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All your sales reps hit 150% quota, but cash flow is down, and churn is up. How can that be? It’s because your comp plans suck.
In this episode, we share the real (and often messy) stories behind sales compensation plans gone wrong - and what actually works.
Learn why "make it simple" is the hardest advice to follow, how to prevent gaming without complex rules, and why taking away commission is worse than never giving it in the first place.|
Creators and Guests
What is Revenue Brothers?
What happens when a VC and a CEO come together?
– They nerd out about all things revenue. And they don’t always agree.
Raul Porojan of Project A Ventures and Toni Hohlbein of Growblocks are the Super Revenue Brothers. In every episode they dissect and debate current issues in B2B SaaS, and offer solutions on how to solve them
No matter if you’re an early-stage startup or a scaling unicorn – you’ll always learn something new.
RevBros - The truth about sales comp
Introduction
[00:00:00]
Raul: You're putting a lot of faith in the calculating ability of salespeople then. although that's probably a good bet because whenever it comes to money and their own pocket, really rises by 30, 40 points or something. and I've seen like so many things, obviously their ability to calculate, but also their ability to outwit your compensation.
Toni: Gaming. yeah,
Yeah, absolutely.
So, we're actually doing this today on a Saturday, like very rarely are we doing this, couple of things happened just, you know, in the weekend. So we didn't get to, so, and we were, you know, just sitting down and thinking, what could we discuss on a Saturday? and what came naturally, what came to mind was let's talk about compensation.
Raul: Yeah.
Sales Comps
Toni: So why not? I mean, it is the weekend. So compensation comes to mind first. and let me just kind of kick us off maybe with the whole thing. So, I think going back to some of, the reasons why this might be interesting. A lot of people are still struggling with this, right?
a lot of people are reinventing the wheel. a lot of people are trying [00:01:00] to, get too much stuff done in the comp plan. Some people are completely against comp plans, to begin with, right? Specifically, we're talking about variable comp here today. and I think people are just making this way too complicated for themselves.
I think if there's one takeaway. You know, and maybe you can hit subscribe and, you know, shut the episode after this year now. number one, should you do it? Yes. 100%. number two, don't make it too complex. make it so that the sales rep can figure out his comp
even when he had four or five beers at the Friday bar, like that needs to be the level. If he needs to pull out a calculator, if he needs to look something up, if he needs to kind of advise a spreadsheet, or if he just says, I don't care, it's more money, then you did it wrong. that's my starting salvo here,
what's your take?
Raul: You're putting a lot of faith in the calculating ability of salespeople then. although that's probably a good bet because whenever it comes to [00:02:00] money and their own pocket, their IQ really rises by 30, 40 points or something. and I've seen like so many things, obviously their ability to calculate, but also their ability to outwit your compensation.
Toni: Gaming.
Raul: yeah, which is a good thing. you want people like that. this is not a bad thing. so I don't know if I would make it that extreme really, but I do think then that simplicity, and kind of like elegance and simplicity, there's a lot to be said for that. it all boils down to me in having the sales team understand the compensation probably leads to them kind of understanding Maybe not rationally, but like feeling wise or having the direction that you want the compensation to give them by design.
And so what I mean by that is if you make it so that the sales people understand, Hey, I'm supposed to get a lot of new deals this year. and you design the compensation that way, then you probably succeeded. Cause that's what the compensation plan is for. If you make them understand that they're supposed to work better with existing [00:03:00] clients, and they can say that after four or five years, and they know that that's what's gonna make them money, then you probably succeeded with that part.
So, kind of the fit with the, the inherent idea of what you were trying to, what message you were trying to get across to the team.
Toni: Yeah.
Raul: I think I would agree with that, yeah.
Examples of Comp Plans
Toni: So let's kind of go back to some of the examples that you and I have basically been executing and maybe the issues we ran into and, how we fixed this. So maybe I go first. in the very beginning of, the first company I was working at, at that point I was like a RevOps person.
We didn't call it back then, but that's what I was. So, you know, guess what I was in charge of commissions.. and I still remember very vividly, that when I entered the organization, we basically had a comp plan that was based on total contract value, TCV, right? and then basically a percentage of that, you know, 8 percent here, 5 percent or once you get to 75 percent of completion of your target, then it jumps to 10 or whatever it might be, right?
