The best ways to screw up comp plans

There are things that just shouldn't be in sales comp plans. And then there are things that definitely should be.

In this episode we talk about a simple approach to drive the right behaviour for you and the sales team.

• Clawbacks (04:47)
• Step functions (08:40)
• Capped comp (10:42)
• Cliffs (12:56)
• Put this in your comp plans: Kickers (14:18)
• Negative kickers or debuffs (18:28)
• Contract length (18:40)
• Free months (22:30)
• Positive kickers aka buffs (23:24)
• Sales rep consistency (23:32)
• Intra Quarter Pacing (26:08)
• Quarter over Quarter consistency (27:10)
• The fifth quarter (28:50)
• Double bubble (30:09)
• Wrapping up (31:29)

You can check out GTM live here: www.growblocks.com/gtm-live/

Email us with questions at [e-mail]

Creators and Guests

Host

Mikkel Plaehn

Marketing leader & b2b saas nerd

Host

Toni Hohlbein

2x exited CRO | 1x Founder | Podcast Host

What is The Revenue Formula?

This podcast is about scaling tech startups.

Hosted by Toni Hohlbein & Raul Porojan, together they look at the full funnel.

With a combined 20 years of experience in B2B SaaS and 3 exits, they discuss growing pains, challenges and opportunities they’ve faced. Whether you're working in RevOps, sales, operations, finance or marketing - if you care about revenue, you'll care about this podcast.

