All about compensation

I’m releasing an article on SaaSSales.io in a week or two debating whether or not Revenue Operations, in all its varieties (Sales Ops, Marketing Ops, CXOps), should or should not be on a leveraged plan. Without recreating the article let’s just go over my general framework around compensation.

But first… why am I qualified to talk about this at all? It might help to break down the segments of my career where I touched on compensation. I was unsuccessful and successful in different sales roles. When I worked in commercial real estate I completely bombed. In fact, for an entire year I was on a 100% leveraged compensation plan. I did not successfully sell or represent a buyer with any properties that year.

Zilch. Nada. I had to be creative on how to generate income that year. Sidebar: I learned how to install open source software such as SugarCRM (my first exposure to CRM), Drupal, and WordPress for small businesses. That’s how I generated income that year. Who knew that years later that information systems experience would help me in RevOps.

Then I was an agency recruiter. Selling people their dreams jobs. This is where I succeeded! I focused on technical roles such as systems administrators, network engineers, solution architects, etc. I learned the surface of each and every one of those roles. I knew the certifications that were shortcuts for me to see if that person was uniquely qualified. The relationships I fostered with my candidates taught me the value of building relationships. They may not have bought from me then, but eventually they did. I loved working as a recruiter.

But then I went to get my MBA at the University of Michigan. I fostered dreams of working at a strategic consulting firm such as BCG or McKinsey. But I found myself at a great company called Intel. I was placed in their venture capital team, Intel Capital. My summer project focused on developing an M&A strategy around media assets. Intel? The chip company? Going into media? Tech was blurring the lines between traditional industries and high technology. Even more so, Intel the hardware/chip company was trying to break into the software game.

After that I went to Google. I was in a Sales FP&A role supporting the Americas, EMEA, and APAC. I supported over 200 sales reps selling horizontally across vertical product lines. Google Apps (if you remember Postini it was lumped in). Google Maps For Enterprise. Google Cloud. Chomebook. All of these products and services were sought after by up and coming companies looking to disrupt traditional technical architecture with lighter weight, remote cloud services. The division I worked for was a “startup” within a larger company.

Intel had near 75,000 employees compared to Google’s 40,000 employees. It felt like the pace of business went to warp speed for me. Hilariously, I ended up moving to a 1,500 employee company called Meltwater a few years later. I had no idea what warp speed meant. UpKeep, my current company, is around 100 employees. I still have no idea what warp speed is apparently.

Anyway.

At Google the comp plans featured multiple product buckets, overlays, overassignment, tiers, accelerators, decelerators, windfall policies. You name it. Plus it had to account for static FX rates.

There was no better place to cut my teeth into compensation.

Here’s how I see the elements of a comp plan. Everyone knows I love frameworks and mnemonics. So here’s one more for you. BOCAS! It means mouth in Spanish. So here is how I would grade comp plans broken down by elements.

• Behavior - Motivate and continually reinforce good behavior

• Outcomes - Clear relationship between outcomes and incentives

• Culture - Develop and maintain cultural cohesiveness

• Alignment - Alignment with the overall business and GTM strategy

• Simple - Simple to understand and execute

Now that we have our “rubric” or guiding principles let’s look at tactical execution.

Compensation design can look like this from a Process perspective.

1. Define principles (see BOCAS above)

2. Align stakeholders

3. Design. Design comp plan variations

4. Test. Scenario plan by backtesting and extrapolating future results based on Plan

5. Confirm plans.

6. Signature collection.

7. Countersign and store with Finance, HR, and management hierarchy.

Compensation execution should feature

1. Established dispute resolution process

2. Period closing procedures

3. Calculation timeline, let’s say Business Day 3 through Business Day 5

4. Send out commission statements for feedback to AEs and Management

5. Build in buffer time for feedback: Business Day 6

6. Payroll submission: Business Day 7

7. Attainment reporting and publication: Business Day 8

More things to think about:

1. Type of plan: company bonus, Management by Objective (MBO), leveraged plan (commissions for example)

2. Leverage ratio: $100K base + $100K variable = 50/50 leverage. Lower ‘at risk’ roles could look more like 90/10

3. Overassignment: layer 1 board-to-management = 8 - 10%, layer 2 management-to-frontline = 8 - 10%. Therefore Board commit of $100M would have a layer 1 overassign of $110M, and $121M to the frontline rep

4. Expected Performance: In the example above to hit Board target we would need 83% average attainment ($100M / $121M)

5. Quota-to-OTE ratio: let’s say for example that we use a 5x ratio; in this example the OTE of $200K above would mean a $1,000,000 quota. Further yet the idea of a “coverage” ratio would call for 4x - 5x rolling pipeline to hit target ($4M to $5M at any one point in time).

6. Accelerators, some will use the term ‘kickers’

7. Tiers

If done well you’re looking at calendar day 10 or 11 for statements issued, feedback incorporated, and payroll submission.

For those of you who are in the compensation game. I completely feel you! Reach out if you ever want to talk.