Jeremy Scheffel is a true titan in the field of Sales compensation, boasting over a decade of experience.
In his recent role at DocuSign as the VP of Sales and Customer Success Operations and Strategy, he was the go-to guy for all things related to success and renewals operations, including strategy, annual planning, incentive compensation, etc.
In the fifth interview of CC: Commission Chats Series, Jeremy shares his insight on crafting fair compensation plans, navigating commission disputes, latest compensation trends, and career advice for new comers in the field.
Let's dive right into the conversation!
What would you say are the two major things that have changed over the last decade or so in sales compensation?
You know, there's this old saying, "The more things change, the more they stay the same." It's not entirely true, but when it comes to compensation, it does hold some truth. In the end, comp is all about motivating people to achieve their goals. If they're hitting their numbers and making money, they're usually happy.
The key is to make sure that the incentives align with the job at hand. You don't want to reward someone for something they can't control. And the fundamental principles of compensation design haven't shifted much over time.
However, in the world of sales, there have been some interesting developments. Roles that are adjacent to sales like pre-transaction, SDRs, and MDRs have always had incentives, but now even post-sales roles like CSMs have variable pay in their compensation. That's a newer trend.
Speaking of changes, in the software industry, there's been a shift toward compensating reps based on bookings rather than revenue. But it's still a work in progress, especially when it comes to dealing with deals that don't go as planned. In smaller companies, reps might bear more of the risk, while larger companies have more controls in place.
The last thing you want to do is mess up your reps' comp plans and make them unpredictable. Nobody likes a big clawback surprise. I've seen my fair share of issues in this space over the years, so if companies can design plans with some protection against excessive clawbacks, then they have to do it.
What's your general philosophy around structuring sales compensation? How do you balance between incentivizing performance and ensuring the fairness of the compensation?
Fairness is a fascinating aspect when it comes to sales compensation. It's all about ensuring that people have the opportunity to earn and meet their goals. Let's say you have a team of 100 reps, each at different levels, but all with a stake in their earnings tied to this. You have to think through how you want the attainment to look like.
But before you even get to compensation, you need to set up equitable territories. The setup is just as crucial as the compensation itself. Also, keep your compensation plans simple and aligned with your overall goals.
Talking about simplicity, I’d like to mention about something that we did recently. Instead of paying based on the presence of a negative (churn), we shifted to paying based on the presence of a positive (retained). It's easier to grasp for reps.
The key difference here is how it affects perception and leverage. If your target was 15 and you achieved 13.5, you were off by 10%. But with the shift, where your target is 85 and you hit 77, numerically, it's still 10%, but the leverage perspective ensures you're driving the right behavior.
How do you handle disputes with sales reps?
Disputes are just part of the game, and you want to minimize them as much as possible. But having clear rules for handling disputes is crucial.
Let's face it, not all data is flawless. So you've got to be smart about understanding the risks associated with different comp components and the data behind them. How consistent is that data, and how will you manage changes down the road?
When disputes arise, you need to figure out what the problem is about. Is it a calculation issue or a discrepancy in the initial numbers entered?
One lesson I've learned over time is the importance of operational efficiency. I've seen people spend hours resolving a dispute that affects their comp by less than 20 bucks. It's just not worth it. Sometimes the motto "When in doubt, pay out" makes sense because you don't want to upset everyone. But consistency is key, whether it's a $100 or a $10,000 dispute. People should know the rules.
In a nutshell, it's all about enablement and clarity in handling disputes, along with a well-defined process for when to get involved and when to let it slide.
What are your expectations for sales compensation trends in the next five years? Are there any developments or changes you're particularly eager to witness in this field?
Certainly, I do see some changes on the horizon, but it's important to note that these shifts might be more specific to certain types of businesses and markets. My perspective comes from working in the SaaS industry, where ongoing billings are a big deal. In this space, simplicity is often key because the more you try to fine-tune things, the more complicated they can become, which isn't always a good thing.
Looking ahead, I anticipate we'll see fewer components in compensation plans, but they'll carry more weight, and they'll be crystal clear. In mature SaaS companies, where the bulk of business comes from existing customers, the focus will likely shift towards viewing the customer as a whole, rather than just individual transactions.
For example, Account Executives might have a slice of the new business, but they'll also be accountable for the broader customer success. This approach aims to align incentives so that initial deals don't end up causing problems down the road.
Balance is crucial. While it's natural to want to seize a big opportunity upfront, it's equally important to ensure it's a good deal for both the company and the customer.
So, to sum it up, I see a trend toward more holistic compensation structures, aligning with bookings policies, rep policies, territory design, and quota setting to create a more integrated approach
How do you approach the entire commission process from ideation to the point where it reaches the sales reps?
When it comes to handling the entire commission process, it's a juggling act with many moving parts. First, you need a clear plan in mind, knowing when you want the commission plans to be finalized. Most of your time is spent on planning, especially if you're making significant changes to the existing plans.
Once you've figured out the plan, you'll start building the systems required. This stage usually doesn't demand as much time as the planning phase. The crucial part is tracking any changes you're making and ensuring they're ready to go live when needed.
Speaking of going live, the target date is often the first day of the year, even though discussions may not happen until after the new year. But there's a lot of other stuff to coordinate too, like promotions and which employees need plans at what levels.
Before all of this, you need to go through different stages: defining the plan, iterating on it, getting approvals, constructing it, and finally distributing it. It's essential to treat these as distinct phases and manage them effectively. If one phase drags on, it can have a domino effect on everything else, causing confusion and frustration among your sales reps who need to know how they're being incentivized.
Ultimately, keeping everyone on the same page and sticking to your timeline is key to avoiding any last-minute surprises or chaos at the start of the year.
What advice would you give to someone who is just beginning their career in sales compensation?
There's a ton of great resources out there, like books and materials, but I'd say one of the best ways to kickstart your career in sales compensation is to actually work within a commissions team. It gives you an invaluable firsthand experience of what the whole process is about.
Empathy is a big part of this. When people are unhappy with their compensation plans, it often translates into frustration with the company and can impact motivation and retention. So, spending time on the comp team helps you empathize with their perspective, understand their concerns, and communicate clearly.
Another thing to keep in mind is that not everything can be fixed or changed, so prioritize the most critical issues. Learning from your colleagues and sales leaders is key too. Don't be afraid to ask questions, challenge ideas, and take a holistic view of how compensation fits into the larger picture of the business. It's all about soaking up knowledge and making a positive impact.