So two great things about this, people are incentivized to close the biggest and biggest deals. [00:04:00] and, it was very easy for them to understand, how much money they made once they kind of hit specific milestones. It was like super, super easy for them. Following issues with this, which is why we decided to change it.
we were actually hitting our bookings goals every quarter for like three quarters in the row. But we are starting to fall behind on revenue. how could that be? the board was sitting there and like, that doesn't make any sense, Toni. why is that happening? well, the reason is total current value means, as long as you can, prebook the deal.
So it could be a two or three year deal, right? So what did the sales reps do? Let's just say they had a deal on the table for $10,000. and then they basic said to the prospect, Hey, you can either have 10K now, or you do 15K for two years, essentially giving a. Massive discount, but making more money.
so that's how they were hitting and hitting and hitting kind of those bookings goals. but we were missing harder and harder on revenue, which had an impact on cash, which had an impact on MRR, ARR, which the stuff people [00:05:00] looked at, right? So we kind of had to change that. that was kind of the one thing.
And then the other thing that was really interesting was, basically the, hey, you hit 75 percent and then you get 10 percent off everything that you've done so far, right? What that creates when you map it out in an Excel spreadsheet, it creates step functions. So from a 74 to 75 percent completion, you get a lot of, you know, a lot more money suddenly kind of, it jumps up by a lot.
So What have we seen? Well, we've seen that people basically had an incentive to, you know, at the last few days of the quarter, close a deal for, I don't know, a thousand, 2000, 3000 and sure they needed to get approval, but also we wanted money. So, you know, did we want to say no on that? But basically kind of they themselves had an intrinsic, you know, motivation to close any deal just to get over the threshold.
It's number one, number two. And this kind of, you know, usually you think like those, those kind of sales guys are like the lone wolf and they do, [00:06:00] you know what they did? They started sharing deals and it was like, ah, okay. you know, you have one guy that's already at 89%. and then you have another guy that goes from 74 to 75.
And then they basically were making a deal that's like, you know what? Actually, this deal that I'm working on is about to close. You can just have it. And then we math out the difference and we split the commission increase from it. And this is like, Jesus fuck, like this shouldn't be like this.
Right. so very short, what did we do? we basically created an incentive that was on MRR. So the monthly recurring revenue that you were bringing in. And then we basically said, If you hit your target, you get all the MRR that you've signed. basically it was 8. 7, 8. 6 percent commission basically.
And up until then, it's kind of a smooth curve, which was kind of good, but people got the target thing, but they didn't get where they were on the curve. So they were like issues with that as well. But I'm just saying those were things we were working through and trying to fix with this.
And. [00:07:00] I think this way of doing it has been with the company now for 10 years. So this is still there. even though there's some flaws with it, apparently there's some staying power.
Raul: and what I like there, even though it's obviously anecdotal evidence, it's more than an anecdote. So the, in different ways, I've seen what you just described probably 20, 30 times by now. While, yes, there's a lot of merit to simplicity. I think a lot of founders take that and are like, Oh, yeah, great.
I don't have to think about anything. I'll just make it simple. So the salespeople don't have to think about things. And that is not what I at least mean by that. And also, I think what is severely underestimated is what it takes to make something simple work. I'll give you another example. maybe two different ones.
Cheating the System
Raul: But another example of. How simplicity can really fail. there was a very famous startup in Berlin, about seven years ago, maybe eight years ago, that was growing really fast. [00:08:00] And,
Toni: Who is that?
Raul: probably one of the top three, famous ones in Berlin at the time.
Toni: But then you can say that, can you not?
Raul: I think they actually don't even exist anymore. it's called, it was called movinga.
it was, the moving company. And, so I have,
Toni: culture. I heard crazy sales
Raul: Yes, I've worked with a lot of, I have never worked with Movinga but I've worked with a lot of people from there since and it was really like hire and fire. Hired 40 sales people in a month, fire 30 and I've probably worked with about two or 3000 people from there by now and they'll report to me how it was there, especially in the beginning.
