In the third Uncappd AMA, we chatted with Shane Tullis, Senior Manager of Global Variable Compensation at Showpad, on sales comp planning, quota setting best practices, handling change management, disputes, and strategies for payout and performance visibility!
Ranjuna Sajeevan [Uncappd]
Alright, let’s do this!Welcome to Uncappd AMA #3 everyone!
Today, we have Shane Tullis on the hot seat to tackle all your questions. Shane has over 14 years of experience in Sales Compensation, and is currently the Senior Manager of Global Variable Compensation at Showpad!Glad to have you join us for the AMA, Shane!
Shane Tullis: Excited to be here!
Siva Subramanian [Uncappd]: Welcome again, Shane. Looking forward to the session!
Shane Tullis: I'm ready to see if I can leverage any of my experience to help!
Ranjuna Sajeevan [Uncappd]:
Our topics for the day are:
- Best Practices for Sales Comp planning
- Setting quotas to drive the desired behaviors
- Addressing disputes in sales compensation
- Strategies for payout and performance visibility
- Handling Change Management in Sales Compensation
We’ve got some fantastic questions that were submitted beforehand, but folks, please jump in with your questions any time during the AMA!So, let’s get started!
Here’s the first question: What methods do you follow to assess whether the quotas you've set are effectively driving the behaviors and outcomes you want to see in your sales team?Okay. There is a lot to unpack here. I think that you need to delve in with some investigating questions to find out more…
For example...
How many rockstars are out there (110+% achievers)?
How many PIPs (60% or less achievers)?
Average achievement to quota by product, region, role type, etc?
Does the overall firm performance vs. financial commitment have alignment with the total commissions expense vs. budget?
Also, it should be noted that quotas don't necessarily drive behaviors and outcomes. Quotas (attainment to quotas) measure behaviors and outcomes. The Plan specifics will drive the behaviors and outcomes much more than the quotas. Now, if the quotas are unreasonable, then you will not have success.
Casteel Roth: How do you handle separation of duties from a sales compensation change management perspective? We are dealing with a very intense internal audit team and would like to know how other companies think about it.
I think that you need to slow down and make sure that your roles are well documented. I've faced some difficult audits in my time. Sometimes you don't have a good answer. But if you have any backup that is better than none. I've answered audits with emailing a .pdf copy of an email! So this may not be the best answer, but a lot depends on the number of Plans / complexity of Plans / how many sales groups / product groups / etc.
Jake Barwick: Regarding quota and reduction of headcount (not planned), how do you help Directors/Managers account for lost commissions due to low headcount? For example, our Directors get a rollup on their teams, but their headcount is less than what was planned for FY24 quotas. So they are below quota and earning less than plan. We don't want to adjust quotas because the company plan is still the same. Any solutions?
This is a good question. If you don't either adjust Directors' quotas or provide some other incentive to them, then you will lose them as well. When you have a reduction in headcount, there is a reason for that. Typically that will have a reduction in the firm's overall financial commitment. But if you have Reps that lose their role which is not their choice, and you don't adjust the quotas of the Directors (or provide some other retention / bonus), then you will lose the Directors by their own choice. The base/incentive split to sales Directors is high on incentive!
Yusuf El Hafy: Hi Shane! I have a question about renewals, There has been alot of instances where Renewals are being move quarters.
Scenario 1: A Q3 Renewal that is brought into Q2, does it make sense to adjust Q2 Renewal Quota to align to the deals closed?
Scenario 1: If Q2 Renewal is pushed to Q3 does it make sense to deduce Q2 Renewal quota and increase renewal in Q3?
Hi Yusuf El-Hafy! I'm very careful about moving quotas for individual quarters. This is a slippery slope if you ask me. I'm much more of a fan of annual quotas and perhaps quarterly accelerators. But as for Renewals moving from one quarter to another, why? This should be an exception. I would have tighter rules and more visibility as to why this is happening.
Jake Barwick: Any best practices on metrics for Sales/President's Club? If just one component, we measure quota attainment. For two components, we take the aggregate of the ARR for each component. For example, AM's have a 70/30 split of Renewal and Upsell, we take the sum of their sales....how do other companies do it?
Good question! I'm going to assume for the moment that you did an excellent job leading the team to develop the best Incentive Compensation Plans. If this is the case, for one group (Plan), then one method to measure this would be to put total earnings on the numerator and ICT (Incentive Compensation Target, or what the role is expected to make for the year in commissions at target) in the denominator.So that creates an "Earnings Score" that you can use to create a stack ranking for President's Club!
We’ve a question from Alex Wu: What’s the biggest challenge you have faced in a Sales Compensation setting and how did you overcome it?
Oh wow - let's go!
