Design a Sales Comp Plan to Get You to $100M | Work-Bench, Movable Ink, MongoDB, and Concert Finance

All right.

All right, everyone. Thank you so much for joining us today for our panel on how to design a sales comp plan to get you to $100 million. My name is Jessica Lin. I'm a co-founder and general partner at Workbench. We are an enterprise VC fund in New York City. We invest in enterprise startups throughout the country. And you know, we live and breathe enterprise tech by how much we nerd out on sales comp with all of our enterprise portfolio companies. So I like to say that if sales is like a train, then sales compensation is the driver. As each of you have likely personally experienced, whether you're a founder on sales, with each compensation lever you pull, there are inevitably behaviors on the sales team that get pushed, that make you either an Amtrak or a bullet train. So that's what makes sales comp, I think, so fun. It's more art than science. There's no one right answer unless you're Jason M. Lemkin. And that's also why we're gonna talk through the 4 different stages of sales today. So all the way from founder-led sales to growth stage sales, the different road signs you should be looking out for, and also the tracks that you need to lay for your growing sales team. And our goal is that there will be at least one new tactic you can take back and try with your teams tomorrow. So please join me in welcoming our terrific panel of sales comp gurus. First up, we have Sanj Sanampudi, who has worked with a number of SaaS companies in New York City as a CFO and is now CEO of Concert Finance, a sales commission platform. In addition to sales comp, Sanj's go-to superpower is a mean rendition, a karaoke rendition of Since You've Been Gone. Next up, we have Michaela Lair, Senior Director of Finance at Movable Ink, a digital marketing platform, and also a veteran of top enterprise startups in New York City. If Michaela were not a sales comp whiz, she'd be crushing the Great British Bake Off with her cinnamon squares. And last but not least, Megan Gill, VP VP of Sales Ops at MongoDB, a public database company in New York City, where she used to run marketing, run marathons, and now runs around chasing after her 1-year-old daughter. So with that, I'd love to jump into our 4 stages of enterprise sales. All right. So first up, founder-led sales. I'm sure many of you in the room have survived this stage. Often known as the lone wolf salesperson, This is generally the first $0 to $1 million in ARR with the founder trying to find product market fit and getting those very first customers. So I've asked each of our panelists, what is the number one driver in sales compensation that they think is most important at this stage? So let's have our panelists flip their cards now. Drum roll. All right. We got that. Why don't we actually go down the line? We'll have each of the panelists read their card out loud and then just share some of what they've seen in their experiences, either work or not work.

Great. I'll start because I'm living this right now. And we're, we're paying on total contract value. Originally, we started thinking about our sales in terms of logo acquisition because We're looking for referenceable customers, right? Like, you're doing something that is brand new, so you want a lot of people on board. We switched to TCV because of the cobra effect. So for those of you who haven't heard this story, when the British were in Delhi, there was a huge problem with cobras in the city. So they paid a bounty for every cobra that was killed. And what happened was people started raising cobras and having cobra farms, making tons of money killing cobras. But once that was discovered, the bounty ended and people released the cobras into the city. So there were more cobras to begin with than what you wanted. And what I found as I was interviewing for the head of sales was was really that that logo acquisition was essentially building cobra farms. So all these customers who might not have been a great fit, instead of doing what I want this head of sales to do, which is really build me a map, show me where the opportunity is for what we do today and what we need to build to capture in the future.

I see lots of nodding heads, probably the cobras of new logos. So, Michela.

So mine says to learn ballpark contract value and figure out the pricing that the market can bear. And I think that we would probably all agree that there is no one more motivated than the founder in the founder-led sales stage to get sales, cross the line. And when it comes to comp design, there's really no big comp design to be had if the founder is the one closing the deals. But what you're trying to learn at this point is not just what your go-to-market fit is and working very closely with your product team on that, but also what is my go-to-market motion? What does that look like? What are my sales cycles? And what is my ACV? Just like I say on my big index card.

