If you haven’t already, it’s well past mid-year and it’s time for you to take a closer look at what’s working and what’s not to generate the best performance for Q4 and to establish a benchmark for the 2023 version of this plan.
The RevOps Co-op assembled some of our expert members and partners to give the 101 on evaluating comp plans for improvement. In this roundtable discussion, you’ll gain knowledge about plan evaluations from our host, Graham and participants, Ryan, Rosalyn and Jessica.
Ryan started things off, saying the first consideration in an evaluation is looking at whether the outcomes planned for at the start of the year were achieved or not.
“Did you pay people what you expected to pay them according to your financial plan?” he asks. “You’re trying to get 80% quota attainment, what did that look like and what was the outcome for each member of the team?”
But more important, he says, is whether the actions desired were at the rates desired.
Remember that saying about actions speaking louder than words? Turns out if you financially incentivize certain favorable actions, they are more likely to happen.
“We’re really trying to get into longer term agreements with our customers,” he says. “So, we are incentivizing our account managers to convert annual contracts to 2 to 3 years.”
Looking at all the outcomes shows what went well and what needs a little more tweaking. It’s something Rosalyn believes in and she was quick to point out that yes, comp plan effectiveness needs to be evaluated throughout the year. She suggests monthly or at least quarterly due diligence – having the conversations while assessing payments.
“It’s not a one and done thing,” Rosalyn says. “It’s a constant evaluation because we all know what Q4 looks like for everyone in terms of trying to juggle the business. You rush through the comp structure; you roll out something that’s half baked.”
Or maybe it’s the best plan the world has ever seen, but it’s not communicated right. Either way, looking at it throughout the year allows for adjustments and adaptation for the coming year.
“Are you achieving the goals that you were expecting to see?”
And out comes the caution flag.
It’s a numbers game, but one or two quarters aren’t necessarily enough time to completely assess the picture. Regular reviews allow for a view of trends and pipeline status.
“Is the comp plan driving us directionally towards those outcomes you want?” Rosalyn asks. “Just constantly be evaluating. You should always be looking at the data and the analytics.”
“Most of us are in a recurring revenue type of model,” Jessica says. “The incentive is to get those multi year deals.”
She talks about finding ways to pay a little more for the desired behaviors as well as for deals closed in the first few weeks of the quarter. As opposed to closing most deals at the last minute.
“I need to pay people just as well as I model the business,” she says. “How can I make sure that 80% of my deals don’t close in the last week of the quarter?”
Pushing everything to the end of the quarter is a typical behavior by buyers and sellers alike. It’s just not the preferred one. Ryan says that’s why getting feedback from front line reps needs to be an ongoing practice.
“If the rep is not feeling motivated by what you’re trying to get them to do, the question is why,” he says. “How do I make this more lucrative for you to really motivate you?”
And maybe they don’t know what’s available. If the way for a rep to double their commission rate is noted on page 24 of a 30-page comp plan, they may not be aware.
Keep It Simple Stupid!
Graham stressed the need for simplicity in comp plans. Asking reps if they even understand their comp plan can be an insightful experience.
Rosalyn notes an incident from a kick-off.
“A rep stood up and said, ‘I have a ****ing MBA’ and I can’t understand my comp plan’,” she says. “It reminded me about simplicity.”
Being clear about the tools to participate in a comp plan and knowing how it works are essential, she says.
“Having a technology tool that they can go and model these things is just so fundamental.”
And here’s the natural segway to say QuotaPath does all this. It allows reps to play “what if” with their compensation. And that prevents what Jessica calls a Frankenstein macro excel with 30 tabs. Curious? Check out our recorded RevOps Demo of Quotapath Here. For a more tailored demo find a time with QuotaPath here.
“We want our best to get paid, that’s the bread and butter of our business,” she says. “So, we want it to be clear.”
There has to be a loop of trust with sales reps in order to get the feedback that improves the plan.
“I’m basically in monthly 1:1’s with all our reps and asking questions,” says Ryan.
He also asks himself a really important question: “If I was selling, would I be thrilled with this comp plan?”
No matter the answer, Graham advises it needs to be taken with a grain of salt, because “what people thought would motivate them is not always what will motivate them.”
So, what if the comp plan is just. Not. Working?
“Anytime you’re changing anything, especially in go-to-market, it can be extremely disruptive,” says Rosalyn. “You want to build the plan so that you’re rolling it out once and you’re not changing comp structure.”
She advises that some changes make sense, but others, like shifting focus, don’t. So, if you start striving for new accounts, don’t shift to expansion within existing accounts.
“It could be the right thing for the business, but it can be very disruptive because then you have to think about how to bridge all of those things,” she says.
She suggests tweaking rates, multipliers and creating additional incentives to push towards the goals to get the desired behavior rather than changing the structure. However, Ryan says that if teams are simply not meeting the quota at all and you can create a better path to making money, that’s the only time to change the structure of the comp plan mid-year.
And, here’s another caution flag.
Sometimes, as Graham says, there’s a need to raise earnings to a place that’s not sustainable to support the team, but you also have to make sure you’re not paying out a 35% commission rate on millions of dollars.
But clawbacks are not the answer. “I try to avoid clawbacks as best I can,” he says. “They demotivate reps.”
Rosalyn agrees and she also says she’s not a fan of caps.
“I’ve never seen a clawback successfully implemented,” says Jessica.
Simplicity is the comment that arises again. Reps need to know what they are dealing with – it needs to be simple, logical, fair and clear.
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