To Hit Sales Targets, B2Bs Need to Define Roles—and How They’re Compensated
To ensure customer-focused cooperation and urgency among team members, all roles in the B2B sales process should have some compensation tied to revenue targets. But in sales roles, all too often compensation is not commensurate with contribution. Sales compensation focuses on results, but the behavior and activities that drive a result might not always be properly rewarded. Some roles might be undercompensated, others vastly overcompensated. This imbalance can cause resentment on the team, leading to the potential loss of top sales resources. Below are two ways to design sales roles and how they are compensated to ensure fairness and drive progress toward your corporate sales goals:
1. For compensation purposes, define whether a sales role is central or supportive. A successful sale is facilitated by many different roles: Account manager, inside sales representative, sales manager, solution architect, product subject matter expert (SME), support technician, and customer administrator are but a handful of the diverse resources that can assist in securing a customer’s business. Each plays a vital part, but they vary in their ability to control whether a company buys your product.
It’s important to look closely at a typical sales cycle for your company and determine the key milestones and each role’s level of impact on those milestones to determine how to compensate for a sale. For instance, in some companies, a product SME is vital to creating interest and developing and implementing the solution, and he becomes a key part of the team the customer is buying along with the product. In this case, he should be compensated highly for the sale, as he is critical to its success. In other companies, SMEs merely provide expertise to develop interest in a product but are not part of the continuing sales cycle. In this case, that role provides a support function and should receive minimal compensation per sale.
2. Vary the leveraged portion of on-target earnings (OTE) and multipliers based on the type of sale. Most sales and sales support roles are compensated with a base salary and commissions and receive their OTEs when they reach 100 percent of their target. The OTE mix varies by industry and sales rep type. Generally speaking, the greater the amount of leverage or pay at risk, the greater the OTE, to reflect the reduced financial security. Organizations have a powerful tool to drive behavior based on how they split a rep’s OTE among these two components.
New account reps, or “hunters,” are focused on contracting business with companies that are not currently customers. This type of sale normally requires more time and energy to establish trust with the customer and demonstrate the value of your product. Compensation for this sale type should be less leveraged (70/30 to 80/20) to give the rep more security while prospecting. Additional bonuses with thresholds for number of new accounts and new accounts with a minimum value are also beneficial to motivate effective behaviors.
Customer account reps, or “farmers,” are tasked with maintaining and growing business in an account. They’re often given annuity compensation. That sends the wrong message. This rep is responsible for keeping business, which often requires minimal effort and should be a delivery responsibility. I recommend reducing the leverage on this role to 90/10 or less to compensate for the existing relationships and incumbency.
Territory reps have a combination of customers and prospects. This is probably the most difficult role as it requires the broadest skill set. This rep has to balance time-consuming new-account pursuits and existing account maintenance activities. This compensation plan should be highly leveraged (50/50 to 60/40), with the high OTE to compensate for the expertise necessary to be successful in this dual role. This compensation plan should also include significant multipliers for overachievement, to motivate successful reps to drive more business.
And I’ll leave you with some additional recommendations:
• Pay more for new accounts, accounts in a targeted industry, selling specific product lines vital to the corporation, or other areas of importance for the corporation.
• Provide a bonus to a colleague who uses existing relationships to secure another rep’s business on an account.
Paul Harney (paulharney@bellsouth.net) is an independent sales process consultant who uses his Fortune 200 sales experience to help companies close the disconnects between sales infrastructure, the opportunity pursuit process, and customer value creation.