ through. But people are paying AEs more on pipeline process behavior. So we’ve seen a trend of this increasing and those plans have a higher satisfaction score than plans that typically just pay on closed-won. But even despite that work, what we see is that quota attainment is falling for AEs across the board. And this is probably one of the most concerning things from a retention and a recruiting standpoint. The average time that you’re losing revenue from an AE departing is 12 to 18 months. It starts in that moment that the AE becomes disengaged, starts looking for new work, and it doesn’t end until you have a new person in the seat who’s fully ramped. So this is a very, very expensive problem.

Hannah (17:36):
Awesome, Sanj. I actually have a live question for you. Peter asked what is more important, quota attainment or OTE?

Sanj:
They work together. In most cases, I would argue for most folks who seem to be looking right now you have more people asking questions about, oh, great, thanks for offering me this fat OTE. What percent of your team is actually making that? So I think the more you see attainment drop down, the more people are very dubious of the company.

Hannah (18:19):
Thanks, Sanj. And then keep your questions coming. And Laura, one more question from Laura, she has never seen an AE plan based on pipeline. Will you be showing that?

Sanj:
Yes. We will be talking about that. That is a big piece of how to improve comp plans in 2022.

Hannah:
Perfect. Ariana is asking, did the quota in these instances go up year over year as well in these examples, or stay relatively the same or go down?

Sanj:
Hi, Ariana. We didn’t ask directly the quota amount, but from the survey, it seems like most have stayed the same or gone slightly down.

Hannah:
Makes sense. That’s what the data says. 

Sanj (19:25):
So the last one is really my favorite to talk about as you know Hannah, that it is the total train wreck that is the customer success or client service comp plan. What is interesting about this is the most common comp structure is still like the 80/20 base/variable split. We are seeing an increase in the respondents who are removing variable comp from CS plans entirely. We have seen a three-year trend now where satisfaction continually is dropping for these plans. We see this trend where attainment is just wildly lower year over year, and what our best guess is, it’s really related to these metrics.

So one of the challenges for most CS comp is somehow CS is like the one group that was the victim of all of these venture capital efficiency metrics. And that’s their comp time. And an efficiency metric is really hard to manage because you mentally have to manage both the numerator and the denominator. How do I lower my denominator? How do I increase my numerator? It’s really unfocused on what you’re supposed to be doing. It creates a lot of ambiguity. The plans that are performing better from this survey seemed to be a little bit more focused, less about an efficiency rate and more about either an outcome or an activity.

Hannah (21:23):
I actually have a question for you from Samantha. Have you heard that AEs and CSMs feel micromanaged if they are comped on pipeline?

Sanj:
So I have only heard that from sales leaders. And, hi Samantha. Sales leaders are very concerned about that. That is a very regular objection we get when we’re working with our customers. We’ll talk a little bit about how you roll that out to a team and what those incentives actually look like. There are ways to roll it out that are much more about presenting them a way to get to quota versus do this thing. And I think when you couch it in, like, hey, we’re trying to help you hit your targets and we want to know where to invest if you’re falling short. It works out much better.

Hannah (22:30):
Definitely makes sense. We were talking a little bit about this in the prep that it’s like, here are the tools in your tool belt. This will help you succeed, versus here are the tasks that you need to check off and I’m micromanaging you.

Sanj:
Hi TJ. This could be an increasing customer churn. I think what we anecdotally have, following up with a few of the folks who filled out the survey to understand their results better, it actually seems like there are more downgrades than actual churn. So it’s not necessarily like logos are leaving. It is more that people are spending less or renegotiating their contracts.

Hannah:
And then just to tap onto that TJ’s question was based on dropping CSR attainment or CSM attainment, would it relate to an increasing customer churn? So Sanj just answered.

Sanj (23:43):
So hopefully, through those three benchmarks, everyone feels like there has to be a better way. So comp structures have largely remained unchanged over the three years we’ve done the survey. I would argue having been in comp for a while, that it has largely remained unchanged for the last decade. So what we see is your strategies really need to change around comp. And your strategies need to change primarily to address the underlying problem that you’re targeting, which is retention and burnout. So what we’re going to propose is going to address the issue of burnout in two distinct ways. So the first is we’re looking for comp structures and comp strategies that drive cognitive engagement.

