Dan Goodman explains why simple comp plans work better. Keep base salaries standard by level, let reps choose between three tiers of base-to-commission splits, and automate payouts so reps aren't surprised when they check their earnings right after closing a deal.
I understand you are a top performer at another company. That's great. And if you're a top performer here, that's great. But that doesn't carry weight here in terms of pay, where you're like, look, you know this, and you can do it, and you're allowed one switch a year.
That just is minutia, and it just causes more complexity and it makes it more difficult to track. You know.
It'S funny because, you know, people ask me about this in reps that are interviewing, right? They're like, oh, well, you know, I have more experience. And my response bounce back always, always is, how much experience do you have with me? Right. I understand you are a top performer at another company. That's great. And if you're a top performer here, that's great. But that doesn't carry weight here in terms of pay. Your base is the same as the person next to you. And if you are a top performer, you're variable will adjust for it. It's that simple. I'll negotiate on variable. I do not negotiate on bases with my teams. These are the levels you come in. Yeah, you're getting paid somewhat. You have eight years, they have three years. You're being paid the same. The expectation is you're better. So you're going to make it up on the variable side. I'll negotiate on the variable. Comp bases are what they are.
One thing I like to see sometimes, and I've seen it in different organizations, I'd like to see two different plans and let the rep choose, offer a higher base salary with less commission upside and offer a lower base salary with more commission upside. So if you want to bet on yourself, then you have the opportunity to really, you know, make a lot of money.
And now you're speaking my language. I've been talking about this for years. My dream scenario is three comp plans. Three comp plans, 80% base with a lower overall OTE, the classic 50, 50 or 60, 40 split, and then a, you know, 20, 80 split where you're like, look, you know this, and you can do it. And you're allowed one switch a year, meaning you picked the heavy base. But you're like, halfway through the year, you're like, dude, like, I'm killing it. Like, I want to switch. Love it. Switch. Bet on yourself. Go for it. Right? Because people are motivated different ways. And I. I firmly believe having those as options is so important. So, so important to do so. No, I love that, man. Absolutely.
Based on different levels of experience, your own personal situation, you Know how many bills you have, family, so on and so forth. One scen you might be much better for the other. And why not provide that rep that flexibility? You know, you might have solutions like we have with a true commission, for example. I mean you can build out, you know, as many comp plans as you want. You can provide them to the to reps at various levels of seniority and the whole thing will be automated so you don't need to deal with sort of juggling all these multiple things happening simultaneously.
Yeah, so then let's keep going down this path. Right, so the first overall theme. Right. Is ease. Simple. So like short and punchy. How many elements do you believe should be in a comp plan? Like how many things should reps be paid out on to keep it simple? Because like you say simple and easy and someone in finance goes oh yeah, there's only 10 things. That's super simple. How many variables do you like to see in a comp plan?
Yeah, I mean it's not so much the variables obviously the fewer the better and the more simplistic it will be. But as long as you have the reporting and it's easy to understand and access and the calculations are at the forefront or easy to back up, then I'm okay with somewhat complicated complaints to drive certain behaviors and incent reps in a certain way. Obviously the fewer the better. I mean 10 is sort of unrealistic. It really depends, you know, how many different products are you selling? You know, I mean if you're working for a value added reseller and you're selling a dozen different manufacturer products in different categories, then maybe the company wants to incent you in a certain way to drive certain behaviors based on the financial situation with those vendors. So there are some instances where it makes sense. But you know, if you're copying reps based on whether the company that you're selling to is publicly traded or the number of employees it has or or other, you know, crazy one off things that just don't have, that doesn't have anything to do with the sale itself. That just is is minutia and it just causes more complexity and it makes it more difficult to track.
You know, it's so true because it is like, and people do this or I guess seem to forget that one of the first things reps do after closing a deal is look at their comp plan. If they have it, if they can access it, it's like how much that is make on this deal. So let's talk because I do, I think this is something that just blows my mind on how many companies and truthfully, how many reps out there are closing deals and have zero idea how much they just made or zero idea on how they're pacing. So then the end of the month comes, the end of the quarter comes, and then the back and forth game comes, right? That Friday comes, the check hits. Ooh, that's less than I thought it was going to be. And now the games begin.
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