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Founder @ Avenue Talent Partners l Strategic Advisor l Keynote Speaker
The B2B sales compensation market shifts quickly – how are you keeping up in 2023?
One of a successful sales team’s greatest assets is the A-players who consistently hit quota, drive revenue, and outperform their team members.
The issue? Top performers are hard to find, and even harder to replace.
That’s why leaders are more pressured than ever to create compelling compensation plans and foster an environment that ensures employee satisfaction and minimizes churn.
In this episode of Closing Time, Amy Volas provides insights into the sales compensation market, highlighting key factors driving it. She also emphasizes the significance of a robust sales hiring process and the potential risks that sales leaders should consider when building out comp plans.
In recent years, the business landscape has been marked by significant challenges, from the pandemic to the great resignation and the current recession period with widespread layoffs, stories of high turnover, and low unemployment. Companies must do more with less and sales leaders must get more creative with compensation strategies.
Remember: compensation is not just about dollars and cents. Intrinsic motivators play a significant role in understanding what drives employees. Take a moment to assess what you can realistically offer, and be comfortable with your limitations. Do not perceive the current market as an opportunity to strike a bargain simply because some companies are struggling and laying off employees. Seasoned sales professionals who excel at their jobs, even if they were laid off, may have multiple job offers awaiting them with attractive rewards. Therefore, hiring managers should always pay people fair market value for their contributions.
Maintaining discipline is crucial when dealing with market fluctuations. The great resignation started the trend of offering high salaries to inexperienced individuals straight out of college. Unfortunately, this behavior resulted in bloated compensation structures that now need to be corrected through layoffs.
This issue exists on both sides, with candidates and sales leaders seeking maximum financial gain when the market favors them. Pursuing the shiniest object, driven by the desire for extra money, can result in added responsibility and pressure to perform. If individuals haven’t mastered their craft and left behind a company that invested in their development for a company with a higher salary, they may find themselves unprepared for the new role. This is especially true for entry-level positions like SDRs, where experience and understanding of business and the buyer journey are foundational.
Choosing a company that provides invaluable support, opportunities for growth, and the freedom to learn from mistakes is often more valuable than a higher base salary. Merely chasing money without earning it or having the necessary skills will ultimately be exposed. Therefore, interviewing well and using buzzwords won’t suffice if individuals are unable or unwilling to do the work.
Designing and implementing a compensation plan as a sales leader involves certain risks and considerations. It’s important to understand that merely relying on monetary incentives won’t address underlying issues. Well-crafted comp plans should be supported by a robust hiring process and other factors that make them compelling.
For early-stage founders or sales leaders, it’s imperative not to hastily assemble a sales team or hire excessively without validating the market fit of your product or service. Failing to do so will result in financial setbacks and disappointment for both the team members and the business as a whole.
Here are a few key points to consider before designing a comp plan:
1. Product-market fit: Ensure that your product or service aligns with market demands. Without a solid fit, no amount of compensation will drive successful sales. Validate your offering in the marketplace before scaling your sales team.
2. Territory definition: Ensure you fully understand the territories and market segments. Overhiring in enterprise sales, for example, can be detrimental due to the limited size of that specific ecosystem. Consider the appropriate number of salespeople for each region, such as having representatives on the East Coast, Midwest, and West Coast.
3. Differentiate between Commercial vs. Enterprise sales: Commercial teams often resemble a large infantry, while enterprise sales require highly skilled, strategic individuals comparable to Navy SEALs. Tailor your compensation plan and hiring strategy accordingly.
When designing a compensation plan, avoid a one-size-fits-all approach and instead recognize the nuances between different roles. Many comp plans fail because they are designed as catch-all solutions without considering the specific requirements of each sales position. For example, data consistently shows that it takes at least 12 months for a new enterprise sales representative to establish a repeatable, sustainable, and predictable pipeline. Therefore, leaders need to align the comp plan with realistic ramp-up expectations. Conversely, expecting a high-velocity transactional seller to follow the same timeline as an enterprise salesperson is unrealistic. Your comp plan should incentivize desired behaviors and ensure that the key performance indicators (KPIs) correlate with success factors.
Keep in mind that individuals often leave behind opportunities when switching jobs – so your compensation should justify what they are forsaking. The first year, especially in major enterprise sales, is often a building period, and substantial commissions may only materialize after 18 months to two years. To address this, providing a buffer in the form of a draw or sign-on bonus can be a useful lever. In contrast, a high-velocity, SMB transactional salesperson, for example, typically closes deals quickly within a month and a half. Consequently, their incentives will differ from those of an enterprise salesperson. A tailored compensation plan should reflect the unique characteristics and requirements of each sales segment.
