Case Study: Sales Compensation – High Tech (Software)

The Issue

The company was wrestling with having a few consistently high paid earners and little talent pipeline from high turnover of new salespeople. The sales compensation plans were based on straight license and professional services commission, without consideration of account or territory assignment. Paying on a flat commission rate meant salespeople on the biggest and best patches earned the highest pay, with little notion as to whether one’s results were optimizing potential opportunities. New hires invariable had the worst patches and could not earn at market levels for 2 to 3 years or until a better patch opened up.

The Solution

We first gained consensus that not all account or territory assignments were created equally. Sales leaders felt opportunities were not being maximized, as salespeople attempted to hoard accounts and many were not getting enough focus. The new plans incorporated volume goals that factored in the potential in one’s assigned patch. Growth against expectations become a critical driver of assessing one’s performance and determining the resulting pay.

The Impact

Setting targets helped management gain confidence in their ability to meet their overall sales results. Account assignments become more logical as hoarding accounts was no longer a benefit; having more accounts meant higher goals. The deployment model and approach become more rigorous. High earning representatives still earned well when growth was achieved; new salespeople earned a more appropriate pay level, retention improved, and talent across the sales organization improved.