Wow, there have certainly been large challenges so far in my career - let me think about one. There was an instance that a certain interpretation of the rules (and calculations) was about $50,000 in terms of commissions different than my interpretation of the rules. I believe strongly that I was correct and I had the logic to back it up. However, as my investigation unfolded, I realized that I was on one side of the tracks and everyone else, including the VP of Sales, was on the other. I could have indeed escalated this to the next level, which would have been the CEO of the entire organization. But I realized exactly what would happen. Bridges would have been burnt and the effect would have been exactly the same. Sometimes perception is reality and you need to put on your executive hat and do what is right of the business, not just what is right in your own eyes. I approved the $50,000 with clear documentation about my objections. It was not an easy decision. Please note that this was an interpretation question, not a legal one. I would never break the law!
Yusuf El Hafy: What is the best way to help Sales Reps to understand their Sale Comp plan? I tried hosting Office hours that a few reps showed up to. However this becomes difficult as we are not able to discuss their specific comp since there might be other reps there? Is 1 on 1 Zoom meetings the best way?
One tool that you could use is to leverage the relationships between Managers and Employees. Managers should be almost experts on the Incentive Compensation Plans of themselves and their teams. In some instances it makes sense for a Manager to know the Plan of his/her higher level manager too. I’ve had years where I roll out and train on the new Plans myself, I’ve also had Managers do it and me be there just for questions. Always find out what will be best for the comprehension of each individual team - be flexible. In some instances I’ve created Incentive Compensation Calculators so that a Rep could put individual performance in and get out commissions. To go after your suggestion, 1x1 zoom meetings are nice sometimes, and it makes you seem more accessible. This also goes into my practice of getting feedback from Reps at the end of the year before doing your next years' Plans. And you can do surveys, indirectly or through Managers, about how comprehendible that the Plans are.
Here’s the next one from Alok: How does anyone know if sales Compensation is favourable for the company or not? What are the parameters which we need to dig into to find out effectiveness?
This is a great question. We in the incentive compensation space are quite busy, but it behooves us to look backwards sometimes. You can start at the top, and look at (A) what was our overall firm's sales compared to the financial commitment, and (B) what was our overall percentage payout based on budget for commissions. Then you can dive deeper by Rep group / product group / region, etc. I think that you also may need to look outside of your Org to make sure that your ICT (Incentive Compensation Targets) are in line with competitors.
What you never want is to have a misalignment. So, for example, your company beat its sales financial commitment, achieving 110%. But you had no or virtually no rockstars. Your total commissions vs. budget was 80%. So your company is doing great, but your Reps are not! You are going to lose your best rockstars quickly.
More on quotas: How do you manage quota expectations for employees returning from a leave of absence to help them reintegrate smoothly while maintaining overall team performance?
Unfortunately - this might be too custom to discuss here. This all depends on the territory / Plan / quota structure. Also, LOA is a very tricky subject that can differ by the type (medical, family leave, recreational, etc.) and the country. I would be very careful and let Legal help you work out what you can and should do. Sorry for not being more helpful here.
Next one… How do you ensure alignment with key stakeholders when implementing changes to sales compensation plans?
If you mean stakeholders in the sense of the team that you lead to develop new Plans, then this means understanding everyone’s goals in depth. For example, your CRO wants to hit the number. Your CFO wants to stay in budget. Marketing wants to make sure that the specific products get the right amount of emphasis. HR wants to make sure that you are treating people equally with equal opportunity to meet VCET (Variable Compensation Earnings Target). You get the pattern here…
If you mean the actual Plan Participants, that means actually interviewing them. This is very important to do anonymously - more about that in a moment. Ask them what they think works well with the Plan, does not work well with the Plan, etc. Then ask them if they could change just one thing, what would it be? Get some qualitative data, but also garner some metrics from it. “Half of the Account Executives thought that the accelerator for this past year was not motivating,” for example. Come with those thoughts and exact quotes to the development meetings that you host. But as I said, anonymity is paramount. I was once asked by an executive at the highest level “who said that?” I had to respond that to keep the integrity of the VOC intact that these quotes had to remain anonymous. It was stressful, but I held my ground.
What’s sales compensation without disputes :p Here’s the next question, Shane Tullis - What processes have you set up in your organization to minimize the commonly occurring commission disputes?
Okay, many of the commonly occurring commission disputes are in the sales crediting process, not the sales commissions process. So you need to have a good relationship with the Revenue Operations department of your Org too. I always have an exception process, which can do in deep, but I think that having a clear set of rules that is known by all (lean hard on the front line Managers - they need to be experts in the sales crediting) helps also.
Ranjuna Sajeevan [Uncappd]: And that’s a wrap for Uncappd AMA #3! Thank you Shane Tullis, for your time and answers, and thanks to everyone who participated!
Shane Tullis: Thanks all!