So what happened there was they were trying to make it very simple listening to Toni and be like, Hey, for every booking you have for moving services, you get X amount of money. And you get that, because, like, whatever, like, obviously when they book, like, that's fine enough. you get that when they book.
so what were people doing? Because it's a one time thing, and sometimes maybe three, four years later you come back if you move again. what were they doing? They were like, okay, I have, These, friends here. I'm calling all [00:09:00] the Tonis in the world, and I'm calling the Mickels and everyone I know.
And, I'll have them sign something, and then they will just, withdraw, after I got my fee, right? so that was, obviously, what people figured out is like, okay, you don't actually have to do
Toni: I mean, this is fraud level for me. there's gamesmanship and then there's fraud and this sounds more like fraud to me.
Raul: Yeah, except that entire departments did it. Like, actually,
Toni: it doesn't, it just because it apparently is no more normal there, it doesn't make it less fraudy. Right.
Raul: Yeah, but like, they were also too exposed to it. And the funny thing is, and here's where the fun starts in my opinion, is that Movinga was not aware of that, and they couldn't figure out why all that stuff was. So, and there's actually more levels to this game, but the idea here is that they were not actually ready to even see what was happening with the deals really because they had some issues in their back end or some data stuff or what, what not.
And so this went on for a couple months, And then they went to level two with like, okay, wait, wait, wait, guys, we figured out what you're doing. [00:10:00] This is not okay. We're going to make it so that we only do this once the money is in the account. So only then do you get the compensation, which was really hard and people were really shouting and screaming at the top of their lungs, like, this is not okay, whatever.
So they did that change. then it went to level two, which is where people were like, hey, Toni, can you just book? And I'll give you the money in advance. And then you claw the money back and we share the money that you got there.
And that happened as well, because Movinga was not able to see those things in their backend. this game went back and forth for a while, where I don't know, how many levels were outsmarted, and they wasted so much money and time for about a year or two, which, I'm not saying that is the main reason for their demise, but it's probably one of them.
Toni: So there's one thing here. number one, you said a couple of times, they couldn't see this in their back end. Totally get it. I think this stuff is difficult to see. And this is also like this ops way of thinking, Oh, and it should be in the number somewhere. You know how this is being easiest figured out.
you have someone on your team, and your ops team or something, go, you know, regularly out drinking with these [00:11:00] guys, you know, share a cigarette, smoke a joint, whatever they're doing, buddy up with them and just have, you know, for good reasons, by the way, for many other good reasons, but just have a frank conversation.
Right. and. So this happened in our case. we had a friend there in the sales team basically. and he came always back and was like, Hey, this is actually what they're doing. It's like, that's how you figure these things out. Right. And then the other thing is, so once you know, how do you deal with it?
I think they're like two, two ways of doing this. Number one is you try and design the perfect system that can't be gamed and cheated. I think that's always very difficult or number two, you go to a certain level of fixing it through systems and then you walk the rest of the way by deciding, Hey, there's also some literal fraudulent bad apple behavior here.
and we can't penalize everyone for a couple of bad apples and maybe this, you know, was a whole basket of bad apples, but you need to start throwing these people out because of it. that's kind of, I think, [00:12:00] you know, if you, if you don't have this crazy culture, but like a more normal culture, the way to go about it, right?
So if you find yourself in a situation in a general culture of needing to write down, oh, it's, it's forbidden, to piss on the floor and people did that before because, you know, you didn't specifically say it's forbidden, right? I think then your culture already went off the deep end, right? And I think that's the same for this commission stuff.
If someone is. Cheating the system and this is, you know, the different ways of cheating. And some of that is kind of gamesmanship. Some of that is more fraud. This is for me is fraud. You need to go in and cut those people out actually. Right. and I don't think you will be able always to manage it through some of a compensation because what I ran into a couple of times was the same thing.
You know, should we pay people, when the money hits the bank account, when it's secured, or when we kind of have the signature. And to a degree, you need to make the balancing act of, how much risk should the company take? Because you also don't want to have those sales reps call up their prospects to kind of, you know, chase them [00:13:00] for money.
you also don't want to have that happen, right? You want to balance it out. And then as you go through this over the couple of months where you pay upfront at Signature. You will see some people doing worse than others. And I think those people need to be addressed instead of everyone needs to be addressed, right?