Retaining top-performing employees is a priority and challenge for sales leaders. To understand why A-players often leave, we need to explore various factors contributing to their departure. One common reason is the disconnect between the enticing vision they were sold during the recruitment process and the reality they encountered upon joining the company. Data collected over the past seven years reveals a recurring theme: leadership issues. It all starts at the top, with leaders who fail to recognize the value of the sales function. Sales can become the proverbial redheaded stepchild, marginalized and treated as an unnecessary evil. This “us versus them” mentality leads to frustration and discontent among sales professionals.
Another reason for employee departure is the absence of product-market fit. Even if a salesperson possesses exceptional skills, without a market that responds positively to the company’s offerings, success will remain elusive. Ignoring salespeople’s ideas, feedback, and contributions further erodes their motivation and satisfaction. Creating an environment where individuals feel heard and valued can help retain top talent.
Company culture also plays a vital role. If a revolving door of employees is accompanied by a culture of badmouthing and negativity, it further undermines retention efforts. Likewise, conducting layoffs under the guise of a “mass firing” due to dissatisfaction with the existing team sends a damaging message to remaining employees. Negative internal narratives only serve to reinforce the belief that they, too, will eventually become targets of criticism and dismissal.
To retain top performers, sales leaders must prioritize strong leadership that recognizes the value of the sales function, ensures compensation commitments are honored, fosters a culture of open communication and collaboration, supports a flexible work environment where feasible, and promotes a positive company culture that celebrates and appreciates its employees. By addressing these aspects, organizations can significantly reduce turnover and retain their most valuable assets.
Sales leaders know they need to stay ahead of compensation trends. Let’s see what’s new in the market in this episode of Closing Time. Hi, I’m Dave Osborne,. Chief Sales Officer, Insightly. And you’re watching Closing Time the show for go-to-market leaders. Today, I’m joined by Amy Volas, strategic advisor, L-P at Stage 2 Capital and owner of Avenue Talent Partners. She’s also the host of Thursday Night. Sales. Welcome to the show, Amy. I’m excited to be here. We have a lot to talk about, Dave. So it’s a great time for this topic, right? It’s been an insane past couple of years. You know, we’ve gone from the pandemic to the great resignation to now as we enter this recession period, we have lots of companies laying people off, which is really unfortunate. Sales leaders are forced to get more creative than ever with compensation. So, Amy, what are you seeing? What’s driving the market right now? So there are a lot of different things. It’s a complex market because while we’re seeing stories of still high turnover and still low unemployment and then the really sad stories of big layoffs, what does that all mean? It means that when I think about compensation specifically, there are companies that have to do a lot more with a lot less, and they’re going to have to get a lot more creative. And then there are companies that are absolutely thriving. And so I think you have to get real clear about where are you in the market place. If you are a small startup and you burn too hot and you’ve had to lay some people off, that’s a really hard story to tell. It’s also hard to recover from. It’s not impossible. And the only way that you can do that is to be honest. So people don’t expect perfection, but they do expect honesty. So if all of a sudden you’re still seeing the same narrative that you were eight months ago when you got that round of funding and the narrative was, we’re on a rocket ship, we’re the next Uber for blah, blah, blah, blah, blah, and now we need to hire a bunch of people and you got way ahead of yourself. And now you’ve had to course correct that. First and foremost, you need to own that. So talk about what you learned. Talk about if you. I think a lot of people assume that if you lay people off that you are completely done hiring. And what people don’t realize is while you’ve had to lay some people off, you may have to make really strategic hires to get through the storm that you’re going through. And a lot of people don’t realize what it takes to do a business. So, yeah, maybe I had to lay off a portion of my marketing team, a portion of my SDR team and a portion of my customer success team. And now I’m hiring a really heavy duty head of engineering now. Well, if we don’t fix our product problems, nobody’s going to have a job. And that’s why we have to do that. But that head of engineering is going to want to know what’s the deal, you know, like what’s actually going on? Some people really crave a turnaround, but you don’t know unless you find out. So when it comes to compensation, it’s not so easy. Just around dollars and cents. It’s those intrinsic motivators to understand what makes somebody tick. And before you can even do that, it’s stopping for a second and understanding exactly what you’re able to do and what you’re not able to do. And to get comfortable with that. What you don’t want to do is you don’t want to think about this market as, Oh, well, there are some people that are struggling and there are layoffs that are happening. That means that I can get a deal because let me be perfectly clear to anybody that’s hiring here somebody that has mastered their craft, that’s really good at their job, even if they got laid off, they have a crew of other people lined up to hire them, and they will be handsomely rewarded for