Great. Megan.

My commentary is pretty similar to what Michaela is saying, which is at the early, very early stages, you're really not trying to optimize a whole lot. You're just trying to see, survive and live to fight another battle. So I'm sure many of you read the essay that Paul Graham wrote called "Do Things That Don't Scale." So this is a stage where you're doing completely unrepeatable types of things to acquire those early customers. And the purpose is you need to understand, you know, what are the sales cycle lengths, what are the ASPs, what are the right use cases to target, what's the right messaging. So it's really not a phase where you're trying to optimize sales comp. You're trying to find product market fit.

Right.

And I think that you're taking those learnings so that when you do cross that $1 million ARR threshold and you hire a sales team, you can take those learnings and give them to your team so that they can go forth and do it.

Yeah.

And I, I, I sort of building on that, then the one thing I would say you make sure to do at this stage is to be collecting as much data as you can.

Mm-hmm.

Because that will feed into the next stage.

Yep.

Yeah.

And I would add at this stage, stage, don't feel bad if you're a founder that needs to hire a salesperson. I'm a CFO. Literally no one likes talking to me. To do that outbound motion doesn't come really naturally. But I learn a lot more about my view of the product versus maybe a sales head's view of the product through this head of sales.

All right. So at this stage, founder-led, keeping it pretty simple. We're going to start adding some fun things with each stage. So next up. An early sales team. So, uh, this is quickly gonna devolve into an Animal Planet panel because we have swans. So, um, this is really when the lone wolf adds a few folks to their herd, right? So we see a few million in ARR now. Things are cranking, landing those customers, but at this stage there's still repeatability in a sales playbook to really nail down. So what is the number one driver for sales costs? Comp with an early sales team that folks need to be aware of. We've got our cards. All right, Sanj. Sanj, we still have TCV from you.

Yeah, I'm still on total contract value. It's really because that's still kind of where you're at. You haven't really figured out all the right go-to-market channels. What you find at this time is that maybe this TCV needs to be a little bit more nuanced. I think of it in terms of the times when I've seen in companies people forget that you need to renew your customers. Like, you need to start paying a team on renewals and focusing them on that sales motion, which is different than a new business sales motion, which you might have to start segmenting by territory. However you just decide that makes sense for your company.

Yeah, and actually I'm gonna skip to you, Megan, 'cause you also mentioned TCV.

Yeah, I mean, I totally agree. At this stage, you really wanna keep it simple. And if you wanna be able to hire salespeople, you don't, this is not the time to have a comp plan that requires a PhD to understand. At the early stage of MongoDB, this is how we paid. And a lot of the early stage startups that I talk to and advise just pay on the total contract value. And again, still gathering that data and that information to figure out what are the data points that you can use to start building a more sort of nuanced comp plan.

And so are there downsides to TCV? Right. We, we chatted a little bit. I mean, how do you keep sales reps around? I know that's something that we hear sometimes often.

Well, I mean, you touched on it. This is a stage where you might actually start having some renewal opportunities that need to get closed. And if you have a team of, of hunters, that might not be the sales motion that they're, they're used to. Um, and if you're paying on total contract value, that can also have, uh, a negative effect of having reps wanna close large multi-year deals. And those are good in some way if you're, if you're acquiring new customers and you're locking them in for many years. But that means as your product is very quickly evolving, you may not be able to capture price increases, um, you know, new, uh, features and functionality that you're adding. Because, you know, many upsells are gonna happen on renewal. So then you have to start thinking about, you know, what are the negative impacts of paying just on a very simple sort of TCV-based plan?

One of the things that I would also think about there is, and this is, you know, coming from my finance hat, but if you are collecting the entirety of the TCV upfront, then I think that paying on TCV makes a lot of sense. The thing that makes me a tiny bit nervous is if you have a 2-year contract, and after the first year, the contract gets terminated or churns out, and they want to get out of their contract for whatever reason, and then your deal economics kind of suffer a little bit. So that would just be the one thought that I would put in from the finance side.

