How Are You Thinking About Commissions?

Robert McLaws
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By now, you probably have a general idea of what your roadmap for the next year looks like. You’ve most likely gotten your arms around how last year ended and had at least one meeting with your planning team to reflect on opportunities and your company’s growth trajectory.

Before people get distracted by family gatherings and holiday festivities, make sure you have a:

  • Growth strategy and related KPIs
  • Clear sense of successes and fails from last year (and how you’ll learn from them)
  • Marketing plan and budget to fulfill your goals
  • Best case and worst case financial projections and dependencies
  • Sense of what types of talent you might need to take your business to the next level (and, as important, an action plan for under-performers)

But Do You Have THIS?

Even when you have the right talent in place, crafting the right incentive plans to ensure that the talented team you’ve built stays motivated and on-goal is challenging.

As Amy Volas, Founder & CEO of Avenue Talent Partners says:

“You create the behaviors you incentivize.”

In short, even the best sales and marketing professionals may run out of steam if you haven’t thought deeply and broadly about how you reward and motivate people for hitting and achieving their goals.

Many organizations create incentive programs without really thinking through factors like, is money the main driver of performance for every individual? Would some of my team members prefer non-financial incentives? The best incentive plans are some meaningful combination of dollars and other spiffs.

Think about:

  • Travel
  • Gift cards
  • Time off
  • Continuing education (especially at a fun location)
  • Food
  • And more

You should also consider the following:

  • Am I balancing out individual rewards with group/team incentives?
  • Who within my organization needs to be incentivized? For example, some companies may only think about bonuses or commissions for their sales teams. But if marketing feeds great leads to those salespeople on a regular basis, should they share in the reward structure?
  • Does my incentive plan factor in customer quality and longevity and not just new deals?
  • If your sale cycle is complex and long, are you offering incentives along the way and not just when the deal is finally closed?
  • If your business is seasonal, how are you going to keep morale high during the slow times?

According to Amy Volas, one of the first questions you should also ask yourself when creating an incentive plan is “How can this backfire?”

Although many people will strive to meet their goals and grow their companies because they take pride in their work and the thrill of success pushes them forward, others will learn very quickly how to game the system.

That doesn’t make them dishonest. But let’s use the example of the government backing student loans. It may result in colleges increasing their tuition. As long as the bills are getting paid, institutions will subvert the incentive structure to their maximum benefit.

Engage Experts in Crafting Your Incentive Plan

Ask other companies like yours about best practices. This terrific article about SaaS compensation plans is sure to get your cerebral and financial wheels turning.

The author stresses how you must have clear business objectives before you can even begin to dive into an effective reward structure. Some examples include:

  • Booking the maximum amount of recurring revenue
  • Collecting cash upfront (which is especially important for start-ups)
  • Longer-term contracts
  • Customer satisfaction
  • Renewal rates
  • Cross-sell and expansion revenue

Individual Versus Team Incentives

It’s a fact. Every team will have stellar performers and others who come up short. Despite your efforts at training, coaching, and even replacing marketing and sales professionals, you’ll wind up with superstars and falling stars.

You need, therefore, to find the right balance of individual and team rewards, so that the strong don’t end up supporting the less strong.

How You Set Quotas is Key

Michelle is one of those superstars. Last year, she blew through her quotas, seemingly with ease. What’s the natural response to that? You raise her quotas in the coming year.

That could result in burnout and disaster. Of course, you want people to work to the best of their abilities, but you also want to hold on to your top performers. So, what do you do? Make sure you’re engaging your sales leaders in setting goals for the new year to ensure that you’re not stretching them so far that they’ll walk at the door at their first opportunity.

Take The Temperature Every Month

Let’s face it, sales and marketing people are good at what they do because they know how to romance the facts and add the “spin.”

However, when you’re thinking about incentive programs and individual/team morale, you want the brutal truth.

This can be more challenging than ever before as many sales teams have moved to remote work. Sales turnover is a huge problem for your company because the ramp-up time for a new rep can be as much as 90 days (not including the recruiting process)!

Who’s Doing it “Right?” We’d Love to Hear Your Stories!

We’d love to hear from reps, sales and marketing leaders, and others about which incentive programs today seem to really be working (and why). Reach out to us with subject line “INCENTIVE” and we may feature your response in Part 2 of this blog.

And remember, even the best sales incentive plan is just part of what you need in the coming year.

Find out how BurnRate can help you build the best capacity plan for next year and for years to come.

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