Kind of this a little bit of the step before of what you just mentioned there. I think this went way further. but that's how I used to kind of try and manage that stuff. Right.
Raul: You're kind of getting to where I want to get to, which is, you were saying a lot of words, which is great because it's a podcast, but there was a lot in what you were just saying to keep kind of the simplicity in place. And that's where I was trying to get to. So it's like, yes, the scheme itself might fit on a napkin. In cases like the Movinga case, or maybe even in other cases, and you had that too, and I have more examples, many more, there, you kind of can't get around the fact that there is going to be some level of involvement somewhere. And it might be that that has to be on a backend level, because you have to [00:14:00] change some things around about the data structure so you can see these things.
But it also might be that you have to be more vigilant, with, behavior or changes in the performance of people once you switch things around in performance. and it also might be that you have to kind of send spies into their meetings or however you want to think about that
Toni: friends.
Raul: friends, however you want to call it, or you have to go in there as a manager, the point I want to get to is, and I believe that a lot of people make that mistake is they're all great.
Let's make it simple. I'll put it on a napkin and get it out to the team on Monday. This is awesome. I'm finally free. It doesn't work like that. And I know that obviously not everyone listening to this is naive, but I do think that compensation is something where people classically underestimate what work there is.
Toni: Just kind of maybe to qualify this a little bit. So when I say simple, I don't mean dumb, you know, it's, it's really, there's an art to it, to boil something that's very complex down into something very simple, right? There's an art to that. and I think that's difficult to actually do. So what you want to end up at is that you're the [00:15:00] incentives and the, direction of that your company wants to go.
Is it aligned with what your sales reps do? The direction of the company sometimes can be super complex. you know, how much of this is upfront? Is it in the right region? Is it, in the right industry? Is it ICP? Does it have a higher churn profile? Do they sign up front?
You know, all of these things. and if you can find a way to bring that complexity in a super simple way for the sales reps to follow that. I think that's, that's the difficulty to achieve. And that's what I'm trying to say here, right? I'm not saying that it should be, simple in a way of being dumb.
It should be simple in a way of you took something very complex you thought about and made it extremely easy for them to comprehend. that's what I guess what I'm trying to say.
Raul: and I agree with that. So it's it should be simple to comprehend, but the work that might come with having what you have to do in the back end to make it work. Um, that is maybe what can be more about that. And one more example.
Sandbagging
Raul: We've actually talked about this here and there sometimes. the concept of [00:16:00] sandbagging.
and I was confronted the first time with sandbagging. Maybe actually 11 years ago now at Treatwell for the first time and I've seen it since a time and time again and it's funny how people aren't aware of it, but at Treatwell there was a lot of sales happening every single month. A sale was basically getting a hairdresser or a spa or whatever to come into the marketplace and the way that that worked was that there was a monthly goal that you had to reach as a salesperson, which was, I think, 30 or 40 contracts.
So, about one or two a day, which was quite high volume. And, once you reach that, you kind of have a huge kicker. So, you get a little bit of bonus before, but if you, Toni, reach your 30 in that month, then you kind of have a huge kicker. what happened very fast was, and I was kind of a junior sales ops person back then, was that I, Got some Intel and I saw people doing weird things.
I'm like, what the fuck's happening? I talked to the top salesperson at the time and they proudly showed me their sandbag contracts, which is basically where they had contracts [00:17:00] that they made right now in February, but, because they had already achieved their quota of 30 this month, they were not putting into the system yet.
And, me as a junior sales ops person or something like that, or bizdev was, Kind of at the forefront of figuring out that something was weird with those contracts, right? Like, why does he have blank, contracts without filled dates sometimes? why is that happening? Well, he has the signature from the customer, or he gets it, like, this is maybe not happening on DocuSign anymore, but we used to have this
Toni: Yeah, yeah, of
Raul: life.
Or in Lieferante or Deliveroo, they have this still with real contracts, right? And then I figured it out and I talked to them and then we found ways around that. But the way that that happened was that people were just like saving, Five to 10 contracts. And, when we, when we actually sat down and I did the math kind of a little bit on a napkin, it was devastating how much money we were losing because of that.