Awesome. And how about you? We have new acronyms. Sure.

So, yeah.

ICR.

So I agree with Megan. It definitely needs to be very straightforward. The straightforward individual commission rate without any built-in incentives. The quota should be determined top-down by the founder. Best guess that can be iterated upon in case it's grossly wrong. And that simple comp design needs to be married with a very simple understanding of what it is that you are actually incentivizing and paying on. My CFO, John Herman, likes to say that Good comp design is like being a porpoise. And for those who don't know, because I didn't, a porpoise is basically a dolphin with a smaller mouth, something like that. But anyways, you need to go— we have a lot of animals. You need to go high, which is the porpoise can swim on top of the water, dive deep, get into the weeds, and then come back up and swim on top of the water again. In the same way with comp design, you need to understand high level, what am I incentivizing? What am I trying to optimize my reps toward for the next year? Get into the weeds, define that metric. What is my operational rollout gonna look like? And then get back up and say, what are the deal economics and unit economics of, of this comp design that I'm putting together? So to apply that to a specific story, in a company that I knew in a prior life, the reps were given the directive to maximize the MRR of their deals. And one specific deal was sold for 12 months for $120K, had an early renewal for $150K. When accounting came in to calculate the MRR of the new deal and the commission amount of the new deal, they decided to define it according to GAAP revenue standards, pre-ASC 606. And if anyone wants to know the nuances of this, I'll be getting beers later. We can talk about all the accounting stuff. But basically what accounting came back with is that that deal was a downsell. And the sales rep is sitting there like, I just went from $120,000 to $150,000. 12-month contracts, this doesn't make any sense. And so that required leadership coming in and saying, what exactly am I looking to incentivize here? And as they thought about it more and more, what they realized was that 120 to 150 annual contracts is a good thing. And what they're incentivizing is ARR. And so the ARR had to be defined so that 120 with an early renewal to 150 is always an upsell. So that marriage between going high and going low and then going back high again was the thing that really brought the comp design together.

At this stage, this is where you're looking for all of these kinds of gotchas, like what are the outliers or what are the strange things, strange behaviors you're encouraging or discouraging with the comp plan that you have.

And totally, I think related to that is just kind of how you're paying out your reps. When I was hiring my team to run comp plans, I would always tell them a quote that Tyra Banks said, "Don't mess with a girl's pay." And so true.

So true.

So inspirational in so many ways. But what that really meant to us was that, that we were going to change our reps' payout from billing to booking. And the reason we did that was because we were finding that our reps were chronically underachieving their quota. So most of our reps weren't hitting their quota, even though it was like pretty straightforward number to hit. We found out that they were actually spending more cycles collecting payments from customers, trying to figure out, uh, new billing schedules with customers that the customers would actually sign up for so they maximize their own earnings. We wanted to focus them on successfully completing their sales motion. Anything around collections, anything around having customers apply on time is really a company and process problem that needs to be solved. Pushing that on your rep is, is kind of bad practice. And really my only advice at this stage is pay your reps faster. If you think paying on collection is the best you can do, push yourself to pay on billing. If billing's what you can do, push yourself to booking. It will pay off. They will focus on the right behavior.

At this stage, I do agree. I think later on when you get more nuanced, because you can negotiate your payment terms in the contracts, and this is for, for a later stage, paying the rep when you expect to get paid, which will in a sense disincentivize like net 90 payment terms, is something that is helpful. But I totally agree in this particular stage, keep it simple.

I would add also, at this stage, it's okay to vastly overpay your sales reps because one of the most challenging skill sets to hire for is enterprise sales. So if you have reps that are making a lot of money, that is the best possible recruiting that you can do. So why would you prevent— you know, go ahead and overpay a little bit. It's gonna pay off in the long term in terms of enabling you to build sales capacity.