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[00:00:00] Toni: Hey everyone, this is Tony Hobe. You are listening to the Revenue Formula. In today's episode, we are going to talk about what you should put in your comp plans and what you shouldn't, and we'll give you a couple of really nice examples. Enjoy.
[00:00:16] Oh, we made it. Oh, sorry.
[00:00:18] Mikkel: Now we are here bright and early.
[00:00:22] Toni: Bright and early. 4:00 PM No, what is it? 3:00 PM Something like that?
[00:00:25] Mikkel: Yeah. There we go. So finally we can record.
[00:00:32] Finally.
[00:00:33] Toni: Finally, we can record.
[00:00:34] Mikkel: Finally, we in the studio the,
[00:00:36] Toni: Mikkel, what did we do? Uh, in our secret trip,
[00:00:40] Mikkel: we did something with a lot of post-its.
[00:00:43] Toni: We did something that is still secret.
[00:00:46] Still
[00:00:46] Mikkel: Still secret, that's for sure.
[00:00:48] Toni: Yeah.
[00:00:49] Mikkel: Yeah. It's um, It's a great project. You can definitely look forward to
[00:00:54] Toni: to. I think it is the greatest off
[00:00:59] Mikkel: No. Yeah, it's gonna be exciting. I think maybe towards the end of the summer we can actually start teasing a bit more about what it is, why it matters. That was a long teaser.
[00:01:11] We're gonna cut it down. Cut it down, so, you know, uh, now it's summer. This room is gonna get really hot, but it also means more outside time with the kids. And my daughter, who is two, she is, uh, at the age now where water is fun. And I was sitting on the terrace and I could hear the water running in the bathroom.
[00:01:30] And it's just, you know, those two minute breaks you get as a parent where everything lines up. And I just knew I had to go out and check, crawled into the sink, filled it with soap, and was taking a bath.
[00:01:40] Toni: All by
[00:01:41] Mikkel: herself Yeah. Yeah. I was a bit surprised, like,
[00:01:45] Toni: but it's also one of those womans like, oh, I know she could have died.
[00:01:49] Mikkel: Yeah.
[00:01:50] Well this
[00:01:50] Toni: It's like, no,
[00:01:51] Mikkel: pretty small,
[00:01:52] but sometimes
[00:01:52] Toni: when you land
[00:01:53] Mikkel: Yeah, yeah, yeah. Thanks for putting that fear in
[00:01:55] my
[00:01:55] Toni: Yeah. Yeah. But it's also this whole, uh, You know, if it's, if it's really calm, quiet for two minutes.
[00:02:01] Yeah. Yeah. It's like alerts go off all over the place. Like what's going on? Either dead or about to die or, you know, something
[00:02:09] Mikkel: burning down the house. Yeah. Always the case is always the case. It's
[00:02:13] the same. it's Yeah. When there are no tasks being pulled into the the Scrum project board, then
[00:02:20] it's like
[00:02:21] Toni: being made.
[00:02:22] You
[00:02:22] Mikkel: something's not right. But it's funny you should say calls.
[00:02:25] We're gonna talk about comp plans today. Highly relevant for those people who are making a bunch of calls.
[00:02:31] Seamless,
[00:02:32] Toni: done
[00:02:32] Mikkel: seamless. segue. No. We're gonna talk about, uh, things to put in your comp plan and things you definitely shouldn't put in there. Yeah, that's it. Today we're gonna focus on, and uh, we recently did a, uh, go-to market live about this.
[00:02:49] Toni: Yes. With, uh, here Paulson, Ola Paulson, uh, was also there. I mean, he's my co-host or we are the co-host or something like that. Uh, and we had a good chat about it. Um, and obviously kind of also prepping in a bit differently and packaging up for an episode here to talk about a bit more.
[00:03:06] Mikkel: Yeah, and I think the cool part about that show is, is interactive.
[00:03:10] So there's a lot of q and a, which is really the good part. And especially in this one, there were a bunch of questions, but one thing that really stood out to me that we're gonna discuss today is how do you drive behavior with comp plans? That's really the focus. Yeah. And. You recently did a LinkedIn post about, you know, things you shouldn't put in your comp plan, really the way to mess up your comp plan.
[00:03:30] And I thought, let's hop into this, because there will be some of those pieces appearing comp plans when they probably shouldn't.
[00:03:36] Toni: Yep. So I think, um, uh, just as a preface to this, complaints don't.
[00:03:43] Um, don't put too much hopes in them as well. They're really important. They're really expensive. Um, but you should never see them as more than like 20% of the mixed bag of different motivations and incentives, why someone is doing a good or not a good job. I think we have another episode on this actually from, you know, uh, earlier, earlier last year actually.
[00:04:06] So we are really talking about the last 20%, right? Um, and I think things that you should, um, Really try and keep out of your comp plan. And I've just seen it a couple of times. I myself was tempted sometimes to put them in. Um, and it just always turned out poorly. There always was like, ah, okay, yeah, we shouldn't have done that.
[00:04:27] It's either, either you get smacked in the face during rollout.
[00:04:31] Mikkel: Yeah, no, I'm not, I'm not buying into this.
[00:04:34] Yeah.