their efforts. This isn’t about let’s make a deal and it’s a bargain. It’s about paying people fair market value for what they’re doing. And if for some reason you got your rear end handed to you because you’ve had to go through layoffs, and that’s a horrible thing to do, you don’t have the same budget. What can you do outside of money that helps somebody get better? Get real clear on that. Totally agree. I mean, a lot of this has to do with really having discipline right? I think that to some degree or measure with the situation we’re in right now, where we’re seeing a lot of layoffs is due in some part to a lack of discipline. During the great resignation,. I saw offers, you know, kids two years out of college getting 250, 300K offers. It seemed almost irresponsible. Right. But then other people started doing it, so they started doing it and then everyone just got really bloated. Now they’re going to lay off. So I think discipline is a really, really critical part of the process. Right? As market ebbs and flows being consistent to what your threshold looks like and not deviating too much off of that mean because that’s where you can get in trouble. Yeah, I think it’s two fold. It’s on the side of the candidate. And this was happening with sales leadership, this was happening with individual contributors. This was happening across the board where it was like, oh, you know what, the markets in my favor, I’m going to stick it to the man and I’m going to get as much as I can get. And guess what? Now it’s called the great regret. You went for the shiniest of objects. You didn’t master your craft. And for anybody that went for that 10, 20, 30k extra in their base, yes, that’s extra money. And I’m not going to discount extra money, but extra money equals extra responsibility. That equals extra pressure on you to perform and if you’ve not mastered your craft and you don’t know what you’re doing and you left a company that was willing to invest in you, that is a priceless thing, especially you mentioned SDR, right? So I’m just using that as a use case. You’re just starting out if it’s an entry level role and you don’t have a lot of experience let’s say you have a year of experience coming out of school. You don’t know how to work yet, right? You don’t know all of the things about business, about the buyer journey. And if you have a company that maybe didn’t give you that extra 10k, but for it, they gave you priceless amounts of support, of latitude to master your craft and to make mistakes without, if you don’t do your job in the next month, we’re going to put you on a pip and they let you figure it out while they were supporting you all along the way. Oh, and you said, forget you. I’m going to go over to this thing here that’s going to give me $30,000 more in my base when you haven’t earned it. And I know that this is unpopular, but there’s something about earning and mastering your craft and the ability to do that job. Because here’s the thing. The truth is always revealed. If I don’t know what I’m doing and if I’ve done a really good con job in the interview of talking about a lot of things because I saw it on LinkedIn or I’m part of a community and I heard some really cool buzz words and I put those dots together, you’re going to have to do the work. And if you’re unable to do that or you’re unwilling to do that, it’s going to catch up to you and you will no longer have that job. And by the way, a lot of the companies that are laying people off right now, they’re not laying off their very best performers. It’s a complex issue. So as we maybe dig into this, what risks do sales leaders run when it comes to designing and issuing comp plans? Money doesn’t fix what’s broken. That’s the easy button, but it’s not the right button, right? Because regardless of your comp plan, you also need to have a strong hiring process, right? I mean, there’s a lot of other layers that go into making it compelling. Yes. Yes. So let’s start with this. So before we can ever even get into designing of the comp plan, which is the end result of the fruits of my labor, it’s really important to understand the reality of the situation. That’s what I mean by money doesn’t fix what’s broken. So it’s like, well, wait a second, do we have product market fit? So for any early stage founder or early stage sales leader that’s watching this or listening to us, do not spin up a sales team or hire a bunch of people or over hire if you have not validated what it is that you do into the marketplace because you’re setting yourself up and the people that you hire for disaster, nobody’s going to be making any money and the business is just going to be set back in a major way. So like, one, product market fit. Do you have that? Two, do you even know what the territories are? So how many times, Dave, in your life have you seen people say, in enterprise sales we need to hire and there’s so much over hiring enterprise sales like true enterprise sales. That ecosystem is a very small ecosystem and usually you can get away with if you’re just spinning it up, a person on the East Coast, Midwest and West Coast. Amy, I love that. I actually aliken it to when you think about the difference between commercial and enterprise, right? A commercial teams like Army Infantry, right? Huge group of people come in and just knocking everything down versus enterprise sales typically is more like Navy SEALs, really highly trained, tactical, strategic people coming in for specific purposes and really go in deep. Yes. Then think about that, Dave, when it comes to designing a comp plan. So if I treat everybody as one size fits all because I don’t understand the nuances between the work, which is one of the main reasons why it doesn’t work out is I just think it’s a catch all. All the data that I have shows that it takes at least 12 months for a brand new enterprise rep coming through