So every contract coming in two, three weeks later, and then also the onboarding is two, three weeks later, or maybe you have to put it on a schedule because we had to do photo shoots with them and all that stuff [00:18:00] that was devastating to the company.
Toni: How are people addressing sandbagging? Like, let's maybe kind of go to this and, you know, I would love to hear your specific story. So what I've learned is it's always great to have monthly targets. I think that kind of creates a, you know, very different rhythm, but monthly is enough of a time span for people to Push to next month.
Like it's, it's too close. I've seen this happening less in quarterly rhythms. you know, when you have a quarterly rhythm, well, the next payout was three months away. So let's just push everything into this year now. And number two, you know, we were a little bit flex on the targets for next quarter.
We didn't really announce them up until the quarter started. And we could always say like, well, you know. You never know target could go up, but OTE would stay the same. so it's, maybe it's better actually to not send back, kind of pull it into this month instead. And we had some other kind of kickers that we tried to kind of create.
But usually those, those didn't work [00:19:00] out like those, you know, we had a linearity kicker or a continuity kicker, I think, actually, you know what, now that I'm saying it, the continuity kicker worked pretty nicely, which was basically we paid them 20 percent more on every deal for next quarter. If they hit this quarter, they love this, that, that thing they loved by the way.
once you're in the a hundred percent plus zone, you were making so much bank on every deal anyway. So then they just kept going. but those kinds of tricks we use to push against, sandbagging, but I think especially in monthly rhythms, it's a little bit more difficult to achieve that.
Raul: There's some very genius ways to combat, sandbagging and, to some extent, some of that is just not really happening so much anymore. Maybe because you don't have physical contracts anymore. maybe because you have a little bit more self onboarding from the customer or whatever.
So there's
Toni: I think you still have it. You still have it. I talked to a founder the other day and he was like, well, you know, I don't want to go to monthly because of sandbagging. That's basically kind of what he said.
Raul: [00:20:00] Yes. and we could go on and on and, maybe we can think about one or two more things. So this has kind of turned into a, compensation fuck ups, story here. one more that I've seen, by the way, which kind of goes into the sandbagging thing a little bit. And I've actually had this when I had quotas myself.
So it's part of the reason, part of many reasons why I'm not such a big fan of kind of like input compensation, input bound compensation or even input bound goals and thinking it's like, Hey, Toni, you have to do 150 calls a day, dials, calls, whatever it is you want.
When I was kind of high volume calling in different projects or different setups, but I've also seen this with people. What happens is that at some point reaching volume can also be gamed quite dramatically. And, there's a lot you can do there without actually being fraudulent as in I'm pretending to call.
So I've also
Toni: I get it. Yes. Hey, a
Raul: people are just calling their own phone or stuff like that. Right. But then just stuff like. Hey, who are these people actually calling? And so what I've seen is [00:21:00] let's say that I have seen this exact same exact example. Let's say that I want Toni to do 150 dials a day because we don't know necessarily like how many net calls is that going to be and how many people are going to respond?
Whatever. I want you to do 150, or 200. Doesn't matter. Many, many. What Toni then will figure out is that there are some numbers that will just forever remain unresponsive and can be an easy dial kind of like it's dials in the bank. Right? So rather than get into new dials every single day, he's going to have like 50 companies.
He's going to call every. two, three days, maybe he's going to like switch them around and then do this week to week. And you're going to be wasting a lot of time on basically unresponsive calls. And I figured this out by looking through the system and seeing that there are some numbers that have been called 70 times to 100 times, right?
And the funny thing is that people doing that, especially in the beginning, were even applauded because they were being seen as very persistent, right? Look at Toni here. He's calling [00:22:00] numbers 20, 30 times. Without figuring out that the reason Toni is doing that is because he's sitting there every morning and he's like fuck man I gotta do 200 calls.
Let me just call these 20 I did I know they're not gonna answer anyways. And so within the first hour, he's gonna have 20 calls
Toni: Yeah. Those are, those are those stories where you can just see how the whole sales floor, like every actual person sitting there being a seller, it's just laughing their ass off when management is like, you know, applaud a specific thing. So I get it. I have never ran teams that were like super SMB, where this was the right approach, but I think for like.