Cognitive engagement for us is defined as your brain is activated and has a chemical release as the result of the comp structure that is put in front of you. So can we get some dopamine firing in your body so that you are physically more capable of moving, of doing anything? And the second way that we’re trying to address the challenge of burnout is by removing ambiguity. So all those feelings of I don’t know where to start. I don’t know what to do next… Can we be a little bit more prescriptive and build habits around those things? So those are the two lenses to look through for the next set of recommendations. So the first thing that we’re going to tackle here is smarter quota setting.

Sanj (25:45):
So 42% of the survey respondents said that they tried to make quotas lower/more achievable, and they failed. So clearly our approach to quota setting needs to change. The first thing that we need to address is what happens when we set quota? What are we actually trying to drive? And neurologically what you were trying to drive is a dopamine release that comes from reward anticipation. So if you have a target that feels reasonably achievable, your brain is going to give you a rush of dopamine so you have the extra energy to achieve that target. So this is the whole winning streak, success begets success. Your brain actually actively tries to help you win. When you get this release, you’re basically re-engaging the person. So it’s like, oh, okay, right, let me try to win this thing. And the diagram to the left, this is a person who is disengaged and removed from the target. I think the target is no longer relevant to them. It’s not part of what they want. They still are getting (thread areas represent the chemical releases), they are still getting some dopamine, but you can see they get far more, it’s much more saturated when you’re really engaged with the target. But that doesn’t necessarily just mean dropping quotas. So now we need to talk about what an achievable target actually is. And the psychology of target perception is called construal level theory.

There are four dimensions that you perceive target’s difficulties. We’ll go through each of these in a little bit more detail and you can apply, mix and match these strategies to fit what you need for your business and what you need for your team. It’s not like you need to optimize each of these four things. It’s really like a blend and a composite score, which was called psychological distance. So the first, probably most blunt, kind of the most obvious when you say it out loud is social distance. This is the OG social distance, not the thing we did all of last year. The idea here is that if most of your group is doing something and you’re not doing it, you are more likely to do it because you want to be part of the group.

Hannah (28:44):
A little bit of commentary on this. A couple of weeks ago, we had a session with Valor Performance on creating a performance mindset, and they help coach executives and salespeople to reach their fullest capability. And that was a huge thing they said was that as soon as you can see your competitors do something, as soon as you see your teammates do something, you think it’s more achievable for you. So just in that, it makes the goal more tangible,

Sanj:
Right. Targets have a lot more meaning when more people are hitting it. So imagine this scenario, where you’re a seller and like most payees now, apparently, 45% of the team is hitting quota. If I didn’t hit quota, it’s not a big deal. Now imagine you’re on a team where 85% of the reps are hitting quota. It suddenly feels like it’s my fault. I probably need to do something different. And what ends up happening is, part of what you’re addressing that’s missing right now when a lot of folks aren’t back in the office, is that social aspect. So if the story becomes about more of the team hitting quota, a larger percentage of the team hitting quota, you’re suddenly working to a team thing. You’re trying to rebuild that community that was uprooted last year.

So the next piece is experiential distance. And experiential distance is the idea that if you’ve done something before you kind of know how to do it. And when you do it the next time, you will continue to try to do it a little bit better. From a comp perspective, we still see that there are a lot of comp plans that are blunt with accelerators. It’s under 100% of quota you get your base rate and then over 100% quota, you get a slightly higher rate. What you can do to drive experiential distance, or compress experiential distance, is you can offer more tiers, have tiers below quota, have tiers above quota and have progressions that people can achieve. We’ve seen this with a bunch of customers that we worked with when someone achieves tier one, they don’t want to stay at tier one. They don’t want to fall backward. They want to go to tier two. And over time you actually do see that it’s supporting the skill build required to get to quota. 

The current average, by the way, I think is from the AEs, is that there are three tiers. One tier is under quota and two tiers are above quota. So that would look something like 0-50% is a certain rate, 50-100%is another rate, 100-125%, 125-150%. So that’s just a way to think about this. 

Sanj (32:06):
So the next lens that we perceive the difficulty of targets is temporal distance. So temporal distance is really about shortening time periods and the classic study to help people understand temporal distance is to ask people about… Actually, we’ll run it on you, Hannah. Hannah, can you describe a vacation you’d like to take next year? What do you want it to be like?

Hannah:
Somewhere far away, a different country that I wasn’t able to go to for the last two years, a couple of weeks, something big, disconnect. 

Sanj:
Great. That is exactly what we wanted to hear. So you can see that it’s very imaginative, but it’s not very specific. I don’t want to put Hannah’s personal life on display here, but if I asked her what she was doing this weekend, or next weekend, it becomes much more specific.