[00:04:35] Toni: And it's usually, you know, when it's, when it's some underperforming rap. You can usually like, oh, you know, it's because he's bad. Uh, but if it's like two or three of the top three reps, it's like, oh, oh, this
[00:04:46] Mikkel: yeah, I'm bad.
[00:04:47] Toni: This is not gonna fly at all. so, but you know, number one, clawbacks. Yeah.
[00:04:52] Mikkel: But it sounds so logical. Clawback staff. Let's explain maybe what it is.
[00:04:56] Toni: Yeah. So clawback is I give you money and then I un give you money, uh, because you did something originally that didn't turn out like it should be. So for example, you sold the deal, and then the deal actually fell through.
[00:05:11] So the customer never paid, or the customer was like, Hey, this was mis-sold, or any other reason why the deal falls through. So you as a company now can say, Okay, we should punish that sales rep because that's apparently bad behaviour
[00:05:26] Mikkel: Mm-hmm.
[00:05:27] Toni: that, you know, that someone is, Kind of selling bullshit, right? So that's, that's really the feeling that you as an organization get.
[00:05:35] Um, and then you basically wanna say, okay, you know, I wanna take that money, you know, away from you again. so, uh, there are a couple of technical reasons why this is difficult. You know, you need to basically withhold money now from the next paycheck. Yeah. you are also gonna take out. The last end of the scheme here, which is going to be the most expensive end.
[00:05:57] They will kind of feel that a lot and they will compare that to maybe where they are right now. And right now they might be in the middle of a quarter and, you know, be further down. and obviously, if you are clawing back on, for example, you know, nonpayment, which is a typical thing by the way. Uh, the incentive that you're really gonna then be pushing for is that your sales reps are gonna, uh, calling down your customers to get money from them, which is, number one, not the best use of their time.
[00:06:26] And number two, maybe not the best way of engaging with your customers in the first place. and then obviously there's these very motivational pieces that, um, usually this clawback conversation. It's probably gonna happen in some inopportune time in the middle of the quarter. And uh, you really don't wanna add any additional stresses around, uh, you know, is that rep going to be motivated or not, right?
[00:06:51] Mikkel: It's like, I know you're having a tough quarter, but lemme just kick you in the gut real hard.
[00:06:54] Yeah.
[00:06:55] Toni: or you can really smell the a hundred percent. Well, let me set you back a little. Um, and honestly, I've, I've just never seen this workout really Well. I think what you should be doing is, and you know I had this as well, you know, basically in the.
[00:07:10] We had something like a around it. Yeah. Um, and basically almost make a fair use clause. Kind of have it hover there, but super soft language, like, you know, the company can decide up on blah, blah, blah, that blah, blah, blah. Right.
[00:07:25] Mikkel: Yeah. Because I was gonna ask, so how do you prevent that behavior from becoming, you know, gamesmanship?
[00:07:30] Toni: Yes. And the answer is you fire those people.
[00:07:34] Mikkel: Yeah.
[00:07:34] Toni: No, this is actually, so I think this is one of those, um, I think Netflix culture had kind of a really cool, so the, there was a culture deck from Netflix
[00:07:43] Mikkel: Netflix. Mm-hmm. They
[00:07:43] Toni: a really cool thing around not wanting to create too many rules. Um, and rather, um, rather getting rid of people that violate kind of the code of conduct, if you will, instead of creating rules around everything.
[00:07:56] And we actually discussed this in Growblocks also. Once it's like, hey, We don't need a rule that says don't piss on the floor.
[00:08:03] Mikkel: No. So we do it all the time. Of course.
[00:08:05] Toni: Yes. So, so, you know, we don't need to have that rule written somewhere that is clearly ingrained here. Yeah. Just as much as we're salespeople, it should be clearly ingrained that, you shouldn't be setting up fake deals.
[00:08:17] Mikkel: Yeah.
[00:08:17] Toni: Yeah. so if someone is doing it and to a degree on purpose or, you know, gross negligence or you know, some in that direction, Instead of creating a rule around that bad apple, you should rather get rid of the bad apple. Yeah. So that's my perspective on this. People can, you know, fall on either side of this.
[00:08:34] and if this is your approach, then you know what? You don't need a clawback, you know, penalty in your comp plan. Yeah.
[00:08:40] Mikkel: Yeah.
[00:08:40] Toni: next one, step functions. So a step function is what, you know, if, if you, if you imagine. if you imagine your payout scheme, and maybe sometimes that's a straight line or it's a curve, or it's like a, a straight line with like accelerators in it.
[00:08:56] if you draw this out, so you know, on the Y axis you might have completion to target, and on the axis you might have completion to, you know, o t e. So full target payout. and if you see steps in it where it kind of suddenly jumps, Usually have this, you know, 49% here and then 50% you up here, um, that that would be a step function.