I think it's good for like a habit forming kind of thing, but otherwise it's difficult. I feel,
Dealing with Deal Approvals
Toni: I, I want to maybe kind of do one other story and one other kind of learning I had here, which is around, you know, you always run into those deals where someone needs to come to you and get approval for the deal.
and, you know, it might be, there's a very large discount or it might be, payment terms shitty instead of upfront [00:23:00] for the whole year. It's monthly, or there might be an opt out after six months, like those kinds of things. And what I've learned is because. Let's just say you're not the CFO who maybe, is incentivized to say no, but let's just say you're a sales ops, deal desk, something like that.
And maybe you don't have crazy kind of strict rules. what happens most of the time is that you're going to say yes. That's what happens most of the time. you can sit there on the kickoff and say like, everyone gets a quota. they can do those kinds of deals four times, those kind of deals five times.
and then someone comes to you and is like, Hey, it's my sixth deal, but I won't do it unless, you know, I don't get the, you know, and they say, okay, let's do it, let's do a dirty deal on the side. Like you can, you can have that. Right. So what I learned is, instead of trying to set quotas, trying to forbid that stuff.
Just make them part of feeling the pain. That's, that's basically kind of what we've, what we've done. Like if you want to have, instead of annual upfront, that was the baseline for the commission. If you want to have, you know, two payments, half yearly, [00:24:00] you get a ding. Like it's not a massive, it's not a massive kind of ding you get.
It's not a massive penalty. It's a small penalty, but basically kind of that helps me to ensure that you are incentivized to try and find the right solution for the organization, right? If you wanted to have a, you know, I don't know, a six month opt out. So half the deal is like, okay, that's a really big ding.
You're going to get there because it's not a baseline 12 months is baseline six months. So your commission is going to be half, right? There's like all of these little things where you. Usually it would be like, ah, you know, I don't know, it's not great for the company, but let's do it anyway,push some of that pain back to the salespeople so you can trust them a little bit more that they're making the right trade off decisions, right?
Have they pushed again against this request from the, you know, the prospect strongly enough, but walking the line of not losing the deal, that's where you kind of want to have them. and the only way you're going to get there is by, by having them feel the pain a little bit themselves.
Clawbacks
Raul: so is that kind of your thoughts on [00:25:00] clawbacks or do you think that
Toni: I think clawbacks suck. I think that's a really terrible idea. so why is that a terrible idea? Just think about the timing just think actually about the timing, because you're going to be announcing clawbacks You know, we can do the math, but you're going to be announcing clawbacks, in the last month of the quarter from previous quarter, right?
Kind of, so you, you end the quarter in March, then, you know, pay out because you need to calculate, make sure that everything is correct. Then you have it maybe in April. and then maybe you see some deals not coming in. and then you need to announce clawbacks there. Right. and what we've seen, you can play around with the timing and so forth, but what we've seen is.
it's, it hurts a lot more to take something away than to not give it in the first place. It hurts a lot more. and to a degree, that's kind of the point, but basically what the VP of sales is going to tell you, if you do this now, these guys are going to be demotivated.
We're going to miss. target. and you're like, no, we don't want them to be demotivated. Don't we?right. that's not what we want to do. we've never done clawbacks. We've never enforced them. We've never done any of that stuff. If we [00:26:00] saw someone where, cancellation rate was through the roof.
contract breaks were through the roof. We had that conversation one on one and, we kind of reserved the right to then, clawback something specific when it was like, Hey, this was going too far, but in general, and this was mid market deals. Don't get me wrong. Like it might be different for S& B deals, but mid market deals, we basically said like, okay, the company is going to shoulder that drop off that.
happens even with, the best of sales reps That are completely, you know, working in honest. and that's kind of how we decided to go about it.
Raul: And I find that clawbacks don't necessarily have to do anything with fraud. It's just, as you said, it's part of the world that you operate in.
Final Thoughts and Best Practices
Raul: And, it is a very lazy CRO's kind of answer to we don't really know how to do things better before, or we don't really want to put in the work. Or we don't want to take the risk, right?
