Revenue Operations

Best Way to Make Comp Plans Work in a Recession? Transparency

Market changes in the past several months including rising interest rates, high inflation and the subsequent buying shifts have led to tough questions around sales targets and the associated compensation plans. 

Should tech companies be changing things now? Wait and see? Leave it alone? We gathered roundtable participants: Mark Schopmeyer, CEO of CaptivateIQ; Christian Borrelli, VP of Sales with CaptivateIQ; Rome Thorndike, VP of Sales with Datajoy; Chris Pitchford, VP of Sales with Ally and Jeff Ignacio, Head of Sales Ops with Forethought to discuss how to think about compensation plans during a recession. One word that came up continuously: Transparency.

'Transparency' may feel like as much of a buzzword as 'pivot' lately, but there’s something to be gained from having frank and honest conversations with your team. This is particularly true during a recession or any other negative economic period. We brought on Mark Schopmeyer, CEO of community partner CaptivateIQ, to moderate on a panel of sales and business leaders to discuss compensation plans during the challenges of a recession. While many factors came up in the conversations, the necessity to keep communication open and transparent was a key element.

No one has a magic 8-ball with a calendar setting

As the group considered Mark’s questions about how long the recession could last, it was obvious that none of the participants are future-seers. It certainly would be helpful if they were – even just a little! Latest reports have speculated a duration of one to four years.

Rome Thorndike, VP of Sales with Datajoy says anything beyond a year is pretty hard to predict.

“I don’t think anyone thought that Ukraine would be invaded,” he says of how things can change in an instant. He also noted that there are trends to watch, “If you see yields collapsing, you know that there’s a larger slow-down on the horizon.”

The average length of a recession since 1900 is 15 months according to Chris Pitchford, VP of Sales with Ally.io, but he’s also very honest about his predictions.

“I’m typically optimistic,” he says. “I’m modeling on 18 to 24 months. I don’t know, is really the truth though.”

Let the eyes bug out as you tighten the belt

"Businesses are sharpening their pencils", says Jeff Ignacio, Head of Sales Ops with Forethought. "Purchases are being limited to 'must have' items. Few businesses are looking for 'nice to haves' or taking risks on radical new technology at this time." He does, however, advise that organizations keep watch on what their competitors are spending on and ensuring the business is staying accountable in its own operations.

Sure, tightening the belt and looking at efficiencies is important, but there’s no need to tighten to the point that your head pops off. Tighten enough to create watchful eyes that might just see an opportunity.

Rome notes that his former organization, Snapdocs, went the opposite way from what investors like Bill Ackman suggested.

“We would have let go of a lot of people,” he says, if the company had listened to all the gloom and doom. “Instead, what we did was look at the signals. What we saw was that Docusign, who was one of our greatest competitors, was doing really well.”

Ackman saw things collapsing, but what Snapdocs had going for it was a platform that allowed people to sign mortgage documents without having to meet face-to-face. It was the perfect fit for everyone who was trying to avoid their realtor’s spittle in the midst of a respiratory-spread disease pandemic.

“We did not let anybody go,” Rome says. “Instead, we did the opposite and it put us in a great position to capture market share.”

This strategy isn’t right for every business, so those watchful, bugged-out eyes need to stay focused. Snapdocs may have benefitted from the pandemic, but other businesses, like Airbnb, made the right decision to conduct layoffs.

“Know your business and see how your comps are doing relative to everyone else,” he says. “I would not listen to what the media is saying.”

Building the right plan in a new environment

"There needs to be an alignment between business plans and comp plans", says Christian Borrelli, VP of Sales with CaptivateIQ. "Part of adjusting to a new market environment includes retaining key talent. That comes from keeping them happy and that, in turn, comes from making sure numbers all jive together."

“You don’t want them stuck on the old numbers in a new business plan,” he says. “In a new environment where companies need to be efficient… there needs to be correction on a comp plan. Don’t try to cut corners and screw your team.”

Jeff suggests doubling-down in areas that are still working and modifying those that aren’t. Revisit things like quotas, the underlying mechanics of the comp plan, looking for rewards outside of money and considering the metrics rewards are based on.

“Readjust accordingly based on the new outcomes of the business and then design new plans,” he says. “Any comp plan should drive the behavior you’re looking for.”

There will be tough conversations ahead says Mark, but this is the basis for that open, honest dialogue an organization needs.

“This honest conversation needs to be happening,” he says. “How do we navigate through a storm that’s coming? The quicker you have that conversation, the easier it’s going to be to, as a team, navigate the harder conversations.”

Chris agrees. “I believe in transparency with your team. There might be tough conversations that are going to come.”

Ones to watch

There are five key metrics Chris suggests to keep an eye on.

“I think the typical guidance founders, CEOs are getting right now in terms of the metrics that are really important to be focusing on are: growth, gross margins, net dollar retention, CAC payback and burn multiple,” he says. He also advises, “Shifting to shorter term goals instead of longer-term quotas.”

None of this should happen in a vacuum. While Jeff points out that this is the ideal time to scoop up some great talent, you don’t want to be the company that watched its top-seller walk out the door with the proverbial file box filled with personal items. Conversations are key to learning what’s happening with the team and these need to happen regularly; because, you guessed it, things in the world are happening constantly that could impact the business.

“There’s a lot of different levers to pull in terms of comp plans,” says Jeff. “Compensation is super sensitive for people, especially sales people.”

He reiterated that if people are taken care of, they will stick around. Talking to them about changes will go a long way to creating that vibe.

“Sales people have very long memories,” says Rome. “If you took care of them in the past, they’ll believe you’re going to take care of them now.”

There may be a need to adjust the team’s size, but not without complete consideration. Or, as Christian puts it, “Balance the number of mouths you have to feed with the pipe that you’re getting to them.”

This may mean larger quotas, but it would also mean larger territories to draw from.

Chris is a fan of the “land and expand” approach where arrangements are made with customers for 500 seats, for example, but with the future built into the contract. This could mean an expansion to 1,000 seats in 90 days.

Keep staff in the loop so that they know change is coming and can have a say about what works and what doesn’t. No one knows how long the recession will last (if you do, please give us a call) but by looking at the right factors for your specific business, you can weather the storm without bumping the rocks.

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