Who better to talk about commission programs than someone who built a company around it? Siva Rajamani, Founder and CEO of Everstage and Adithya (Adith) Krishnaswamy, Head of RevOps and Growth with Everstage delivered a masterclass webinar to RevOps professionals about creating great commission plans that actually inspire people, instead of forcing them into a cycle of repetitive tasks.
In their previous positions with Freshworks, they felt the pain of all the manual entry and errors involved in commission plan implementation and management.
That kind of pain makes a person bang their head against a wall, or a desk, or…
They started looking for other options, but were surprised to find everything that existed in the market led to that same head-banging experience – and not the good kind that comes from heavy metal music.
“One of the frustrations we had, among other things, was around the entire compensation and commission planning all being very manual. It was a painful task,” Siva says. “We thought, ‘hey, you know what? This has to change for the good,’ and we set out to build it ourselves. So, the solution was Everstage.”
Everstage may eliminate those pains of manual entry, but it doesn’t create the commission plan itself. That’s up to the Revenue Leader (You). And that’s what Siva and Adith spoke about on their webinar – how to create a solid and fair plan.
What? You thought they would do it for you!?
Actually, they almost do. See below for the steps necessary in creating a working commission plan. If reading this article isn’t enough detail for you, check out their guide at https://www.everstage.com/compensate-with-clarity
Siva noted five aspects that go into making a successful plan:
1. The right balance of salary and commission
2. Alignment with business goals
“Setting the right ratio between fixed and variable is important because you want to make sure you give a sizable weightage on commissions so that the team is incentivized to go off and get those numbers,” he says. “At the end of the day you are setting those commission plans in order to drive certain business goals.”
3. Limited components and complexity
“When you incentivize too many things in a commission plan, you end up incentivizing nothing,” notes Siva.
4. Effective territory planning and quota setting
5. Objective and quantitative in nature
Aside from those five things?
“Of course, the big caveat aside from those five things we discussed is that your plan should depend on what geography you’re focusing on, what kind of buyers you’re focusing on and obviously what business you are in,” he says.
Plans absolutely must focus on the buyer. What works for selling to SMB businesses isn’t going to work for enterprise level businesses or mid-market businesses, you have your own internal goals, yes. But if they are not focused on the buyer, you risk setting impossible goals that demoralize the team, or building a commission plan that does not give your Revenue team the value that it needs..
So truly, it’s all about them. Surprise, surprise! It always is.
Adith noted that when focusing on selling to small businesses, it’s not all tube socks and bathrobes. One size does not fit all for your commission plan. On top of that, very seldom do any commission plans fit the set-it-and-forget-it philosophy. Build your plan with your customers and sellers in mind, and then focus on being flexible and adaptable in your approach. The market and your sellers will provide feedback on your plans. It is important that you are ready to change them based on that feedback..
“When it comes to these kinds of businesses, the things that you incentivize on your commission plan… you have to go specifically and focus on incentivizing number of deals,” says Adith.
When a company sells to both small businesses and mid-market and/or enterprise level, there needs to be separate commission plans for the different sales teams because the objectives (and the deal sizes) aren’t the same.
“When it comes to SMB businesses, it’s very fast moving,” he says. “So, you need to be able to adapt very quickly and change.”
Selling to mid-market is kind of like the middle of a movie, you know, like The Blair Witch Project, when they’re just wandering around, freaking out and you’re wondering if anything is going to happen. The payoff can be any range of things, from something not worth your time to an event so scary that it's life changing. You won’t know until the deal comes in. Mid-market sales is this middle point where you’re hoping something big will happen, but it can take longer than you thought. Oftentimes, we spend an Enterprise level amount of time waiting for a Mid-Market deal to come in. And sometimes, they roll in as fast as an SMB deal. It's hard to tell. Plus, everyone’s definition of “Mid-Market” is different. It's important to set clear boundaries on what your ranges are.
“It’s not going to be easy for you to create a pipeline for bigger deals, so you need to incentivize that aspect of the business as well,” Adith says. “When it comes to mid-market, it’s more about longer term.”
The timing gets longer still when it comes to enterprise-level sales.
“It’s super important for you to think about… if it’s going to take nine months or 12 months for them to close a deal… you [need] to know the variable pay is not affecting their day-in-day-out cash flow,” he says.
This is where the math cap gets put on. Should there be advances on commissions? What will draws be structured like? Do we pay out quarterly? Yearly? And because of the length of time, the plan needs to be considerate of the deal cycle., It can’t change every six months when it could take longer than that to close a deal.
The point is that commission structures need to align with the purchase process of the customer as well as with the type of business they represent.
Yes, there’s an echo – I’m repeating myself – because these were really important points mentioned by both Siva and Adith. And let’s say it once more just for emphasis: plans must be built around the customer buying process, the territory alignment and the sales teams.
Structure of the plan will be based on three things:
“Why do you want to look at behavioural changes when it comes to account executives? This could be something like multi year deals, if you want to incentivize cross-border deals,” Adith says. “Something that’s a bonus component that shouldn’t be part of your primary success metric and shouldn’t confuse your reps.”
Companies, reps and customers can all be in different countries and this location factor plays a part in the creation of commission plans. They could even be multiple departments within the same company located in different places (usually at the Enterprise level). All of these factors are important to consider when building your plan (See why we couldn’t just build it for you?)
“There are different ways that there are plans purely based on activities, what they have done,” he explains. “Then there is another top of plan where you want them to focus on pipeline generated. Choosing these commission types is super important and you’ll need to tailor these based on your business model.”
The next element is choosing the success metrics and keeping them in place for at least two or three years. Both primary metrics and bonus metrics.
This is where team conversations are valuable. Looking at all the variables between people, territories, teams and customers can make standardizing commission plans difficult and feel overwhelming. The thing to remember here is that other companies have also gone through this and there are plenty of examples of missteps and wins out there to learn from. Like we said earlier: It's not one size fits all. Communities like RevOps Co-op help add that context, with people who have done this work before willing and open to share what worked for their specific use case.
That’s why they offer the guide and other resources on their site. And once that commission plan is decided on, having a partner that can help implement it with automation wouldn’t be a bad thing either. Imagine having to do all the math of building a commission plan and then having to manually calculate it every time it is supposed to be paid out! Thanks to Siva and Adith for their amazing platform, and expert advice.
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