[00:09:20] You do want to avoid those things. and the reason is it simply creates really awkward behavior around the, you know, the, just before and just after those step functions. Um, the, the, the easiest one is, oh, I'm about to hit this step function. So my behavior now to close the next dollar is almost infinite,
[00:09:42] Mikkel: Mm-hmm.
[00:09:43] Toni: right?
[00:09:43] It's like I could have a $1 million deal pending, and it will probably even be better for me to discount it to $10,000 just to get over the step.
[00:09:52] Mikkel: Yeah.
[00:09:53] Toni: So you wanna avoid that. The other thing is, what I've seen, and this is no joke, this literally happened, uh, sales reps started trading deals.
[00:10:04] Mikkel: No way. So they're like, if you give, gimme that, I'll take then
[00:10:09] Toni: so, so that, yeah.
[00:10:10] But it was basically, someone was at 85 and the other one was at 75 or 73 and see there 75. There was a step. So then the guy with the 85 gave like a deal to the other guy. So they would, you know, he would jump up and then they split the, you know, the step function, gain, basically Well, it's, you know, so it is smart and it's actually no, you know, that is, that is behavior that you create.
[00:10:35] And I would just say, you know, stay away from that stuff. Try and make it smooth. Try and kind of not have these things.
[00:10:42] Um, next one, capped comp.
[00:10:46] You
[00:10:47] never want that. so first of all, there's some physics around comp being kept anyway. Yeah. So there's no reason to put a cap into your comp plan. Uh, usually people add a cap into it because they, oh no.
[00:10:59] You know what? If we need to pay too much commission, Right. That's, that's the reason. and first of all, champagne problem. Yeah. Celebrate that. And number two, you know, for, for the overall, uh, on the cap comp, um, you know, the reason why it's kept physically is the amount of deals that someone gets.
[00:11:19] Yeah. And the amount of time that they have in a day, the conversion rate and so forth. It's like, you know, they will have an extremely hard time to surpass that. If they do, it's usually because of one big deal. and what we actually also, we put it into the Ts and Cs. Um, we didn't cap anything, but we basically said if there's, you know, one deal that's, uh, crazy,
[00:11:41] Mikkel: Yeah.
[00:11:41] Toni: Um, then we at least wanna, you know, wait with compensation for that deal until payment has been received.
[00:11:48] Yeah. To kind of mitigate the, the financial risk for the company because it's like a, a significant outlier. Right. So we had like a, it was literally I think a 750 K deal and usually we had like 20 K deals, right? So it was a significant outlier. Um, and basically we're like, I mean, we are also in a position.
[00:12:08] We could have paid that, but it was just to kind of balance it out a little bit. Right? And, and otherwise, Otherwise never kept that. And actually what I did was the opposite. Whenever I met a sales rep on, you know, at the coffee machine or something like that, um, the, the one thing that I kept saying was like, Hey, do you actually know how much money that guy made?
[00:12:30] Yeah. Last quarter. Um, and I didn't need to. Necessarily kind of say the exact number because everyone knew what the target was for that person, and everyone knew what the number he hit because of the, you know, thing. I just literally helped them to calculate it through at the coffee machine. And, and there, there was a bit of a spring in the step when they walked back to their desk, you know, in order to maybe kind of hit the same number.
[00:12:52] So never ever cap comp plans. It's gonna kick you in the nuts.
[00:12:56] Cliffs, it's a little bit, uh, a similar concept, just the reverse basically. And you know, I see this a lot with SDRs. Yeah. Is zero money until the seventh meeting.
[00:13:08] Mikkel: Yeah. Yeah.
[00:13:09] Toni: Or for AEs is like zero money until you had 50% or something
[00:13:13] Mikkel: that.
[00:13:14] Yeah.
[00:13:14] Toni: it creates, uh, quite a lot of demotivation, don't get me wrong. I think the lower tiers should be paid lower. And it's usually always a combination between how much com, how much complication do you want to add, kind of, you know, how many tiers and how much lower and how much then accelerates. but you should for sure, um, you know, pay a little bit less for, you know, the below 50, below 75, whatever you pick.
[00:13:39] but I wouldn't paint nothing.
[00:13:41] Mikkel: Yeah. I think Olafur put it nicely. So we value the work, just not those five first deals. They're worth nothing.
[00:13:48] Toni: No, exactly. Um, and, and especially with SDRs, I had it because I had that brilliant
[00:13:52] Mikkel: Yeah. yeah.
[00:13:52] Toni: we're like, Hey, no, let's not pay them anything. and it's really, um, you know, someone was then at seven meetings or something like that, and then, you know, it's so easy to create like this bad mood on the, on the floors, like, Yay.
[00:14:06] I got my first paid meeting today,
