Source: Forrestor.com /Seth Marrs, Principal Analyst, Sales Operations
Most compensation plans pay Sales reps on a version of committed sales like bookings, revenue recognition, or contract revenue. This was the best measure because the Sales process consisted of shorter Sales cycles and less-complex deals in which the rep handled all facets of the process.
However, times have changed, and today, the majority of B2B Sales reps manage complex Sales with long sales cycles in a team selling environment. Closing a Sale requires not only a Lead Sales rep but also an entire revenue engine built to navigate the labyrinth of steps buyers require to get to the point where a closed sale is possible.
Given all of these changes, why are we still using the same measures? Compensation plans are high-stakes investments that consume a large part of the sales budget. Companies cannot afford to get it wrong and need reliable measures aligned to results. Despite the changes in process, closed sales are still the safest choice.
This inability to change has a cost. If a rep doesn’t follow up properly or doesn’t get the support needed, deals are lost with no incentive structure in place to reward or punish poor execution. The ideal compensation plan would offer rewards for performance on all key touch points in the process because each point increases or decreases an opportunity’s probability of a successful outcome. Although this has not been a reliable measure in the past, it won’t be long until these insights are accurate enough to include as compensation measures. Once they’re included, companies will use them to motivate improved performance across the entire sales process, leading to three major shifts:
- Activity visibility will improve predictability, leading to accurate quotas aligned to sales cycles rather than the arbitrary annual planning.
- Compensation measures will expand beyond the closed sale to areas that enable companies to be more targeted to ensure optimal sales process execution.
- Compensation programs will expand beyond the lead rep to ensure that the people with the highest impact for the most critical touches are rewarded for success.
Sales leaders have always aspired to measure and reward reps who were able to maximize every touch point, not just those who hit their number. These insights have never been reliable enough to use in compensation plans. However, new innovative technologies are making it possible to reward for every step in the process which will enable opportunity optimization. Technology segments like revenue intelligence, sales engagement, and intent data are all leveraged by many companies to make this happen.
Today, the large majority of buyer and seller interactions are now available and starting to provide reliable insights. Once confirmed to be accurate, they will create the foundation for future of sales compensation plans.
Maybe it’s time to review your Compensation plans for your Sales team. Does it make sense for the company? Does it align with the company goals and help your Sales team achieve their targets? Does it take account of the complete Sales funnel and cycle?
Lots of food for thought with this one!