Hannah:
Hanging out by the pool.

Sanj:
Maybe reading a certain book, listening to a certain podcast, going to a certain restaurant. Those are actual actions that you know how to take. So remember, we’re driving cognitive engagement and reducing ambiguity. Compressing timeframes cuts out the ambiguity. If I need to reach out to 100 prospects in the next two weeks, I know how to schedule my time. If I need to close one million dollars of ARR in the next year, I don’t even know what that means. So the real thing to see here is we can change our tactics to shorten the quota periods. What you see here is from this year’s survey, we can see that teams that have monthly quotas have a higher level of their full-year target attainment. And that’s extremely powerful. And as practitioners in this space, we’ve seen this work not only for short sales cycles, more transactional businesses, this works for very large six-figure enterprise sales as well.

Hannah (34:39):
All right, Sanj. We’ve got some questions coming in from Tiff. For the tiers, the low quota, does that mean that you would be paid a lower commission percent than the usual standard rate? And as you get closer to 100% percent, it moves closer to that standard rate and has been accelerated past 100%?

Sanj:
Yes. So there are certain ways, that’s like budgeting side of how to run quotas. You can introduce decelerators in the tiers below 100% percent. So you can say you’re going to get 75% of your base rate in this tier one example. And then once you achieve quota, you can either say now you’re paid 110%, or you can say that everything back to dollar one is going to be paid at your normal base rate. That is a great question. But those two things are more on the budgeting side where you’re trying to really draw up the right payout curve and match the cash flow for the business.

Hannah:
Awesome. Thanks for that Sanj. And then from Stephanie, for AEs, what about quarterly versus annual quotas, monthly seems too frequent for a non velocity sale?

Sanj:
You can, absolutely, if you’re on annual quotas move to quarterly, anything shorter than a year, you’re compressing the temporal distance. So that is better. I would say related to Samantha’s question earlier. I think there’s always a lot of concern from sales leaders about giving an enterprise seller a monthly quota as well.

Sanj (36:31):
So the last is sort of the most blunt, but definitely powerful. It’s actually dropping quota, just give a lower number. There are two ways to think about a lower number. There’s the super quantitative way where you’re looking at average sales price, sales cycles, rep tenure, kind of what the factors are that we consider. But there is the more nuanced way, or the more simple way of approaching lowered targets, which is like, think about pricing a car. Are you going to price a car at $30,000? Or would you price it at $29,000?

29 just feels more approachable than 30, because it starts with a two instead of a three. So if you can, if you want to give a million dollar quota, don’t just give a million dollars because it feels good to you. Try to make it $950K so it feels good to them. But what we’ve seen in our own work, the first customer that we worked with on resetting quotas, they had 30 AEs only one was hitting quota in a given month. So we recommended that they drop quota. So they dropped quota by 15% and over the next three months, their sales increased by 15%. They didn’t have new products, they didn’t change pricing, they didn’t have new management, they didn’t have new training. It really was cognitive engagement that changed. And then they moved to two or three people hitting quota, and then they started believing that maybe they should have more tiers. So the thing to remember about your quotas,  just because you set it to fit your financial model doesn’t mean it’s going to happen. You lose basically nothing by lowering your quota. It is a fake number. 

Hannah (39:01):
Fair. We’ve got some questions coming in Stephanie: If you go to shorter quota cadences, do you pay accelerators on the monthly quarterly quotas or do a true-up at the end of the year?

Sanj:
You do the accelerators at the quota cadence that you set. You really want to close the feedback loop for them. So this quarter happened, this quarter is over. We’re not talking about it anymore. One of the real challenges and the real reasons why you see annual quotas leading to lower performance is there’s the first piece of ambiguity. How do I get to a million dollars at the end of the year? There’s a second piece that it’s September 30th, I’ve only closed $200,000. I’m way behind them. I’m never going to get here. So it gives you a natural reset and especially in cases of a team that’s burned out, you might need that reset more frequently.

Hannah:
I love Alexi’s question though. We have to address it… How about no quota?

Sanj:
Hey Alexi. No quota absolutely could work. I mean, it’s bizarre selling our software and saying that. It absolutely can work. There needs to be a very different culture in place. So it requires a different level of how you’re screening candidates, the profile that you’re looking for, your sales process in general, who you’re selling to, how mature the process is. There are a lot of pieces that fit well, but there are really successful organizations that operate like that. So like monday.com, great company, they don’t have quotas. So it is totally possible. I think a lot of us don’t necessarily have the tool or potentially don’t have the financial means to do it. So yeah, it’s absolutely a great point.

