Incentives for Sales to sign healthy deals?

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Jeremy Katz
Jeremy Katz Member Posts: 6 Seeker
edited August 2023 in CS Conversations

I'm trying to find ways to incentivize the sales team to ensure that the clients they sign are set for success from the get-go (right product fit, right deployment approach). 

One approach I'm trying to push is to have 50% of their variable comp be paid out ONLY at the end of a successful deployment (with specific usage metrics). 

Anyone's tried things along those lines?

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  • Kevin Mitchell Leonor
    Kevin Mitchell Leonor Member Posts: 248 Expert
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    edited June 2020
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    I had a similar idea, but I would like to see if anyone successfully implemented this comp plan, so I am hitting that follow button on this discussion. I know many Sales leaders that would fight back tooth and nail against such a comp plan. But if this is becoming a very big issue to the overall long-term health of the company, the sales leader is forced to look at alternatives.

  • Ed Powers
    Ed Powers Member Posts: 180 Expert
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    edited June 2020
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    Mark Roberge from Hubspot wrote a Harvard Business Review article that might interest you on this topic: https://hbr.org/2015/04/the-right-way-to-use-compensation-2

  • Griffin Fuller
    Griffin Fuller Member Posts: 10 Contributor
    edited June 2020
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    It's important for an organization to have a clear ICP (ideal customer profile). 

    I've heard of sales teams getting kick-backs upon each annual renewal.  In doing this, sales teams look for customers that align with their product so well, that they will most likely stay a customer for the long haul. 

  • Jay Nathan
    Jay Nathan Member Posts: 108 Expert
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    edited June 2020
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    I have see that approach and it can work @Jeremy Katz. However then the sales team is going to be “all up in implementation / CS’s business” to push customers through the process rather than focusing on what they should be doing: generating another new logo  

    Two things in addition to what @Ed Powers recommends with the Roberge piece: 

    1. A CEO-level commitment to selling the right business and enforcing ICP. 
    2. A claw-back approach where deals that cancel early result in commissions being revoked. 

    The latter can be hugely demoralizing for sales (which we really don’t want). 

    I‘d also highly recommend Mark Roberge’s book, The Sales Acceleration Formula. It’s as much about customer success as it is about sales. 

  • Steve Beaumont
    Steve Beaumont Member Posts: 3 Navigator
    edited June 2020
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    Sales should be incentivised to focus on good fit customers, so part of their compensation should be linked to renewal. Hitting quarterly targets with too higher proportion of bad fit customers is short-termism and ultimately bad for the organisation.

  • David Jackson
    David Jackson Member Posts: 36 Expert
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    edited June 2020
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    Jeremy

    This is an area where CS has to get ahead of the curve by leading the definition and implementation of ICP.  At one company I worked with, we came up with an ICP scoring and conditioned sales comp based on fit.  Sitting behind that was a cohort analysis of CLTV based on retention period.  Once the CEO saw the numbers, it was a done deal.  Claw backs are less effective as they after-the-fact and create discord.  

  • Brian Hartley
    Brian Hartley Member Posts: 185 Expert
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    edited June 2020
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    At a previous company, reps were only paid their commission once the actual invoice was paid.  So if a project was sold with wrong expectations and payment was delayed, the reps would feel the lack of compensation. 

  • Jeremy Katz
    Jeremy Katz Member Posts: 6 Seeker
    edited June 2020
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    Thanks for sharing @Ed Powers, I hadn't read this, it's super helpful.

  • Jeremy Katz
    Jeremy Katz Member Posts: 6 Seeker
    edited June 2020
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    Thanks @Griffin T. Fuller . I've considered this one, but it's not enough for us. We aim to sign deals with 2 year commitment, so the chance that the sales person will still be here by then are limited. 

    This probably works much better with monthly subscription models. 

    Thanks for sharing!

  • Jeremy Katz
    Jeremy Katz Member Posts: 6 Seeker
    edited June 2020
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    Thanks @Jay Nathan . Good reminder that I am probably overdue for re-reading the Sales Acceleration Formula :)

    How do you usually see a claw-back approach working? 

    That mechanism is the sort of thing that I am pushing to implement, but if the sales person has already received their bonus, then I guess the failed deal would get substracted from their next quarter, which can be pretty demoralizing (we work with large enterprise deals, so a sales person may sign 2-3 deals per quarter max). 

  • Jeremy Katz
    Jeremy Katz Member Posts: 6 Seeker
    edited June 2020
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    Thank you all for sharing! obviously a contentious topic here :)

    I highlighted in my initial question just one example of potential solution (50% bonus delivered after onboarding) to a problem, but I'm also wondering about other solutions that you might have been successfully implemented to solve for bad deals getting signed. Any additional recommendations not linked to sales compensation?  

    For context: we are a B2B Series A startup, so that means longer contracts (2 years), small volumes (few new contracts a month), limited history to analyze, ever-evolving product with ongoing limitations (and still way too many commitments to product enhancement as part of deals)... 

  • Alex Turkovic
    Alex Turkovic Member Posts: 61 Expert
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    edited June 2020
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    @Jeremy Katz On the comp front - there are plenty of opinions here so I won't go further into that - other than to say that a blended approach is important. Mix of clawbacks, post services commission & renewal.

    Enablement: 

    I feel that there is a HUGE benefit though to really focusing on sales enablement around services engagements. I do believe that focusing on the ICP is important, but probably doesn't go far enough.

    Pulling sales people into the world of services engagements by way of mentoring, shadowing and training sessions is a fantastic way to foster cross team collaboration and mutual understanding of the challenges each team faces. 

    While there are bad apples out there that oversell everything under the sun, I believe that the vast majority of sales professionals out there suffer from a lack of understanding of WHAT HAPPENS after the deal - and documentation which highlights the most commonly mis-sold deals. 

    Focusing on this type of education will help the sales person to:

    1. Focus on setting clear (and correct) customer expectations in the handoff from sales to services
    2. Set the Services team up for success by conducting solid internal handovers
    3. Have an empathetic approach to the handoff conversations that need to be had in order to ensure success.

    Hope this helps!

  • Sheryl Hawk
    Sheryl Hawk Member Posts: 12 Contributor
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    edited June 2020
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    @Jeremy Katz I've seen a couple of things work successfully. The most effective has been when there is agreement on ICP and the ability for the Success Team to turn down a deal that will never be successful because either the technology or use case was sold incorrectly. It only takes a few de-bookings before everyone gets on the same page. 

    This obviously requires commitment from the CEO/CRO for it to be successful.