Cool. Fantastic. So should we move on to our third stage? Again, this is where we're starting to layer things. I think these are, again, the things that folks might not have seen yet or are just trying to think about. So at this point, we're at our third stage, a sales team that's scaling $10 to $50 million in ARR. This is really exciting. You've got a sales engine that's humming. A herd of ducks out hunting. And at this point you've got pretty discrete roles, right? You've got your SDRs, your AEs, your CSMs. What are the comp levers that folks can start experimenting with to continue scaling and to systematically drive growth? So we've got more cards. Cards, cards up. Vasanth.

He's nothing if not consistent.

Yes, exactly. Let's all talk through these, because I think this is where we can get into some of the really interesting nitty-gritty stuff that, again, gets a little bit more complex and drives behaviors that you might not expect. Vasanth, kick us off.

Sure. I am all for keeping it simple and consistent. What you're going to find is territory design matters a lot more now than the metric itself, per se. So I think keeping a simple TCV metric makes sense, but you have to be really smart about how you're designing your territory. Everything that you've done to this point breaks. In tens of $50 million, it actually breaks like 2 or 3 times, in my experience. The things you're adding are—

The company or the comp plan?

Like the comp plan and the—

Yeah. Yeah, agreed. Hopefully not the company.

You're adding more go-to-market strategies and you're focusing people around those. You're adding territories, you're adding currencies. Every single thing that you did to start paying people will no longer work because you're trying to pay 50 people on time every month. And that's really hard.

Mm-hmm.

Well, so tell us a little bit more about territories, because I think this is the first time we're hearing about it. What works well with territories? What are some red flags when you're actually building out this plan?

Well, I, I think at this stage, you know, I, I had a slightly different take from Sanj, which is this is the point where you might start segmenting your sales force, where you might have a team that's focused on new business that's gonna be comped differently than a team like a customer success or an account management team that's trying to retain and maybe upsell existing customers. Um, so that, that's gonna be sort of an inherent decision about, um, uh, how you assign your accounts. Um, you may also need to start thinking about who owns the renewals. Is that a dedicated team? Do you have a chance? Again, this is why collecting data is so important. If you're upselling consistently on renewals, you probably want a rep assigned to those accounts and maybe you don't want an account manager. If you're, you know, one and done, it's probably good to transition that off of the rep's plate and give it to a dedicated team. So these are all the things you need to start thinking about and, you know, thinking about which are the different elements that you would be paying, different types of salespeople on.

What are some pain points that you've seen, again, for folks in the audience once they start doing these optimizations and transitions? Are there things that you've seen that you can advise folks to either avoid or lean in on, Megan?

Well, I would definitely go to your, um, most— I'm trying to think of a nice way to put it. Go to some of the sales reps that you know game the system, and when you show them the comp plan, you need to ask them, how would you make a lot of money on this comp plan and figure out what the holes are and what are the things that they're, what are the weird behaviors that you're encouraging with your comp plan? Because that's what they're gonna target. I mean, they, reps will spend time reading terms and conditions finding a place that they can, you know, make a lot of money and that may be an unintended consequence.

[Speaker] And do you, how much time do you give your plan to really test before you change the, change the plan to address the weird behaviors?

[Speaker] I mean, we issue annual plans and we typically spend, so our fiscal year just started, so I'm in the thick of it right now, but we probably spend a good quarter just going through and iterating on these are the behaviors that we wanna drive this year versus last year. These are the types of incentives that we wanna include in the comp plan, and then you show it to one group of people and they say, well, this is what I would do and this is the behavior I would be worried about, and then you show it to the next group first group of people and you just keep iterating on it. So I would give yourself at least a quarter to do it.

Yeah, I mean, I, I, I totally agree. And one of the things that I think about is as you get to this stage and you have a nuanced view of what you want to accomplish as a company for the next 12 months, you want to layer those incentives into your plans. But I totally agree with you, Megan. You need to think about if I incentivize one side of the machine, what happens to the other side?

