Designing Effective Comp Catalyst 25 1747945319605

Usually has a little something to do with compensation. Anyone else here interested in compensation? Oh, love those hands. Yes. Well, you know what, friends? I've got my buddies Peter and Graham here, and they're going to talk to us today about partner team comp planning. Guys, take it away. Thanks for being here.

Thank you. This is strange to talk into a microphone and not be able to have it, like, loud, but y' all are giving me half sheepish smiles as if you haven't heard this joke before. So I assume that means that we're good to go. I don't know how this thing works. We'll figure it out, though. Maybe. There it is. Hi, everybody. I'm Graham. That picture is a little bit from a little while ago. Had long hair. I run partnerships at a company called Quotapath. Outside of running partnerships, I've done LED sales teams. I've also focused on sales compensation and compensation in general quite a bit over the past few years, which is what we do. I'll talk a little bit more about that here in a bit, but I'll kick it over to Peter.

Hey, can you hear me? Awesome. I'm Peter Folgesanger, also known as Peter Fogg. I'm a recovering direct sales guy that got into partnerships by accident about 10 years ago. And since then, I've been trying to help other young partner managers avoid some of the pitfalls and have some of the scars and blood on the floor by learning from my mistakes. So that's what we're going to talk a little bit about today.

Yeah, we sure are. Awesome. So this chart again, you'll see it's for illustrative purposes only. So it's not specific numbers here, but variable compensation is for everyone. When we think about compensation, lots and lots of people get paid on a lot of deals. So this is just a simple example of what you might see in one company is that 8, 10, 12, 15 people can all get paid from one deal. And so it's incredibly important to get it correct. So how do we do that? I have done this presentation a lot of times specifically around sales compensation. This is my first time doing it about partner compensation. So if I slip into accidentally saying things about sales compensation, you'll know why. But I'm a big rule of threes guy. And one thing here is that every comp plan must be simple, logical, and fair. So a simple plan focuses on two to three components, not five, 10, 20 different components. It should be logical, so it should actually be backed by sound reasoning. You should be able to explain to the people who have that comp plan, why they have that comp plan. And it should be fair to both the people who have received the plan as well as the company.

So, Graham, let's do a quick survey of the audience. Raise your hand if you and or your team are on a comp plan that is simple with one primary metric. A lot of you, I bet that one primary metric is sourced revenue. How many are source revenue? How many are primarily booked revenue? How many that are on booked revenue? Think that that is logical or fair to the role that you're in?

Somewhat, yeah.

Do you close those deals? No. So we'll talk a little bit more about that. But I think that this often gets overlooked, especially if your partner comp plan was brought to you care of the CRO or the VP of sales, because what do they care about? They care about book revenue. So that's what they're going to hold you accountable for. And that's only part of the equation for us doing our jobs.

Yeah, absolutely. And although I actually don't have the slide in here, one of the slides that I generally talk about as well is who builds comp plans? Who builds these compensation plans? And oftentimes it is the leader. Then it shifts more to finance and then it shifts to like a rev ops or finance organization as the organization grows. But the best answer is actually all three or multiple organizations. So we have a chart that shows confidence in comp plans. And as you add more departments to a certain point, you know, not five or eight different departments, but once you get up to about three different departments involved in building comp plans, that's how you have the most confidence in those.

And I just realized we're on slide 4 of 50 and we have a countdown here.

No, no, no, no, no.

We do have a countdown.

