| 00:00 | You know , Larry , you've been a global sales leader for a very long time , have dealt with different size organizations. How important is it for the organization when it comes to developing a sales comp plan ?
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| 00:15 | I really feel like the development of the sales compensation plan is , is actually key to , building a successful team and having a successful business. And so I take the sales compensation plan really , really seriously.
There are different parts of the compensation plan. It's the quota development.
It's , are we going to pay on margin ? Are we going to pay on revenue ? And it is how frequently are we going to pay ? Are we going to pay bonuses ? How are we going to accelerate payment ? There's just so many factors to sales comp that are , are important. And if you get it right , it really drives the behavior of the salespeople.
And you want it to use it as a tool to drive the behavior of salespeople. So I just think it's really important to get that piece right.
And it does involve talking to , you know , if you're the sales leader , you , the CEO , the general manager , the operations people all have to be a part of this discussion with sales comp because whatever you decide to do , that's the behavior you're going to get from the salespeople. And it needs to reflect pieces of everybody's business.
So it Yeah. I just think it's key to the success of the company to get the sales comp right. |
| 01:36 | It's really interesting how many professionals are talking about , like , mid quarter change or a comp plan change. I see companies do that.
Would you ever part of those mid changes , or how do you feel about that stuff with organizations ? Because I could tell you the candidates do not like it.
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| 01:53 | Yeah. And they should.
Okay. You know , when you change a comp plan midstream , you only do that out of , like I'm I don't wanna use the word desperation , but you do it because it just has to be done.
And , and so who , I , I won't say you never do it because there are times where if you have totally screwed up your original comp plan and you're running out of money as a business because you're way overpaying your sales reps for revenue that's not bringing in margin dollars to pay it. You have to make a change.
So , but you have to really be in bad shape to do that. So you could tweak a comp plan mid midstream , but like you could decide that one of the products solutions that you guys are selling is generating higher margins than expected.
So let's drive the sellers that way by tweaking the comp plan and maybe giving them more quota credit for that particular product. Interesting.
Absolutely. You can do this in 2 different ways.
The comp plan is the comp plan , and you could say , right , we're gonna have a contest now. And you can tweak.
It's still the comp plan , but it's outside of the comp plan rule. So we're gonna have a contest now and try to drive our sellers toward selling this particular solution.
The other way is to actually tweak the comp plan and say , you know , we're paying 8% of revenue on that particular product. We're gonna pay 9 or something like that.
So you can do it. Either way , I I'd rather tweak the cop plan than have a whole lot of different contests.
Yeah. But I've been in organizations where that did contests , that really rewarded , solutions higher during certain parts of the year and , and have that work very effective.
So either way , as long as when you're tweaking it , you're not tweaking it so people get paid less. You if you're gonna tweak it , you always wanna tweak it so people get paid more. |
| 04:04 | Now as far as , like , complexity goes , I've seen some comp plans where I'm sure you I you I I don't even understand it. |
| 04:11 | I think simplicity helps me hire better people , and it helps me inset my sellers in a way that I can change their behavior on a dime. Meaning , if if I can get away with paying some percentage of revenue , you know , a flat percentage of revenue , that to me helps me hire and go after top talent.
I can explain the comp plan very easily. They get the comp plan very easily.
And there's a lot less confusion about what the expectation in the business is. Right.
So , yeah , if the comp plan has to be complicated , it it then takes away your ability to sell your company to a top seller. Because if they can't figure out what you're doing with your comp plan and 30 minutes of talking with you , that's a problem.
That that's gonna be a problem. And they're they may be reluctant to leave because top sellers are already working somewhere.
Very few top sellers are unemployed. A. |
| 05:20 | 100%. Yeah. |
| 05:21 | They're employed somewhere. And so if they can't understand your comp plan in a short amount of time , the chance of them wanting to come and work in your organization starts at the clock. |
| 05:32 | And I couldn't agree with you more on that because , I mean , I haven't I know I knew your top sellers and still know them , and there's a lot of others out there. And we always talk about that.
I'm just a fly on the wall , but I could tell you none of them want a complex plan. They want to know exactly.
I produce this because we agreed in the offer letter. I want to get paid this.
And I just can't imagine , like , being in an organization myself as a seller , wanting to go work for a company where I've got to do , like , taxes to figure out what I'm gonna get paid.
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| 05:59 | The other part is it's funny sellers have a way of , you know , figuring out the most complex. |
| 06:06 | We we do. We don't wanna do it.
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| 06:08 | You don't wanna do it. Right ? And I don't wanna have you do it.