Sanj (41:33):
So strategy two to drive cognitive engagement and reduce ambiguity is to pay on activities. This is pay on process, pay on pipeline.. we call it a few different things. What you see below on this slide is what we at Varicent Concert call our blueprint to quota. So if you have a target, we talk to our teams about working backward and figuring out what you need to do at what time in order to ultimately deliver that target. This alone removes quite a bit of ambiguity. I don’t think many organizations are giving their teams this level of insight into what needs to be done in order to succeed.

But again, we’re really tactical with our comp strategy here. And what we’re trying to do is increase cognitive engagement, remove ambiguity. So what we recommend is paying on really specific parts of your sales process, and that gives you smaller wins sooner. So that part addresses the cognitive engagement like, Hannah, if you reach out to 59 leads every month you’re going to be paid $20 per lead. Like, okay, I know what to do. I’m getting a reward for it, so I’ll do it. But also it removes ambiguity because you know specifically what you need to do. And the real reason to do this is this is actually how comp works. So if you were trying to use rewards the way that they’re intended to work in your brain you understand that comp is part of our reward-based learning feedback loop.

So basically you’re setting your targets that should trigger a specific set of behaviors that trigger a reward to reinforce your engagement with that target. And then it keeps going. So this is applicable to pretty much everything in your life. It’s applicable to comp, it’s applicable to motivating your sales team. It’s applicable to training your dogs. This is how mammals learn. And one of the real challenges we see is a lot of plans are really stuck down here, worrying about the commission and the reward. And just because you put a high percentage at the end, the bottom right tier of your comp plan doesn’t mean anyone knows how to get there. 

Sanj (44:46):
So the third strategy is around focused reporting. The first thing is this is a pretty material part of your team’s comp. Even at the CS level, it’s 20% of someone’s pay. They need to have some visibility into how they’re doing. What we’ve seen is satisfaction scores go much higher the more frequently you get visibility up to real-time. We’ve also seen that the number of companies who’ve started providing real-time reporting has doubled year over year and it doubled the year before that. So this is becoming more of an expectation. So for those candidates that you spent all this time and money recruiting, this will be a real letdown if you’re like, oh, by the way, you have no visibility into your performance or your comp.

And then the last piece, near and dear to my heart, I think I’ve said this on MSP webinars, maybe 10 times now, and people still are doing it… Stop the leaderboards. So 72% of SDRs are on leaderboards from our survey. 66% of AEs are on leaderboards. Stack rank leaderboards, disengage your team and drive less collaboration. The best study on incentives and sales performance was done from the University of Pennsylvania. It had a control group versus a treatment group. It was done across 1,700 reps and it was done over three years. It is the highest quality study ever done on this. And it showed that employee performance increased by 11% without leaderboards. And that this increase applied to high performers, it applied to low performance, it applied to core performance. Just stop the leaderboard.

Hannah (46:49):
I mean, if you think about a team going through burnout, which it sounds like literally everyone is, seeing a competition board up on the wall, that is very disheartening, if your whole team is struggling to show up and just get stuff done.

Sanj:
Right. And compound it with only 45% of the team is on track to hit quota. So how relevant is it?

Hannah:
Totally. Anish has a question. Does that apply to president’s club-type incentives?

Sanj (47:25):
President’s club-type incentives are typically not related to placement. It’s more like reach this level and you get this thing. So that should not be impacted. If it’s like, you have to be among the top two, that would apply.

Hannah:
It’s like, there’s not a set limit to the people that can go, right?

Sanj:
Right. It basically is, you don’t have to do poorly Hannah for me to have an incentive or for me to have the same perceived social clout that you’d do.

Sanj (48:18):
We’ll go through the takeaways real quick. So if there’s anything you remember from this webinar it should be these five things. One, remember the idea of reward anticipation. You are giving people energy and they can engage with your target meaningfully. Think about small wins. So how do you help people notch things on the board and build that momentum? The root of comp is in habit formation. So what habits are you really trying to drive and use those to make sure everyone knows what they need to do and when they need to do it and then manage it well, give your teams clear reporting and stop the competitive stress. It’s certainly not the right time for it now. And I think the last thing is everyone who’s registered for the webinar and our survey participants will all be getting this report next week.