Mm-hmm.

And how do I keep those pieces balanced? And one of the, if I can kind of expound on that, uh, Jas, one of the companies that I've, I've seen do that really well and, you know, not just because I work there is, is Movable Ink where the sales machine is a really finely tuned machine. And that's largely because the leadership and the VP of sales have a very clear and crisp directive that they give to their team on this is what we are looking to optimize. In this next year. And the sales comp is just a numerical expression of that. And to give an example of an incentive that I thought worked particularly well, as a lot of SaaS companies do, as Movable brought new products to market over the course of the years, some of the incentives that they brought on were related to bringing those new products in and to having that initial traction. And one of the organic motions that a lot of the sales reps what they did was that they would then cross-sell those products into the existing base, which is great because that means that they have a good relationship with the customers and the customers want to buy more of our product. But what we also thought about as we did that was, what does that do to the net new machine? And how do we make sure that that keeps humming? Because that is the lifeblood of the company next year and the year after and the future upsell opportunities. So as we created these incentives, to Megan's point, you need to control for, well, what does it do if I pull this one lever? What happens to the other side of my comp plan? And one of the people who actually talked about this, unbeknownst to her, and who did a really great job at it, was Alanis Morissette, who was talking about the balance of upsell and net new. And she said, if you have too much one, it's like 10,000 spoons when all you need is a knife. You need the full culinary set to eat your meal. And you need both upsell and net new for your business, and you need to think about the levers you're pulling and what the flip side of the coin is.

Double-click on your specific example, Michaela. What did Michaela— what did Movable Ink do at that point to correct for that behavior?

Yeah, so one of the things that we thought about was how do we layer in multiple incentives and at what level to ensure that it makes sense to still You know, bring the new product to market, cross-sell that into your base. That's great for our net negative churn. But then we also have an incentive on ensuring that the net new machine keeps purring. And it's an arithmetic exercise with some assumptions, right? So you have to come to a number that you think makes sense in both those categories.

I would also add that if you're at a fast-growing company, you're constantly releasing new products, always try to keep some money in your back pocket for SPFs for new products because it can take a long time for the sales reps to learn the sort of muscle memory of cross-selling or talking about new products. And SPFs are a really effective way, effective way to do that. And you have to have some reserves so that you can incentivize that behavior. And I would say it's just sort of building on that, you know, typically you start with the carrot. Here's a SPF, sell the new product. Over time you might decide you need something more like a stick. Stick, like whether it's a gate or a product-specific quota, in order to make sure that they're selling it.

Well, I think we could just even talk about SPFs for just a minute here, right? So again, another acronym. Just break it down for folks who might not have introduced them yet to their teams.

Sure. I mean, it's a SPF, very basically, is a bonus on, you know, a kicker or an extra incentive on a certain behavior that you're trying to drive. So a simplest— the simplest one might be You know, you're selling a new product, you get an extra point or two or whatever it is for selling it, or you get a certain dollar threshold, like a dollar amount bonus for bringing in a new logo because you're trying to drive new logos. So maybe in the case Michaela gave, if you happen to over-optimize your plan for cross-sell and upsell and you're like, crap, we have a new logo acquisition problem, that's a great time to introduce a new logo spiff and, you know, basically pay the reps to try to get new customers in the door.

Right. And you're trying to anticipate the two sides of the behaviors as well. Yeah. Right. And that's one of the ways to solve for it. And I would also focus on deal and unit economics. And sorry, I just keep bringing that same finance hat on, but just make sure that that stays in line as you bring those FIS to market to ensure that it's a sustainable solution.

And I would just add here, this is where you're seeing people added a lot of different levers. And that means people are going to start building cobra farms. That's really when this is going to happen. But the flip side of that is just as dangerous. So Forrester wrote a study recently that estimates 40% of commissionable people don't actually understand their comp plan.