Fortunately it's 4 of 11, so. Oh, this one's animated. I thought I removed all the animation. Sorry. So, comp plans again, rule of three, three questions that all comp plans need to answer. Question number one is how much? And we're going to do a dive into each one of these. Question number two is for what? What are the quota or quotas? And the third question is how. So what are the commissions and or bonuses and what the difference is between those? And so this is data from directly from partnership leaders, but talking about how much. So how much is actually broken into two different components. So this is on target earnings or ote, which is I define, and you should define as how much someone can expect to earn if they hit exactly 100% of their target or targets, not how much the average person earns, not how much you earn if you hit 200% of quota, but actually hitting your target and then pay mix is what percentage of that OTE is base salary and what percent is variable compensation. So again, we have some benchmarks here. This is broken down from partnership leaders, from you folks. So don't complain to me if these numbers are higher or lower than what you were hoping to see. So question two for what? Now this question is if I had to build this deck again, probably would have put this at the end because this is actually the question that we'll probably spend the most time talking about here, which is what are the applicable quotas? Quota or quotas that you're responsible for? What is the amount of those and then what is the frequency of those? So how often does that quota attainment reset? Is it a monthly quota? Quarterly, annual? In most partnership organizations you'll see quarterly or annual targets, sometimes monthly. In sales, it varies based on sales cycle and average contract value. And finally, how most people probably have had a. Well, I don't know who here came from sales before they went into partnerships. Is it a lot of folks? Okay, so a lot of you have probably seen most of these different structures before where you have a commission which is a percentage of a currency that's paid out. A bonus is maybe the most generic definition I can come up with, which is a set amount of money earned for doing something specific. But that might be, for example here, the milestone bonus. You may get a bonus as soon as you hit your quota. If you don't hit your quota, you don't get anything. You don't get more if you hit additionally, you just have a milestone bonus. But the most common that we see are single rate commissions, multiple rate commissions, and then increasingly multi year commissions where if you sell a two year or three year deal, you're actually paid more than you would if you got if you sold a one year or even a month to month deal. All right, we did form what they're. Sorry, how much for what? And how Graham and I spent.

Go ahead. A great deal of time talking about this because I, in my experience working for or with partner programs, this is not talked about as much as I think it should be. And that is there should be a mix of compensation for you and your teams across these dimensions that fits the maturity of your program. So obviously down in the lower right, if you're a new program or a new territory, you want to incent that person more on sourcing new partners. They're out there recruiting, they're out there hustling, they're trying to build an ecosystem that's, that's day one job. So maybe more heavily weighted to that. And if your program is completely new, that may be the majority of of your variable, but then you can move up and to the right and again depending on how mature your program is, Closed revenue is certainly important, but you don't want to compensate your brand new team and a brand new program overly on closed revenue, especially if you have a 12 to 18 month sales cycle because they're going to starve to death for a year and a half at best. So my best practice, and we'll talk a little bit more about this in a minute, but my best practice recommendation, if you're not thinking about these four or more, think about what are the right incentives for the right behaviors that your team needs. If it's recruiting, then that should be more heavily an MBO for recruiting a certain number of partners per period. That's easy. So everybody thinks about that. But do you pay them on that? Another one might be engagement. If you have a lot of partners that are not engaged, is there a way you can put some kind of incentive into the program for a quarter to say you got to get your partners engaged and then measure that and then compensate them for doing something measurable? It could be badges, it could be certifications, it could be number of deals of any size. If you see an increase of deal registrations, could be an MBO or something like that. And then obviously if you're more booked revenue, don't overlook pipeline revenue because that's ultimately what we have the most control over if we're the partner team is building partnerships that drive pipeline. And if you're not compensated to drive pipeline, it's very easy to think about recruiting and let somebody else worry about pipeline and vice versa. If you're only compensated on pipeline, it's very easy for the partner team to not care about the quality of the deals or the quality of the partners. I built my pipeline, it's not my fault the sales team didn't close it. So there needs to be a balance there. There in my opinion.

Yeah, I think that's great. And, and this chart is, I tried it with the X and Y axis on it that you might have seen in the, in this one but it got too busy. So I put it just on this one which is we have direct value from partners on the bottom and partner program maturity on the top There. And so this is actually deliberately done going from bottom left up to the top right here, which is exactly what Peter talked about there. Often times in really early organizations, just number of new partners sourced tends to be where, what, what the metric is that partner leaders and partner managers are held to MBO's management by objectives. Oftentimes those are used in concert with each other. Moving into pipeline revenue as a program matures and then finally into that closed one. Revenue tends to be as a partnership organization is very mature. But again, to Peter's point, go ahead.

Before we get to that, like Graham, I like the rules of three. So pick three things from that previous slide. Three. Three things that you want to measure them on that are related, but not directly related. I particularly like that as a tool for your team. If you have somebody who's really strong at one thing and weak at the other two things, they can still make some money by doing what they do really well. And then you can coach them like you're, you're at 40% of pipeline, but you're at 100% of recruiting. You might even use that to pivot what their role is if they keep doing that same repeat over time. But it gives you some very specific tools to reward them for what they're doing well and what they're good at and to penalize and motivate them to do something better.