[00:14:08] Mikkel: Yeah.
[00:14:08] Toni: know,
[00:14:09] Mikkel: And
[00:14:09] Toni: and that was like on the 20th, you know, of the month. So, uh, I wouldn't, I wouldn't do it. Um, it's, it's not gonna help you. Right? Um,
[00:14:18] Mikkel: so makes me wonder, what should we then put in a comp plan? Because we've had, we have a bunch of things now that, you know, don't do that period, but we still wanna have other things in there that helps drive the desired behavior, which is let's get some more deals.
[00:14:33] Toni: Yes. and, um, you know, that's, that's really what comp plans should be about, right? So today we're actually not gonna talk about the scheme and I should kind of build out the scheme and, and all the math on how do you go from OTE to, you know, OTE to what the target is and so forth.
[00:14:50] Some of that was actually covered in the GTM Live, but today we're gonna deep dive a little bit more on, kickers
[00:14:56] Mikkel: yeah,
[00:14:58] Toni: Yeah, and there are many different ways to say kickers, um, accelerators. I think for the, uh, eSports folks, it would be buffs.
[00:15:10] It's like no joke. Yeah. Um, and, uh, but, but what's really important is you actually want to do both.
[00:15:15] You want to do, uh, kickers and you want to do dings or negative kickers or duffs, um, which, uh, Which is, um, which is basically kind of the, the mix that we are talking about here today. I think one, one preface to that is also, hey, try and keep it simple. Yeah. I think, um, I think the kickers sometimes it's easier to keep simple or keep understandable because you can create a story around it.
[00:15:43] It's like when you do those things, you get that in return, versus if you land at, you know, 72.3%, then you get this plus this other thing and this scheme, it's always difficult to calculate with kickers is a little bit easier actually. Um, and, uh, because there's some storytelling aspect to it. I also heard it way more often being then mentioned by sales reps.
[00:16:06] It's like, Hey, if I do this, I actually unlock that kick out of, uh, you know, uh, you know, get to this thing. I actually have something else,
[00:16:13] Mikkel: Yeah.
[00:16:13] Yeah.
[00:16:14] Toni: There's some, uh, there's some, uh, you know, storytelling around that, that actually also helped us in forecast meetings. And so forth. Right. and how to actually go about it.
[00:16:25] Right? So I think what's really important before we going into specific cool kickers that we have lined up here, so examples of that, is, um, you need to figure out what is, what is normal.
[00:16:38] Mikkel: Mm-hmm.
[00:16:39] Toni: What is a normal sales behavior for you, right? If you, um, if you take some of the kickers that you line out and you're an SMB company or an enterprise company, they might be completely, you know, misleading and not helping at all.
[00:16:53] Right? So before you discuss, what, uh, you know, positive and negative, positive tweaks, you wanna incentivize the negative tweaks you want to de-incentivize. You need to be very clear on what, what they're tweaking. Yeah. Right. What's the, what's the, the standard that they're, that they're helping to deviate from in a good or a bad direction.
[00:17:13] Right. And again, um, these might be things like, uh, this is the average quota that someone can hit. This is the average quota that they can hit in a qu in a month versus a quarter, uh, or in a year. Um, this is the average, uh, deal size potentially, if you want to do something around that. Um, this, those are the payment terms that are normal for us.
[00:17:34] This are the contract lengths that is normal for us. Um, yada yada, yada. There might be so many other things that are really important to you. Um, but contractually speaking, the ones that it just went through, they're usually the ones, right? It's really the, um, it's really the contract. So in my case, let's just say it like that.
[00:17:51] It was really the contract length. Yeah, so our standard was 12 months. Yeah. Like a year. And our standard was a year upfront payment. Yeah. Boom. Period. That was it. Um, if then someone, uh, made it happen to go beyond the 12 month, we wanted to, you know, appreciate that
[00:18:11] Mikkel: Mm-hmm.
[00:18:12] Toni: if someone made it happen, uh, to get two years upfront, we wanted to, you know, show our appreciation for that.
[00:18:19] But equally so as someone went below the 12 We, and this is kind of pretty important. We didn't wanna forbid it.
[00:18:28] Um, and, and maybe I'll kind of talk about the negative kickers actually first
[00:18:31] Mikkel: Yeah, yeah. do it, you know,
[00:18:32] Toni: know, I'm segueing into this. Um, we didn't wanna forbid it, but we wanted to align the interest of the seller with the interest of the company.
[00:18:40] Yeah. So what does that mean? Um, If you are, let's just say you're rev ops and you're doing deal desking at the same time, which is, you know, usually, you know what happens or the COO does that. someone, uh, comes and asks you for an approval on a deal. Uh, let's just say it's six month with six month payment terms, uh, which is,
