Your Sellers Hit the Revenue Target. But Who Is Paying for Tomorrow’s Growth?

What happens when your sellers are being paid for what they did last quarter but your asking them to act differently?

Your sales team is likely being compensated on things such as Revenue, Bookings, ARR, Premium and Margin. All good metrics that drive results. They just aren’t going to drive your sellers to act on what you want them to do today.

As an Executive this presents you with a dilemma.

Lets say you have a new product to market, new market segment to sell into or you want to drive a different type of selling motion or customer behavior. If you only pay for results (revenue) when those results come in you may be to late.

Activity based incentives can help bridge this gap.

The idea is not to pay your sellers for every call they make, meeting they book or CRM entry they log. We are not trying to create activity but we are trying to create productivity. So what types of activity can we drive our sellers to do that will help lead to that business outcome.

As an executive you should be able to make the following case.

You can drive strategic initiatives, help improve seller productivity and get your sellers doing what you want them to do sooner.

By implementing these types of incentives you are no longer trying to pay for activity or outcomes you can pay for both.

Pay for revenue but also pay for the behaviors that will lead to that revenue.

Here are some examples: 

New Product Launch: As your company begins to push a new product you want to see your sellers create more pipeline and get adoption for this product. If you only pay on revenue for the product it may take a while for them to generate any revenue from the product. They may default to their older products that have a quicker sales cycle.

So you have your strategy. 

They have their Quota. 

How do you get them to act on your strategy and hit their quota?

Activity incentives. You could pay for your sellers to do more meetings but maybe we can be more targeted. We can pay for qualified meetings with key accounts. We can pay for them to talk to the right level of executives, show our product and move an opportunity forward.

See how this can help drive the seller to act in a way that helps lead to your outcome. You are not just saying go do more activity you are telling them here is an activity that will help you reach the outcome.

You could use this when driving your customers to buy converged wireless and broadband from your telco company. Drive your sellers to start these conversations earlier.

Drive your insurance agents to look for more lines of business to cross sell to the customer.

Or your SaaS company selling into Enterprise and want your sellers to talk to more executives and drive expansion in their accounts.

All these scenarios you can pay your sellers to drive these behaviors that will lead to more revenue for your business.

1. Why I think you should put dollars behind these types of activities.

First you shouldn’t view activity based incentives as another form of compensation. Your looking to drive or change a behavior that will lead to an economic outcome.

There are many reasons to do this. 

Drive Strategy: You can help drive your sellers to act on a new product, market or selling motion quicker.

Seller Productivity: Not all activities are created equal. You can help drive your sellers to do more quality prospecting, move more opportunities forward or spend more time with your customers.

Help get to your outcome faster: As we know revenue can be a lagging indicator. You can help get to that revenue faster by having your sellers do more activities that lead to that outcome.

Aligning your sellers to do what you want them to do. By paying them to do certain activities you can help align your sellers to do what your business needs them to do.

Of course you need to make sure that your sellers aren’t already doing these activities and you are just increasing their compensation by adding these incentives.

2. Where should activity fit in your incentive mix?

I believe you should have a well balanced incentive mix. Here are some ideas that you should incorporate into your sales compensation plan.

Outcomes: These should still be your primary metrics. Revenue, Gross Margin, ARR, Premium, New Logos, Retention etc.

Activities/Behaviors: As we discussed above you should be driving your sellers to do more of these activities that will lead to your outcome. Some of these may be to create qualified pipeline, spend more time with your key strategic accounts, drive cross selling with your customers. You could also drive them to activate partners or help save renewals.

Transitioning Activities: When you want to drive a behavior in your sales team you may want to incentivize them to start doing something new. Maybe you want your telco sellers to drive more converged wireless and broadband opportunities. Pay them to do that for a period of time. Or if you are a SaaS company and you want to start driving more consumption you could pay them to help drive customer assessments. You could pay your Insurance company to drive more cross selling activities.

3. What Executives should consider when driving these types of activities.

There are some questions you should ask before you add any activity to your incentive plan.

Is this going to help me achieve my strategic goals? If not then maybe it shouldn’t be an incentive but a managed activity.

Are my sellers going to be able to impact this activity? If you have no control over this then there isn’t much you can do to leverage incentives on this activity.

Can I tie this activity to an outcome that is going to drive economic value. Make sure that you can create a story that goes from activity to outcome.

Meeting > Qualified Opportunity > Revenue. If your only paying for a meeting that may not be worth paying for.

Is this going to drive incremental activity from my sellers? If they are already doing this at a desired rate you may not want to pay for it.

What is the estimated value that will be driven from this activity?

Once you can estimate the value you will want to drive from this activity. Subtract what you plan to spend on incentives to see what kind of return you are getting from this activity.

How long do you want to drive this behavior? You may want to pay for this for a certain amount of time. Once your sellers have this ingrained you may not need to pay them for it anymore.

Create a measurement plan and know when you will test this out. What behavior do you want to change, what is your current activity level, what will we measure to know that this behavior changed and how long do we want to measure this behavior. Then you can decide if you want to continue paying for this or remove it from the plan.

Don’t let these become permanent line items on your compensation plan.

4. What your Board should be measuring when it comes to ROI.

When your presenting to your board or executives you should be measuring these types of incentives off of a few key business metrics.

a.Strategic Adoption – Am I driving my sellers to do what I need them to do?

b.Behavior Change – Did we actually drive this behavior with our sellers?

c.Revenue Driven – Did we drive more revenue from this activity?

d.Value Created – Did we drive value from the additional revenue?

e.Cost to Create Value – Are we spending too much to create this value?

f.Seller Productivity – Are we driving our sellers to spend more time on activities that matter.

g.Pay Back Period – How soon can we recoup the costs of these incentives?

h.Longevity of Activity – Can we stop paying for this activity once the behavior is established?

Ultimately what you want to know from your board is. What are we paying to drive, did we drive that behavior, what economic value did we create and do we want to continue to drive that behavior.

If you can show that you are creating value from your activity based incentives then you will be able to keep them in your incentive mix.

The future of Sales Compensation will allow us to pay for activities and drive results. By using sales compensation software we can start to tie these activities to your sellers outcomes.

Allowing you to drive more activity that will lead to your bottom line.