the door to build a repeatable, sustainable, predictable pipeline, at least 12 months. So now if you’ve got a comp plan that incentivizes me to be ramped up within three, we have a big disconnect. And then the reverse, like if you reverse that, right? So if you then try to take a high velocity transactional seller and expect that it’s going to be the same thing as what I just described for enterprise sales, those two things do not correlate. So it’s like your comp plans need to go back to the work that it takes to be successful within that segment. And are you measuring what matters and are the KPIs that you are measuring correlate back to what it takes to be successful that then correlates back to what you’re compensating somebody on? I like to incentivize the behavior that I want to see. And so, for example, an enterprise seller you’re all in sales, sales leaders, enterprise sales, mid-market, commercial, transactional, SDR, I don’t care, channel,. I don’t care, I don’t care who you are. Here’s what the deal is. You’re always going to walk away from something when you take a new job. You just need to make sure that what you’re walking away from is worth it in terms of what you’re going to. Because keep in mind that first year is a build year if you’re in major, major, major enterprise sales, it might be the first 18 months to two years before you start seeing a windfall of commissions. So if I’m trying to design a comp plan for that, then I need to think about this. Hmm. If somebody is walking away from a big pipeline that they just built and they are really making it rain where they came from, and I’ve validated that I need to give them a buffer as they’re ramping up so that they’re seeing some dollars that’s called a draw of some sort. It could be called a sign on bonus. That’s one of the levers that you can pull, right? That’s going to be different than a high velocity, SMB transactional person that’s a one call close. That’s going to get ramped up in a month and a half. It’s a very different thing. So then I would incentivize something different there. But that’s what I mean by that. That makes a ton of sense. Why are companies losing some of these A-players? What’s the draw?. How is this happening? Many, many, many reasons. So one thing is you sold them on the vision and they got super caught up of what it could be. Right? And then they get there and I survey every single person that we talked to and I collect the data. And so this is what the data has shown me over the last seven years of me having my firm. They leave because of leadership. It starts at the top so leadership does not believe in sales. Sales is like a redheaded stepchild that’s like shoved in the corner. It’s an us versus them. And it’s like a deep eyeroll of like unnecessary evil. Well, for anybody that’s listening to this, if you feel that way, let me remind you, if you do not have customers, you do not have a business. And that function drives customers if you mess with their money, right? Like if you tell me you’re going to be able to make $1,000,000 if you do X, Y, and Z, and then I do that. And then the very next quarter you say, yeah, I guess what, now you’re never going to make that again because I’m going to screw with your comp plan. You’re going to irritate A-players and they’re going to leave you because that’s not cool. If I upheld my end of the bargain, you need to uphold yours. Don’t mess with people’s money. You don’t have product market fit. I could be the next coming of the greatest thing since sliced bread of sales. And if you don’t have something that the market responds to and there’s no market fit,. I won’t be able to sell a darn thing. So that’s another reason why people leave. You ignore their ideas you ignore their feedback. They don’t have a voice. You could care less about anything that they have to say. If you just say you’re really good with the numbers, you just do your job and just shut up and go over there. They’re probably not going to stick around for very for very long. I think we’re in the world where people crave flexibility and the mandates that like. So we went from pre-pandemic to where there were some companies that were remote, there were some companies that weren’t remote, and then all of a sudden COVID hits and it’s like and now we’re all remote, whether you like it or not. To now we’re in this world where it’s like, yeah, so we figured it out. And now you absolutely have to go right back to work. Well, if I’m in sales and I’m in enterprise sales and I’m traveling again, why do I have to go back to the office? Right. So I think it’s that concept of meeting people a little bit where they are and understanding what makes them tick. If you are having a revolving door of people and turnover and you’re just badmouthing every single person that left, or you just went through a layoff and I’m quoting the word layoff, it was really a mass firing because you hated the team and you just want to start from scratch. And a lot of companies are doing that right now. And behind the scenes after that, you just bad mouth everybody and their brother. Why am I any different than that? These are a lot of the reasons of why people leave. Wow. A lot to unpack there, Amy. So many different factors playing into this. Really a complex issue so thanks again for the time. Really appreciate you joining us here on Closing Time. Thank you for having me. I feel like we could cover so much more and this just scratched the tip of the iceberg. So for anybody that is listening to us,. I hope this was helpful. And thank you, Dave. This was really a wonderful conversation. I appreciate it. My pleasure.. Thanks, Amy. Let’s do it again soon. Yes, please. Remember, everyone, if you like this video, please subscribe to the channel, and tick the bell for notifications so you don’t miss an episode. We’ll see you next time on Closing Time.