So either you're lazy on kind of the work front or you're lazy on like kind of putting yourself on the line of it there, too. And maybe to finish that up from from my side, what I really like though. Even though I don't like [00:27:00] clawbacks, just as you, is this, getting people to feel the pain or another way would be like to, to have them some skin, to have them have some skin in the game.
and this is at the end of the day, what this is all about. I think there is a lot of pitfalls though, and, Typically, the mistake that people make is just underestimating that there's more that comes with it and, also staying with it. and maybe the last meta kind of, it's just, it's not one idea, but it is what many things that I've seen that kind of developed over time is, That you really have to stay with it and maybe having people on the floor, such as sales of people just to see more than just the numbers.
The truth about how well your compensation is working is not just seen in the numbers. It's also seen. And as you said, like what people are talking about in bars and how these contracts are coming to be and the quality of them. And that is just really hard to see when you're sitting in your ivory tower or whatever office just looking at the dashboards.
Toni: Yeah. And one last parting thought on this one here.one way to [00:28:00] kill compliance the fastest or the positive impact of compliance is have one rep maybe through luck, but hit two, three, 400 percent and get crazy money. And then the CFO comes in and doesn't pay it. Like I've heard about those stories.
but that's a surefire way of basically telling everyone that those contracts that they kind of signed there. actually not enforceable, they're actually not, right? so I would be extremely careful with that. What I did in opposition to that, because I had those conversations, like, one of my guys was 600 percent or something like this, something crazy.
and because of all the kickers that apply, there was so much more money even, and the CFO was like, Hey, you know, he can go on vacation for the rest of the year if we pay him this stuff. And, we paid it. And what I actually made out of it, I told every sales rep how much money he made. they could have calculated themselves, by the way, it's kind of that, that was all super transparent.
I just helped them. And it's like, Hey, do you, like every time I met a sales rep on the coffee machine, I was like, Hey, do you know how much, how much [00:29:00] Morton, made with this deal? and I told them and everyone was just walking away. It's like, fuck me. I want to, you know, I want to close this deal.
Right. and, again, You, you don't want to mess around with this in like, you know, either direction, but anyway, so having talked about this a lot and basically kind of saying like, Hey, make it simple. And then I explained all the special things we had in there. I'm also realizing, yes, you know, there, there are some things you need to consider, you know, getting it right.
But I would say. The vast majorities of, the deals that we signed on this comp plan, they were kind of very uniform, look the same, 95 percent of those deals were according to the baseline and it was very clear and easy for them to calculate. And they understood that if they deviated from the baseline in a negative or positive way, they were, kickers and or dings.
and they kind of affected them in a good and bad way. But they couldn't really kind of calculate in their head what it would be. Right. So, but optimize for the 90%, 95 percent of deals that you kind of having seen coming through and make that part at least super simple. that would be [00:30:00] the way I would maybe kind of end this year.
Raul: maybe one more parting thought from me, which I really like your last example. with all the downsides and risks, obviously we've talked about, there's a lot of beautiful things that come with compensation, one of them really being motivation. And, whenever it's difficult or maybe you're scared of all these things, you shouldn't be.
as Toni said, there's a lot of good things that can come with getting this right or getting this into a simple kind of way. And, just having people meet you at the coffee machine and talking about that is just one of the many, many upsides. So use it. I would say a bigger mistake than a fucked up comp plan, unless it ruins your company or the CFO's company budget, is probably not having a comp plan at all.
Toni: Yeah. I agree. I agree. And on the CFO ruining thing. so we had like one crazy payment that was just like a lot. And we basically sat down with the sales rep and said like, Hey, this is. It's, it's just too much cashflow. would you be okay if we chunk it out over the next six months? And he was like, yeah, of course.
Let's do that. So there's always ways to kind of, you know, manage around some of these things. But anyway, [00:31:00] so, if you haven't yet hit subscribe, tell your friends, send this to your sales op CEO and friends and everyone kind of who's struggling with compensation, which I can tell you it's going to be a lot.
and otherwise, thank you Raul for the session and thanks everyone for listening. Have a good one. Bye bye.
Raul: thanks everyone.