Aligning Your Sales Team Compensation With the Executive Team

Is your sales team compensation aligned with the executive team?

Figuring out sales leadership compensation is always a challenging task. In our mind, there are two things to consider:

1. Recommendation on the comp plan.
2. Answers to the pushback you might get from the executive team as you share this. 

We believe the payout % be exactly the same as the CEO/VPs. This creates stronger alignment to reaching goals as a team.

Then you do the same for the reps. 

Too often, we see managers and directors not getting paid while VPs and executives always do. This way everyone is on the same path and has the same skin in the game.

When you don’t do this, it will lead to higher turnover, missed goals, and lots of “blaming” with no accountability from leadership.

Note we said percentage, not the same dollar amounts.

It also depends on how complex you want it.

We encourage overages sooner, not later

• 50% of goal: 50% of payout
• 60% of goal: 60% of payout
• 70% of goal: 75% of payout
• 80% of goal: 90% of payout
• 90% of goal: 95% of payout
• 95% of goal: 100% of payout
• 100% of goal: 105% of payout
• 105% of goal: 115% of payout
• 110% of goal: 125% of payout

Answers to the Pushback From Executives

1. Execs will often want to do something like 50% of goal, and 25% of the payout. 
   1. Richard’s Replies – 
      1. Shouldn’t everyone have the same percentages to stay aligned?
      2. What exactly is your % payout if we only hit 50%? 
      3. I am confused, you get more but you’re the one with ultimate control over the budget on how much support via technology and training we offer, right?
2. Execs will question why would I pay 100% at 95% of goal.
   1. Richard’s Replies – 
      1. It encourages the hustle much sooner through the month/quarter, not the end. Remember, they are going to see the light of this at 80%. 
      2. It provides the catalyst, boost, and encouragement early as opposed to fear and anxiety later.
      3. It makes it easier to manage the leaders and reps to say, “how far away are you from XX, so you get paid YYYYY?” (Positive reinforcement)
      4. Drives greater accountability at the front line.
3. Right now they will say, “We can’t afford it.”
   1. Richard’s Replies
      1. That’s confusing to me. If we cannot afford it, that sounds like execs and the board are concerned we won’t hit the goal, right?
         1. (They will give you counterfeit no’s here)
      2. If the exec and board concern is around “affordability”, then that suggests the goals are not based on reality. 
         1. How did we get to the goals specifically?
            1. Top down from the board and VCs who want their money back?
            2. Who reviewed the actual pipeline and close ratios to make sure they align with reality?
4. They will also say, “Well we’ve been through this before so this is what we think is right.”
   1. These folks are straight-up lying. 
      1. Nobody in charge, unless they are 80 years old, has ever been through this level of inflation.
      2. Covid is not even close to the same.
      3. 2008/2009 maybe, but even then, not entirely true. Yes, you may have had to do layoffs, however, those layoffs did not also coincide with the inflation we have.
   2. Richard’s Replies
      1. Really, when exactly have you been in this leadership position before when this level of economic uncertainty, along with the massive increase in inflation, hit at the same time?
      2. No, Covid is not the same, because there was assistance for people laid off, as well as organizations. Feel free to ask them, “Wait, we didn’t get a PPP Loan?”.
      3. Oh, and there was no inflation. 
      4. No, 2008/2009 was not the same because there was no inflation, and in fact, interest rates went way down. BTW, what’s the interest rate on your home these days? It’s hitting 5% right now. 
         1. Oh, you didn’t refinance, yeah, that tells me you know exactly how to set sales comp plans.
5. Other Suggestions
   1. Of course, you may not be able to say these things directly, but for a lot of us, its what we want to say. I suggest taking this and wordsmithing to suit your style, as well as your leadership. 
   2. Use the Hashtag #BlameRichard and give them my cell phone, 415.596.9149

While this advice has a lot of ideas and “things I wish I could say”, I completely understand you need to “hold on tight” right now too. 

Use this as your anchor and then find the right way for you, your team, and your company.