Suddenly, it’s a new sales world. One where you can’t determine rep compensation by sales quota achievement. For most reps, quotas now seem completely out of reach.
Demand is down. Churn is up. Reps are sending 50% more emails, yet are getting an average response rate of only 2.9%.* (Even before the pandemic, 57%** of reps stated they planned to miss quota in 2019.)
Buzz cuts abound
While no one can get a real haircut today (I’ve cut my own and you don’t want to see it), many in sales are getting big compensation buzz cuts.
This creates another challenge: Your reps are your lifeblood. Right now, you want to keep them as motivated as possible. And be absolutely sure you don’t lose them.
Even in the best of times, reps only spent 34% of their time selling.** Prior to what’s going down right now, busywork was already at an all-time high.
During COVID-19, that number is escalating, as moving sales teams to remote and disparate locations (homes) requires technology setups and ramp-up time, and an overall environment acclimation period.
On one hand, you want to preserve cash flow and stay solvent, but on the other, you have to support your reps.
So what do you do?
We see 4 options
Option #1: Whole payouts
Some sales orgs are keeping their reps whole, paying them their base salaries as well as full commission—through recoverable or non-recoverable draws.
While a godsend for reps, this can cause a company to hemorrhage cash very quickly.
Also, some reps could decide to take a sales vacation, stalling current efforts and even delaying pending deals.***
Option #2: Base only
Other orgs are simply paying a base, which puts reps at a huge disadvantage. We all know that base doesn’t even cover rent or a mortgage payment in most of the U.S.
Plus, if your company’s overall sales drive turns out to be 50% less during this crisis, each rep’s base will obviously be substantially less than pre-crisis.
Option #3: Classic MBOs
Implement a traditional Management by Objective (MBO) system that pays reps for hitting pre-defined metrics, like Number of Calls Made, Number of Web Video Appointments Set, and the like.
Option #4: Progressive MBOs
Shift your reps’ MBOs to hinge on their prospects’ activities, instead of their own activities.
In this scenario, you still determine rep incentivization by account progress, but not necessarily quota progress. Account progress hinges on customer actions.
We are currently collaborating with clients to set up, measure, and track Progressive MBOs programs through SetSail.
One innovative customer who launched a category-defining app a few years ago has decided to shift away from focusing on revenue targets for this quarter and potentially next.
They’re rethinking their variable comp structure by assigning points to percentage-of-rep-MBO attainment for a task; those tasks are measured by how the prospect “acts.” Points are then paid out to reps in the form of cash.
By creating a tighter correlation between customer behavior and reps’ rewards, a leader can empower their reps to achieve significant deal milestones—for instance, securing a Zoom Meeting with a Prospect VP of Finance—and be rewarded with a percentage of his or her commission money on the deal.
The nice thing about this approach: A leader can leverage the data science in SetSail to see what is working in their new sales process for one sales team, then customize an MBO program for each team.
For now, not forever
Even in an ideal world, defining a company’s top objectives—and cascading those down to sales tactics—seems like an amorphous task.
But with this new approach, the process can actually become more concrete. Your sales MBOs are translated to SetSail incentive rules, and interpreting company-level objectives “up” through them is often a matter of simple rationale.
Says our CPO Bert Lui: “Long-term, we hope customers will make SetSail comp a permanent part of quarterly variable comp. But until we get through this crisis, an MBO model can work.”
If you’d like some help moving a quota-carrying team to an MBO incentive model, reach out to our team here.