Yeah.

So you might have the opposite of the cobra farm, which is like inaction because they don't actually get what all of these levers mean. So this is like a great opportunity to like really explain, this is a company goal, this is what we're trying to incentivize you to do.

And the other thing to consider is like, you might decide, okay, I'm rolling out a whatever, a new logo spiff or something along those lines. You have to think about, am I gonna get incremental deals from this? Because if you're just gonna be paying people for something they're doing anyway, then you're just throwing money out the door. So you really have to pair whatever, you know, spiffs or incentives you have with sales enablement and with other initiatives to really get them to change their behavior. So I think that aligns to what Sandra's saying, and it's not just about the, the commissions, it's also about setting the vision for what the company's trying to achieve.

Yeah, agreed.

And that's why, Michaela, I'd love to dig in just a little bit on your card, because I think there's different, there's different things that you can be creative with, right? So you've got new products, you've got multi-year contracts, you have specific industries and verticals. Yeah, to your point, I mean, how many should you layer on before it gets so confusing? Should you be testing a few at a time, see how they work?

Yeah, so the way that I would think about it, and one of the first things that I made sure to say is that there has to be a clear and crisp vision of what exactly you're incentivizing for the next 12 months. And so if that means that you're creating 18 different levers, I mean, that's not a clear and crisp mandate. So first I would practice saying in front of the bathroom mirror, and if it takes you more than 15 seconds to say what you are optimizing for, you've got too many levers.

And keep in mind that when you're designing the plan, it's like, it's always easy for me to understand the plan because I've been living in the spreadsheet. You gotta go test it with like real, you know, salespeople to make sure that they're not like, whoa, I don't know if, if they can't repeat it back to you, then you gotta go back to the drawing board.

And I think that your, your sales reps respond well to logic, right? So just level with them as human beings because, you know, believe it or not, they are. And the things that you're trying to optimize for should make sense to them. Intrinsically. Everyone wants the company to be successful. So being able to communicate with them on that human level, I find, really helps a lot.

Cool. Any other red flags or war stories at this stage?

I would say mine is really focus the process on paying them correctly and on time. This is really when kind of the opposite of what Megan was saying at the last stage of of, you know, overpaying people to improve your recruiting. If you're missing payroll cycles, if you're paying inaccurately, you're really going to lose a lot of credibility with your team.

Yeah.

And, and you also mentioned that, um, this can create weird behaviors, right? If you're paying on bookings versus billings, if you start paying your reps incorrectly, they're gonna spend a lot of time poring over their paycheck, and that's time that they're not on the phones.

Selling.

Right.

One of the worst stories that I guess I have in a company that I knew in a past life, again, was the company brought out a new product. And they really wanted to get that initial traction. And they told the reps, go sell this product. It could be for $0. And we're going to pay you a flat amount per sale. And so one of the sales reps had a large mid-market base that doesn't have the same gating structure as some the enterprise companies do in procurement. And she just went and just sold a ton of that free product, got them to sign the paperwork, made a huge paycheck. The implementation wasn't there. The actual follow-up wasn't there. And the company didn't get that thing that they were hoping for, which was feedback on the product. So it has to be— you have to be very thoughtful about the way that you design the comp and the way that you pay your sales reps to ensure that you don't create those bad behaviors.

Yeah. Well, terrific. Well, we are at our last stage. Our growth sales team. This is last but not least, this pride. I'm mixing up my animal terms. $50 to $100 million in ARR. Again, a fleet of salespeople, very specialized in their roles. So not only the SDRs, the AEs, the solution architects, but you've got pre-sales, post-sales. What comp levers do folks need to focus on here to continue turbocharging their sales growth?

No one's going to guess this.

Surprise!

This is where it's fun. We've got a lot of other variables and layers to add in here. So yeah, Sanj, take us home.