Hannah:
Awesome, thanks Sanj. I’m really excited about this one. It’s our third annual one. It’s our first third annual anything, which is very exciting. So super pumped about that. And with that, there’s Sanj’s email, but we’ve got about 10 minutes left of Sanj’s time. Let’s just keep submitting all your questions. So first up for hyper-growth mode companies, how does that change quota structure and comp plans, or should it even change? Should the approach be different?

Sanj (50:03):
For hyper-growth companies, I think the temporal distance aspect of it is much more important. You basically don’t want to break your model. The team knows what to do, if you are in hyper-growth, you just want them to execute more. So I would say focus on the temporal distance to see how much can you execute in this short period of time. And that will also guide how you should staff the organization, how it’s going to scale up. The thing you’re trying to get from comp in hyper-growth is learning what the sales process really can look like and how you’re eventually going to scale it.

Hannah:
Yeah. I think for those you’re still experimenting with your various motion, so it’s important to pull the levers you know work. Right?

Sanj:
Right.

Hannah:
Thoughts on solutions/sales, engineering, compensation plans, those have been the most tricky to get right, for Anish.

Sanj (51:04):
Yeah. So this is where something like the blueprint or quota might help a lot because you can figure out what are all the stages, who’s involved in those stages, and how do I know who’s going to be involved? A lot of solutions in sales, engineering plans that we help support, we usually end up turning it into something that’s a little bit more piecework, just coming up with the POC that you’re presenting gets some piece. And then there might be some kind of bonus on the side related to what you actually end up pointing.

But one of the things I would caution against is we see a lot of solutions engineers paid on a team incentive because you never know which account you’re going to get. Those really don’t work. You’re kind of differing payroll at that point.

Hannah (52:05):
Dan is wondering how strong an impact you see in lifetime value having on sales performance. Like, you sell through something in February, you get commission on it until September, vs. until next February vs. in perpetuity?

Sanj:
We typically see that the kind of impact on LTV is dropping off fairly quickly, assuming that the rep doesn’t have continuing contact with the person. So if I get Hannah on my platform and then that’s the last time I talk to Hannah, there is no reason to pay on Hannah’s activity in perpetuity. What we do see as very effective though, is if you operate more of a usage-based model. Think about your commission in two pieces, one like getting someone in the door and the other is like a residual for what happens, what their maybe unpredictable usage is for the next 12 months or 24 months or whatever it is.

Hannah (53:26):
All right, Denise, I love your comment/question. So Denise, we have eliminated quota for 2021 and our employee performance has increased 200%. However, commissioned reporting remains to be a challenge. Getting real-time data would be amazing. I would love to learn more about how to make that possible. I think fundamentally, how can you make the ‘no quota’ come to life?

Sanj (53:53):
Yeah. So, cutting out quota, but still having commission reporting. So if you’re paying a flat rate on everything, which I think is what she mentions here, to getting commissioned reporting to be real-time like I know of a solution or probably somebody will reach out to you after this webinar to make that happen. But the main thing that you’re going to need is really making sure your data is buttoned up. We work with a bunch of customers who are saying like, oh, I want to pay people on three-year deals. Great. How do I know what a three-year deal is? Look at the contract. That is a really important part.

And what’s interesting about moving to real-time reporting is when you add in that staff, it is really, really impactful. So to the quality of your data. So you tell someone that you’re paying them on term and this term field needs to be filled in. They suddenly fill it in, kind of a virtuous cycle. In terms of eliminating quotas and seeing a 200% increase, that is great. I think you’ve probably taken off a major pressure valve that your team has had with quotas. I would say that if you can find the right sweet spot, you can optimize their performance more, like push them beyond where they think they could have gone.

Hannah (55:22):
Definitely. Alexi has another question, can you comment on sales teams’ tendency to push deals till the end of the quarter, how can these lessons help spread out the results?

Sanj:
That’s a great question. One way is moving to monthly quotas from quarterly quotas. So with some of our work we’ve seen that one customer had about 80% of their bookings come in in the last month of the quarter, every quarter. When we move them to monthly quotas, it didn’t totally smooth it out. I’m not going to pretend it’s going to solve everything, but it definitely moved them more to like 15%, 25%, 60%. So it really did relieve some of the pressure that crushes the support teams that aren’t resourced to deal with that influx. So your legal team is reviewing two-thirds fewer deals. The other thing that can help and that is not necessarily related to comp, but if you stop discounting practices near the end of the quarter, I think buyers know that a bunch of companies discount to hit their quarterly numbers. So they drag their feet to see what they can get.

Transcript has been edited for length and clarity

New Insights from the 2021 State of Sales Benchmarks