[00:19:02] You know, really, you know, bad in comparison to your standard. Yeah. Um, and, uh, you don't have any governance around that. Right. So the person closing a $20,000 deal would progress on his or her comp plan just as, as well, six months or 12 months, right? if you, um, if you now sit there and you want to approve or disapprove the deal, You will always sit there and be like, yeah, okay. Fuck, let's do it.
[00:19:31] Mikkel: Let's get the money. Right. This is, yeah. Yeah.
[00:19:32] Toni: It's like, hey, you know, six months better than nothing. We can prove it. I believe in our product. Let's go. Yeah. what's now gonna happen is that that sales rep is gonna, keep doing it because it's an, is an, is a, basically an a non non-painful discount.
[00:19:45] Yeah. To give for him or her? Yeah. To, uh, you know, whenever say, um, um, a customer or prospect says like, ah, ooh, you know, that's, that's gonna be difficult. then the first thing, uh, the salesperson might throw out is like, boom, let's just cut the deal in half. Yeah. Uh, or let's cut the payment terms in half, or let's cut it down to monthly.
[00:20:04] I mean, who
[00:20:05] Mikkel: Yeah. Yeah.
[00:20:06] Toni: Um, and then you have it at the finish line. And then when you have it at the finish line, then you go to get the deal approval. Yeah. and it's, it's usually this weirdo set up where it's like, well, you know, you know, I could probably close him for that. He mentioned this and, um, as a deal approval, you're, you're kind of behind the, you know, you, you can't really kind of change much here.
[00:20:26] Yeah. Right. so what you want to do is you don't wanna, um, you know what some people do is they completely say like, Hey, you can't do it. But to be honest, that's just not a good practice because you want the money. You totally want the money. and number two, you, you know, some people then get smart and just like, Ooh, let's create a quota around it.
[00:20:48] Yeah. We can only have five of those deals a quarter, uh, and no more. and then guess what happens when the six one comes around, you're like, okay, yeah, let's, let's, let's not tell anyone,
[00:20:58] Mikkel: Yeah,
[00:20:58] Toni: but let's do it anyway. Um, and, and all of that spirals out of control most of the time. So really, Really, um, simply align, align some of that stuff with you.
[00:21:10] Give them a little bit of a ding. Yeah. If they are doing something that's not great for the company, I think it should be balanced out. Um, so for example, for, , you know, the, the six month contract term, we actually dinged 50%. So we dinged by quite a lot. but if someone gave half yearly payment terms on a full year contract, I think we only ding 15% or something like that, right?
[00:21:32] Just to kind of, to balance it out and to create a little bit of an incentive for that person to, you know, go the right routes and maneuver with the prospect in the right way to, to kind of, you know, land where they should land. And what's really cool if you design this kicker thing pretty well. You almost give a, reverse discount hierarchy to your sales rep.
[00:21:55] Mikkel: Yeah.
[00:21:56] Toni: They're basically, you know, if you do it well, They're basically gonna look at their comp plan and they're gonna, okay, I'm gonna start offering this kind of discount. Yeah. Could be on, I dunno, payment terms here, then I'm gonna move to, um, you know, maybe the contract time. Yeah. The next one is gonna be, uh, you know, three month.
[00:22:13] Then it's gonna be, uh, one off discount for the first year. And then it's gonna be a perpetuate, uh, discount into infinity. Yeah. Right. And basically, that is great. You want to set up something like that for, uh, for your reps to be in full, full on sync with you.
[00:22:29] Mikkel: Mm-hmm.
[00:22:30] Toni: and yes, so I mentioned, for example, free month.
[00:22:33] This was kind of very uncommon when we invented it. We didn't invent it, but. We came up with it, we asked some people and they were like, no, we're doing the same thing. Yeah. Um, and basically like, uh, you have a 12 month contract, and people wanted to have maybe 20% discount, 25% discount, and then they say, you know what?
[00:22:50] I can't give you this discount, but I can give you the first two month for free. Yeah. That will not renew though. Right. It was very clear. We sometimes called it an introduction. Yeah. Kind of while you're being set up, we're gonna not charge you. Uh, but that then obviously meant then next year when you renew, well guess what?
[00:23:05] We're gonna, we're gonna charge you. Right? Yeah. and, um, you know, it, it took us a while before it may click because, you know, you wanna set up real nice structure around all of these things. Yeah. So not every time is kind of a weird conversation about it. And, you know, the sales rep has questions. It should just be kind of very clear to that
[00:23:23] Mikkel: person. Yeah.
[00:23:24] Toni: yeah, I think that's it around the, uh, the negative kickers.
[00:23:27] Mikkel: Mm-hmm.
[00:23:28] Toni: positive kickers.
[00:23:30] Mikkel: Yeah. It's got a bit positive.