Because as you're figuring it out , you find all kind of loopholes , and you find all kind of things that may maybe were unintended consequences of comp plan. |
| 06:21 | Companies that wanna drive better results with their sales teams , how do you feel about caps on commissions ? |
| 06:28 | I'm not afraid of any caps. |
| 06:31 | Okay. That's what I thought you would say.
But.
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| 06:34 | Once again , just like I would say , I don't wanna ever change a comp plan midstream. I don't wanna ever cap a seller , but I want it in the comp plan that I could , if I had to.
So I don't ever want to use it , but it needs to be a line item in the comp plan. There are unforeseen circumstances , Things that happen in a sales environment.
Let's talk about the first thing that could happen. The business , the business could be failed.
So if the business is failing , it's not the seller's fault , but everybody's suffering. And so the seller is a part of this greater team.
And so you need to have the ability to protect the business. Now , I don't want to ever have to cap this up.
I cannot recall once. I guess I was a seller for , I guess , 8 years in technology and I've been a sales leader for like 30 plus years.
And I don't remember ever had cat as against the comp. |
| 07:38 | Now for organizations out there , I guess it would depend on how big the sales force is or mature. But when you think about splits , that's another thing that comes up in sales comps.
Do we do a 5050 ? Do we do a 60 40 ? I've even seen , which is interesting , 70 , 30 , 80 , 20. Because I've seen organizations go very high on salaries.
Right ? And maybe their sales cycles are extensively longer. |
| 08:02 | I tend to go 5050. But if I have a solution that's gonna take a long time to sell , my 5050 model isn't gonna work.
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| 08:10 | Have you had instances where you do go higher or have you always been 5050 ? |
| 08:14 | I'm either 5050 or 5545. I can't think of a time where I paid 70 , 30. |
| 08:21 | But you've always had them , like , literally every sales team , and and I think most people may not those and some do , but , like , you've every sales team you've led was crushing it. And I get companies that , well , we wanna pay this.
And I'm like , you don't need to. Right ? Or they're not paying as much.
They're like 40 , 60. So regardless of the product , you were hey.
This is where I was because I want the right type of sellers.
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| 08:45 | Yeah. I I prefer to be 50. |
| 08:48 | What are some situations that sales leaders that are at getting to your level or they've got the right mindset for a comp plan , but it falls short at there ? How do you deal with influencing the right comp plan ? |
| 09:01 | Typically , you know , what the CEO cares about is are we driving a proper behavior ? Are we gonna get the best people ? Which means is our compensation market based so we can get the best feet. The CFO carries about how much are my sales expense for what amount of revenue.
And so I think that in my experience , I value what the CFO brings to the table because I'm really focused on market based compensation , driving behavior , and getting these folks paid. They'll model it out for you.
And many times working with with CFOs , yeah , there's a push and pull and there's an argument , but it we're both after the same thing. |
| 09:48 | Yeah. |
| 09:49 | And and in the end , we're gonna come to a balance that I can live with and that they can live with and that the CEO is gonna be happy that we're able to do that. |
| 09:58 | We pay ours monthly. Is there quarterly ? Is it monthly ? How do you feel about that on comp plans ? |
| 10:05 | Sooner is better and more frequent is better. So I'm a big fan.
I don't think you can pay any sooner than month. The sooner you could pay somebody after they close the deal , the better.
That motivates people.
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| 10:18 | What's that dopamine hit ? Right ? Like , from , like , social media , it's the same thing with fight. You see it hit your account , and you're like , okay.
Great. Let's let's keep it going.
Exactly. What would you kind of summarizing , like , things that sales leaders should really think about 3 , 4 , 2 , like , I don't know how many bullet points you have , but that when you're developing a these are what you need to think about.
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| 10:39 | Yeah. Which what are your fixed cost sales expense ? What do they look like ? What are your variable costs look like ? What is the market pay for , for what your guys are doing ? How can I make this comp plan now ? If I have all that data , how can I make this comp plan simple ? And so on the side of simplicity all the time and never try to pass off comp plan that's lower than market based , because then you're accepting that you're gonna get C players.
Remember , getting the best people means that you have to have a comp plan that makes sense. That's market based because the best people think they're going to make above market.
So if your comp plan is market based , they think they're going to blow it out anyway. And that's good.
But if you've given them something that's lower than the market and saying that the only thing they're gonna get to is market , that that doesn't play well. And and one other thing they're doing , a lot of sales leaders , I don't , I think , forget.
A little bit of overpayment goes a long way. Their CFO's gonna cringe when I say it.
If you're gonna in your comp plan , on the side of overpayment. |
| 11:55 | Now this is helpful. I'm glad you shared your thoughts on this stuff because this is something that's obviously a big topic , especially around this time of the year.
So Absolutely. Thanks , Larry. |
| 12:03 | Thank you. |