So my choice of TCV at this level is really about alignment. In one of my previous roles, we had paid reps on 12 to 15 different metrics. So no one in the company could actually say, are we having a good year or a bad year? Because it depended on what you did. That reconciliation became fondly referred to in our executive team meetings and board meetings as the slide of shame. The kind of one artifact that showed that as a company, we actually weren't aligned. So the choice of TCV is not like you're paying everyone on every single deal that closes, but it's actually you're paying on the same metric and you're carving out your territories in kind of a more kind of credible go-to-market driven way. I think related to this, another thing to acknowledge at this stage is you're actually, $50 to $100 million, you're running a couple of different businesses that are at different stages. So one business might be really mature, but you might have new regions or new products that actually look more like the founder-led or the early-stage sales. So you're running a few different organizations, and you need to figure out how can you make all of them speak the same language. Same language.

Yeah, we'll go down. Now we have sweeteners, now we've got incentives.

And Michaela, tiered accelerators and flavors of acceleration. So at this point, you are— your sales org is pretty well built out, and what you'll probably have is something assembling, resembling a normal distribution of your sales reps. So you have your winners on one tail, the people you need to manage out on on the other tail. The, you know, unwashed mass is in the middle. And what you really want to do is you want to double down on your winners. And you want them to be really successful, not only to motivate them and the rest of the sales team, but also it's a great recruiting story. And so one company I thought did this really cleverly. And what they did was they had quarterly and annual accelerators that were tiered. So they had a specific acceleration between 100 and 110, 110 to 125, et cetera. And what they also did that I thought was even more clever was that it wasn't just about getting to your quota and then getting beyond, but also then they had a different flavor of acceleration that depended on how you got to your quota and beyond. And so one of the things that they did was they then had different acceleration numbers if you got to your quota with a specific product mix, right? So if you had a sweet product mix, then, then you were getting slightly bigger kickers in each level. and then yet a better one was product mix and mix of industries. And then you got even better kickers at each level. And what this got down to was the company was advanced enough that it understood where it got the best LTV to CAC.

Yep.

And which deals are the optimal sales motion. And what this created was not only telling people that I want you to get to your quota and beyond, but I care how you get there. But then it also created a conversation within the company around what does an ideal sale look like and why.

Yeah.

And why are these industries better than others? And so I thought that that was a really clever way to package up this, this doubling down on your winning reps. Yeah.

And all the data that they must have been able to collect.

Yeah.

So valuable.

Yeah. And getting that LTV to CAC by industry and truly understanding what my use case is in those industries that it solves and why some are stickier than others is also a great feedback cycle for your product. So there's, there's a lot of, I thought, a lot of really clever conversations that came out of, uh, a thoughtful comp design.

Well, Megan, uh, I think my answer's similar to, uh, Michaela in that like, this is the point where you probably have a lot more data about your customers and about which customers are growing, which customers are churning, um, you know, which, which, um, what, what kind of, uh, behavior you're encouraging among your reps. Um, so you might think about, uh, kicking off anchors. So we talked about SPIFs. You might think about gates, which are more of a sort of stick versus a carrot. Um, so as an example, you know, we find that, um, our customers that buy services, they grow much faster. So we have a gate around services. You can't just sell software, you have to sell the services with it. So our customers are going to have success. Um, and that's kind of related to the story you gave where you, the, the, the rep sold a bunch of deals, a bunch of, um, product into a customer and the customer never got off the ground. So you have to— once you start to understand your customer behavior and your rep behavior, you can start adding those kinds of incentives into the plan.

And do you find that your sales reps like these gates and kickers?

Well, they like kickers. They don't like gates.

Yeah.

But I mean, I do think you have to think about how much carrot versus stick you have in your plan. You might have, you might have some stick, but you have to balance that with, with things that are gonna get them really excited, with things like, you know, carrots or some kind of incentive.