Yeah. And Peter, I think that one of the things that you and I had been talking about as we prepared for this was around influenced versus sourced revenue. And those, those two are, you know, it's a hotly debated thing who measures.

Influenced revenue in their company. Who gets paid on. Ah, a few of you. Very good. Very, very controversial. I went through more C suite level conversations at one of my firms about this topic and I had some salespeople who really pushed back on this. Salespeople tend to think about partner stuff very binary. I had a guy say it's only referred if they recommended. And we were talking about this at lunch. Those are not synonymous terms. Referred is one thing. Recommended is better. But a partner refers a deal that you didn't know about before. It's in your pipeline and it wouldn't have been if you didn't know about it. Recommended. Of course it's going to be easier to close. But if you're measuring on referred, then that's referred. Influence is the same thing. If we're doing our jobs well and we're building a thriving ecosystem of partners, there should be more than one influencing a deal. If there's only one influencing a deal, then we're probably missing some opportunity, especially with the way software works. Now. How many, how many deals are you in that there's only one partner in that deal? You might have three ISV partners and two solution providers in the same deal. Do we only want to compensate or give one of them credit for influence? And I'm talking about the team's comp. I would say you should not be doing that because the team that's gotten those five partners engaged with you, he's trying to call me for some reason those five partners engage with you and influencing that deal in your direction is a good thing. And the more of that happens, the bigger your deals and the faster they close. So my advice is as an organization, agree what influenced is. You find out about a partner in the deal talking about the project and you in some way during the sales cycle. That should count in my opinion. Don't let the CFO say, well, we need this metric. It's a directional metric. It's. We're going to going to do baseline now. We're going to decide what is influence, how much influence revenue we have right now it's zero. And we want that to go up and quarter over quarter. It doesn't matter if on a deal by deal basis, some sales guys say they didn't really influence a deal. They were in the deal. We counted it as influenced and we want to see that go up. So take the debate out of it. Use it as a directional metric that you're looking for growth and improvement as an indicator of your ecosystem being in your court. And if they're not, then you have some work to do.

Yeah. And a real world example of that is my company. I'll tell you about what we do here in a second. But we work really closely with HubSpot as a CRM and it actually allows us to. Before I started focusing partnerships on HubSpot, we were able to say this percentage of our revenue is tied to HubSpot. They use HubSpot as the CRM. And then I do a lot of efforts with that organization with marketing and product and sales and customer success. And so what we're then able to do is set that baseline and work on improving that number. So yes, sometimes it's zero. For us it wasn't. It was about 25% of our revenue. And we were then were able to see over time how has that increased. And we've brought it up over 50% now.

And if you get the C suite thinking about this, your message to them should be an ecosystem led go to market motion should have 100% of your deals influenced in some way by somebody in your ecosystem. And if you're not, you're not. Nobody's doing that right now. But if you're not, how do we get there? And so if you're looking at as a corporate metric and then compensating the teams in their territories that way, everybody should be rowing the boat in the same direction.

Awesome. We have, we may be. We may run under, which I don't know when the last time you were at a speaking session where they didn't fill the full time, but hey, it's a, it's a surprise treat. I'll tell you a little bit about Quarter Path. So we're a software that automates commission management for finance, sales and rev ops and partnerships. I should have added that in there. So we are not a tool that actually can be used to pay out partners. I mean, you kind of can, but there are whole myriad other tools out here that do that a lot better than we do, but we do more direct selling. And so both for sales reps and also partner pros, you can use a tool like QuotaPath to actually track your progress towards a simple, logical and fair comp plan.

My last large team I managed, I did not have Quotapath. I had 12 people on my team that all had three KPIs that were unique to their role and their territory, and all of them had unique spreadsheets. That was a colossal mess to manage. Every quarter we had a rev ops person who spent a massive amount of time at the end of the quarter helping me figure out those spreadsheets. Really, really important. Worked extremely well for my team, getting them paid for what they did and driving them in the right direction. But if I could have used quotapath, I would have been a lot more happy. So I don't work for them, but that's my plug for Graham.

Awesome. Thanks, everybody.

Thanks for your time.