Why Do I Have To Pay 10 People For 1 Sale?

Have you been asked this question before? or maybe its a question you have?  As most sales comp practitioners know, the amount of people that is paid on a deal is based on a company's roles, sales compensation plans and quotas.  If there are unnecessary roles in the sales process then the amount of payments per deal will be inflated.  So, if this is your question, the first item to look into are the roles in the sales process.  How many, and what type of, roles do we need to a complete a sale?  Out of those roles, who is eligible for a sales incentive plan?  Roles that should not be on a sales compensation plan should be transitioned over to a corporate bonus plan, or structure.  Once the roles are determined, the number of individuals in each role depends on the volume of transactions and quota allocation (which factors in capacity).

For simplicity’s sake, let’s assume a company has 3 roles in the sales process - a sales development rep (SDR), a sales representative (sales rep) and a solutions engineer.  The SDR has their own quota, the sales rep has their own quota, but due to the company stage, the solutions engineer has a global quota (equal to the sum of all the sales reps quotas).  Global quotas are not ideal, because it implies every solutions engineer took part in every sale.  However, some companies use global quotas in the earlier stages of their company because of limited headcount, or because they want the ability to assign the solutions engineer to various sales reps.   In regards to payment for this type of structure, for 1 sale - 1 SDR will get paid, 1 sales rep will get paid and all of the solutions engineers (because their quota is built upon all sales).  If we have 8 solutions engineers then a total of 10 people will get paid on the same deal (1 SDR + 1 sales rep + 8 solutions engineers).  With this type of plan structure, you also want to look at the ROI.  With 10 people receiving incentive payments what is your return?  Evaluate your sales process and sales organization to make sure you can reach corporate objectives with the team you have, and the ROI is satisfactory.  Although some companies will start with global quotas, as processes improve its always best to align pay to performance in compensation plans; giving the person the ability and control over their variable compensation.  One of the risks with a global quota is that some employees will be carrying others.

Now, if the company is in the stage where they can assign 1 solutions engineer to 1 sales rep, then only 3 people will get paid on the same deal (1 SDR + 1 sales rep + 1 solutions engineer).  Because the sales process will be designed that way and quotas & comp plans setup accordingly.  Of course, this is heavily dependent on other items as well (e.g., operations, headcount, comp administration etc.).  As an example, if your CRM is not able to track this level of detail then its best to not create this type of plan until you have proper headcount and processes in place.  Another option is to go from global to regional quotas.  The key is to build sales comp plans for where you are as an organization now, with an eye on the future goals of the company.  Start setting up processes now in order to build the incentive comp plans you desire in the following years.

Perhaps you are in a stage where you have to pay 10 people on the same deal.  This should not cause over-payment if you design the plans to be based off of the target variable and setup quotas accordingly.  That is, if 10 people are getting paid on the same deal, then that deal should be built into their quotas.  If it is built into their quotas, then the payment for that deal is just the variable portion that is earned once the sale is completed.  Most sales team members have a fixed pay (salary) and target variable pay, the target variable is earned as sales are completed and quota is credited.  So that at 100% achievement of quota, the company will be paying them what they planned to pay them, their OTE (On Target Earnings).

In the end, you want sales compensation plans to center around the responsibilities for each role, and the part they play in the sales process.  The number of people you pay for 1 deal depends on your sales process, sales comp plans and quotas.  If you are concerned about the count of people who receive payment, then take a deeper look into your sales strategy, sales process, sales organization and comp plan eligibility.  This will help you determine if the number of payments makes sense, because the compensation plans are typically built off of these preceding items. 

To keep track of revenue as it relates to sales compensation expense, a good metric to use is CCOS.  You can find out more about CCOS in our course here, which teaches you how to design and project the cost of your sales incentive plans.  Also included in the teaching is how to determine who should be on a sales compensation plan, i.e., sales compensation plan eligibility.