Sales compensation is fraught with challenges throughout the year, but Q4 brings particularly unique difficulties for Chief Revenue Officers (CROs) as the end of the financial year-end fast approaches and forecast revenue must be realised through aggressive pipelines.
Given the pressure to balance motivation and quality of deals, while emphasising long-term strategy over a short-term mentality, what are the top Q4 challenges with sales compensation?
1. Driving Performance Without Discounting
In Q4 each year, sales teams often offer deep discounts to bring in a strong harvest at year end. I’ve heard many chief revenue officers from software companies tell a story where they observed their sales teams making deals at radically reduced prices to meet their goals. They would gladly trade short-term revenue and lost margins for the time it took for their reps to negotiate a full-list-price deal or hit a longer customer-commitment. To do that, CROs need compensation plans that call for royalties to be based on the full, up-front price, or provide rewards when a rep either upsells or extends a customers’ contract.
2. Re-energizing Sales Teams After “Compensation Fatigue”
As sales cycles shift towards the final quarter, many sales reps might be burnout after chasing an incentive for four solid months. For instance, a CRO at a consumer goods company might have managers tell her that the best performers are no longer motivated, as they’ve already met their quotas. One way to keep sales reps motivated and eliminate fatigue is to create year-end bonuses or gamify the bonus structure by adding extra rewards incentives – such as executive recognition or extra trips – when stretch goals are reached.
3. Managing Adjustments Without Creating Chaos
Especially in Q4, but really every quarter’s end, quota adjustments are par for the course, as market conditions can change drastically and suddenly. A CRO in the manufacturing sector is going to need to recalibrate quotas if a supply chain disturbance reduces sales capacity, for example. Unless changes happen too often, confusing or frustrating your employees by making it appear that you’re moving goalposts isn’t a great idea and communication needs to be very clear. CROs who make quota changes will need to articulate the why clearly, and they need to make sure that they, and their accounting system, calculate payout accurately and transparently.
To wrap up, Q4 requires CROs with elegant strategy and nimble thinking to craft the right sales compensation plan for balancing the need to make sales today with ensuring the company has customers tomorrow.