[00:23:32] Toni: I think we had lots of fun Uh, so on the, on the positive stuff, So what many people are, struggling with all the time Yeah. Is sales rep consistency now, uh, you know, adding those kickers, not gonna fix that.
[00:23:50] you know, it's only fixing 20% of that. Yeah. The 80% is, you know, constant opportunity supply, low seasonality, you know, good coaching, you know, blah, blah, blah, blah, blah. That's, that's the 80% of creating that consistency for the rep. Um, but you know, having some pieces, that help the rep to drive urgency or, you know, motivate them to drive urgency is really helpful.
[00:24:12] Right. Because if you're really thinking, so we did the following. Not experiment. It turned out to be an interesting experiment. so when you think about it, you are quarterly set up business and see there you are always closing, uh, gian amounts in the last two weeks of the quarter.
[00:24:27] Mikkel: Yeah.
[00:24:29] Toni: You know, why is that?
[00:24:31] There's, there's no actual reason for that in term, you know, that is, True. In reality, it's all just, just the reps optimizing for their quarter end. It's like suddenly they come up with all kinds of reasons why this thing needs to close in the next two weeks, right? That's why you build it like this. Um, if you know, now you could say, well, maybe, uh, end of March, end of June, end of, uh, what is it?
[00:24:54] Uh, you know, September, those are just the, the purchasing month. Toni, this is where all the purchasing decisions are being made. Obviously that's, Stupid. Um, but let's just say that were to be true. So then, you know, one year we shifted, uh, the fiscal year by one month. And see there suddenly January, April, November, and I'm mixing something up
[00:25:18] Mikkel: The other one
[00:25:19] Yeah.
[00:25:20] Toni: Became the closing month.
[00:25:21] Mikkel: Yeah. yeah, yeah.
[00:25:22] Toni: Uh, suddenly, suddenly that last month of the quarter, that was suddenly the, the, the big closing month. So, um, you know, uh, if you realize that some of that, uh, delaydness, that back loaded ness, Has to do also with their sales reps. And I don't wanna take away that, yes, you have enterprise level, you know, sales cycles, they are annual, you know,
[00:25:42] Mikkel: Mm-hmm.
[00:25:43] Toni: you know, they're concluding the budget and maybe they need to set up a New Year's budget and they will close in q4.
[00:25:49] Don't get me wrong, some of that stuff you can't fight. But the why does it close in, uh, March versus April versus February. There's no, there's no real life reason
[00:25:59] Mikkel: that
[00:25:59] Toni: of that stuff, right? So what you wanna create with those positive kickers, basically an incentive for the sales rep to come up with urgency, fake urgency.
[00:26:08] That's how sales works, right? Fake urgency to get those deals done. At that given point in time. Um, and the first one, that we basically kind of did, we did a, uh, intra quarter pacing. So basically within the quarter, um, hit first month, second month, third month. So we basically gave a sizable kicker if you were pacing towards your quarter end goal.
[00:26:31] Yeah. In month one and in month two. And so far so. That's it. Um,
[00:26:35] Mikkel: because there was too much risk of everything just closing in the last two weeks or,
[00:26:39] Toni: yeah, I just, um, it's, it's also then, you know, it becomes a physical problem suddenly if you kind of push the whole pipeline in front of you and then want to close everything in two weeks.
[00:26:50] And also, um, you know, as more staff is getting taken out, you have more time for CSMs to work through that. You wanna kind of. You know, remove those highs and, and, and, and throws, I guess. Um, and that's why we wanted to kind of, you know, create something like that. It also looked nicer on those dashboards.
[00:27:08] Like a a straight Yeah.
[00:27:10] Um, Then, uh, the next thing that we did is, inter quarter. So quarter over quarter consistency. Yeah. and this was kind of a trying to avoid sand bagging to a large degree. So we are fairly.
[00:27:28] consistent with our target setting, so with the quotas, but we did always leave a little bit of residual risk and, and on, I couldn't say it, but the VP could say it.
[00:27:37] Yeah. Uh, VP sales could say it's like, well, you never know what the quotas are next year, next month, um, to kind of create this. Okay. I'd rather wanna have this deal this quarter, the next quarter, because if the quarters, uh, targets go up next quarter, this deal will be worth less. Yeah. So rather wanna close it now.
[00:27:55] So was kind of, there was, you know, one incentive to, to not send back. And then the other one was basically to, uh, basically what is it? Celebrate the people, um, and incentivize the people that didn't sandbag. and give them an incentive then for the next quarter. Yeah. So what we actually did, if you hit a hundred percent or above, we gave you a payout kicker on everything you closed next quarter.
[00:28:23] Yeah. Because if you think about sand bagging, it's basically trying to help your own next quarter. Yeah. Um, and we wanted to take that off the table by saying, well, if you get to the number. We will help you next quarter