Yeah, well, one of the things you and I discussed was just decelerators, right? So maybe we can talk a little bit about that concept here of how you guys have potentially included those in some of the companies you've seen in the past.

Yeah, we talked a little bit that, you know, it may not only be about the incentives for the behavior you want, you may want to build in disincentives for behaviors you don't want. So for example, at the very beginning, Sanj talked about the Cobra story. So if you know you're acquiring a certain kind of customer that is not a good customer, that's going to churn, and you understand that, you can consider putting a decelerator into the rep's plans to disincentivize them from doing those kinds of deals. Um, another way to do it is, you know, we, we had a more sort of junior team and we wanted them to focus on our, our cloud products. So we said, you can sell our on-prem product, but you have to do a split with a more senior rep. Guess what? They stopped doing deals with on-prem, with on-prem product. It got them to focus on, um, the product that was a better sort of match for their skillset. So there are ways that you can, um, um, build in those kinds of, um, uh, uh, ways to focus the reps, uh, into the comp plan.

I would say, I think decelerators tend tend to be something that's trying to control behavior, and comp design shouldn't really control a behavior. It should drive outcomes. And I would say in that regard, if you have reps that aren't selling the right types of customers, the right types of deals, I kind of turn it back to the sales managers and say, manage the personnel. Create different performance metrics, but don't manage this with with their paycheck.

Right.

Yeah, that's, I mean, that's a really good point because comp design is not a substitution for good management. If you have a rep who is performing well, say, but is not displaying the right behaviors, then that's a management problem, not a comp problem. And you need to address it as such.

I, yeah, I agree. I mean, I think these are all things you can explore, but at the end of the day, like, you know, the, You can expect what you inspect. So if your managers are truly managing, especially your frontline managers are truly managing the deals and understand what the reps are doing, that should control a lot of the behavior. But certainly the comp is gonna drive the behavior.

Right, I mean, that's definitely a stronger stick.

Yeah.

That's a stronger statement there.

You have to have both, right?

Yeah. Yeah.

And the managers have their own comp plans, so. You have to derive the manager comp plans from the rep comp plans. So they're gonna be motivated for the same things that the reps are motivated towards.

Yeah, actually to that point, that's a good point. I think at this stage you also want to get slightly more nuanced in your sales team lead comp plans so that they're not, you know, before this you wanna keep them relatively straightforward. And I think you, or, you know, at least what I've seen in the past is that you get creative with the rep plans before you get creative with the sales team plans. Sales team lead plans, but then at this stage you want to align them at least on the things that are the most important. And so you start to get more creative with the sales team lead plans as well.

Great. Any final words of advice for our sales comp designers out in the audience?

Ooh.

This is our final words of wisdom?

I think this is it.

Ultimate words of wisdom.

I think I'm— No pressure. I guess my final words of wisdom are, you know, always test your comp plan with real reps that are going to be honest. Yeah. Well, get the honest feedback and make sure that you don't need a PhD to understand the comp plan.

Yeah, I would say be very clear on your metrics and what you are incentivizing on. Think through, you know, as Megan said, kind game theory your own plan. Try to understand what levers you're pulling and what things you may be uncovering by doing that. And like I said before, and I will double down on this, understand your metrics. Look at them, stare at them, define them clearly. Make sure the organization is educated on them because these are the things that are going to drive success for the business going down a year, 2 years, 3 years.

Yeah, all of that. I would add— TCD. I would add— One point on make sure it fits your culture. So the company that you individually are a part of has its own culture and you can't have a comp plan that is at odds with that. And then the next thing is follow Tyra's wisdom. Remember that this is some girl's pay and don't mess with it. Pay them quickly. Pay them faster than you think you should.

Awesome. Well, with that, we end our sales comp and planet Earth game show. And so, yeah, remember to pay your elephant herd and pay them well. Can I get a huge round of applause for our amazing panelists? Thank you so much.