[00:28:35] Mikkel: Yeah. yeah, Yeah.
[00:28:36] Toni: Right. so that was actually, that worked out pretty nicely. Um, and a lot of people were, uh, were referring to that a lot, like, yeah, yeah.
[00:28:43] No, I still have this, the carryover,
[00:28:45] Mikkel: Yeah. Yeah. Some tailwind.
[00:28:47] Toni: Yes. Um, so this was one, um,
[00:28:50] and then, and this was the breakout. Everyone loved it. Uh, success, we call it the fifth quarter.
[00:28:59] Mikkel: Yeah. usually that's a bad thing
[00:29:02] Toni: usually. So I heard, so I only heard it after the fact that, uh, some people use it for like, Hey, the, this pipeline is for fifth
[00:29:08] Mikkel: Yeah. Um,
[00:29:10] Toni: but, uh, basically what we did is if you hit, and I'm not sure if it was a hundred percent or 105% over the year, right? So this was really, you know, annual pacing. Annual target. if you hit the annual target, and that could be zero first quarter, zero, second quarter, and then everything in q4, for example, you would still unlock that thing.
[00:29:34] then we will pay you a full fifth quarter.
[00:29:38] Mikkel: Yeah. Pow.
[00:29:40] Toni: Everyone got really jazzed up about that
[00:29:42] Mikkel: I can imagine.
[00:29:43] Toni: Like this was like, yes. Yeah, I want to have that. and it's, um, that, that, that helped to drive a lot of, especially Q4 then. Right. Uh, helped to drive a lot, uh, in that direction. That also was a thing that we presented in every kickoff.
[00:29:57] So we had quarterly kickoffs. Yeah. Um, that's maybe a bit obsessive, but that's what we did. And we basically kind of listed out who's still tracking too. Um, and, uh, people were like really excited
[00:30:08] Mikkel: like a scoreboard.
[00:30:09] Toni: Yeah. Okay. And then we had one, and that's kind of, you know, I think everyone should have that.
[00:30:15] Uh, the second you go above a hundred percent, you should get double payout, uh, basically on every additional deal that you close. And the rationale is, um, if you really think about this,
[00:30:28] OTE example where you basically have a 50 50 split, um, and once you get to target, you basically kind of reach that 50 50 E equilibrium and now what you can actually, uh, pay that person is double up because you are not paying on the base
[00:30:45] Mikkel: Yeah, yeah. Yeah.
[00:30:46] Toni: And why would you do that? You know, that's a, that's a way to save cost eventually. Um, the reason why I would do this is you want to overly pamper all of your overachievers.
[00:30:56] Mikkel: Yeah.
[00:30:57] Toni: you want them never to leave. and basically kind of once they're in the double up zone, it's like really fun for them to close any other deal.
[00:31:05] Mikkel: Yeah, no. I can imagine.
[00:31:07] Toni: I mean, we had people close a, um, $24,000 deal. And just because of that deal and the continuation kicker and all of this other stuff, they got a payout of like five or six K on that 24 K
[00:31:20] Mikkel: deal. Yeah, Yeah.
[00:31:21] Toni: It was like nuts. but that's how that thing worked and it worked really well, uh, especially with our over performers.
[00:31:26] Right. Yeah. I it.
[00:31:29] Mikkel: So a bunch of positive and negative kickers. I mean, I can see. Why there were a lot of questions, like, if you have a specific business, there's so many.
[00:31:38] If this, then how should we approach it? Right? Um, so I think, you know, maybe if there's a listener right now that has a question and didn't have a chance to attend the GTM Live, you know, number one, go sign up for that. You can do it at growblocks.com/gtm-live/. You can sign up there or you can drop us, uh, a question on [e-mail].
[00:31:58] Toni: you know, DME on LinkedIn. I think kind of to wrap this up, right, so, uh, a couple of things we talked about that you shouldn't be doing, couple of kickers and why you would do it in the first place.
[00:32:09] I think. In the end, you do need to keep it simple. Don't overcomplicate it. If you ask a rep when he or she is drunk to explain the complaint to you and he or she can't, then you did too much. what I learned is that, uh, more complex in this scheme, so how the. Payout works confusing, uh, the kickers, uh, you can add quite some complexity without people losing track of that So, you know, think about this maybe as a, as a nicer way to place some of the, the carrots, um, uh, versus, you know, potentially in the
[00:32:42] Mikkel: scheme.
[00:32:42] Yeah, yeah, yeah. No, I think it makes sense. If you can't understand it, then how will it drive your behavior? It's like,
[00:32:47] Toni: yeah,
[00:32:47] Mikkel: what am I gonna do now? It's not, do you want, you know, uh, gummy now or two tomorrow? That's not
[00:32:54] Toni: Oh, wow.
[00:32:57] Mikkel: That was the outro. That was the outro.
[00:32:58] Toni: Fondant colors.
[00:32:59] Mikkel: No, I'm just tying it back to the intro.
[00:33:01] It was about, you know, kids and then back to kids again.
[00:33:07] Yeah. Yeah. well have a good one, kids. Thanks for listening.
[00:33:11] Toni: Okay. Thanks everyone. Um, thanks Mikkel.
[00:33:14] Mikkel: Thank you, Toni. Bye.
[00:33:15] Toni: Have a good one.
[00:33:15] Bye.