Sales Compensation in a COVID-19 World

Well, hey Michelle, how's it going today?

Hey, Mark. I'm doing great. How are you today?

Not too bad, not too bad. I'm excited that we're in the sales Globe studio.

Yes, we are. For another Friday roundtable.

SalesGlobe rethink sales roundtable. Really glad you guys are here. And we are in the really big studio to share some really big ideas that we have here. And we're gonna be talking about what.

This week we're going to be talking about a survey that we just conducted with world at Work. We had over 300 companies participate and we're going to talk about sales compensation in a COVID 19 world. So what are companies doing today and most importantly, what are they planning for as we look ahead into 2021? So a little bit about us. We are a problem solving firm for sales. What does that mean? We're an advisory firm and all we do is solve the biggest challenges that companies have with sales in their sales organization. You will see that we've written a few books here and a couple of those we're going to be referencing today.

Yeah, that's right. So if you guys have not checked these out yet, these are good to reference what your CEO needs to know about sales compensation and also quotas, design thinking to solve your biggest sales challenge. And a lot of the ideas we're talking about today you'll find in these books, which I think will be really helpful for you to check out.

Yeah, so I just had an idea. Mark, some of you may already have one of Mark's books or you may want to go out to Amazon and buy one of those books. But if you give us a review on Amazon, I would actually we can send you something special. How about a new business insight that's not yet available out in the market.

Like a business treat?

Yes, a business treat.

I might actually go buy one myself.

Good. Well, go out there and give us a review. Let us know and we'll send you something special.

So in the studio here, we've got these rolling whiteboards. In fact, I look over, I can see a whole bunch of them over here. And we're working on mind maps to kind of figure out what the implications are and all the considerations in the future of sales. So if you look at this one example here, you see from the company perspective, questions like how's the environment going to change? What challenges we're going to face? What the sales organization needs might look like what customers are going to be looking for. So these are not answers, but they're Considerations. So we're going to be talking about some considerations today when we talk about the results from the survey. And it's really important to remember that these are starting points for your thinking. And I want to zoom in a little bit here, Michelle, just to talk about a couple of these areas about our environment. And these things are going to affect sales roles and sales compensation, which are fear and cost reduction.

Right. The two big things that we know as we went into COVID 19 were impacting organizations. Fear about the health of the business, but also just about COVID 19. Right. So individuals had fear. So fear about health of the business, their job, and then just what's ahead. And then of course, cost reduction. Because companies weren't quite selling the way that they were pre Covid. Gosh, I don't know, Mark. But coming into 2020, we know that our clients and all of us, we had really pretty high aspirations. Right. For what sales were going to look like. And then March 13th in the US anyway. COVID 19.

Yep. So 2020 was a nice one of those nice landmark, round numbers. And we thought, big things are going to happen in 20. Well, guess what? Big things happen in 2020.

Big things happen, but just not what we thought was going to happen. Huh. So 2020 has been an unprecedented year which led to SalesGlobe doing some surveys that we haven't done before. The one that we're going to be revealing to you today, we said over 300 company participants. There's going to be a lot of benchmarks in there of what other companies are doing. And remember that they are extremely valuable. However, for your individual and your unique organization, data driven creative problem solving is what you're going to want to do. So what does that mean for us? That means that we always want to know what the benchmarks are, but then we want to use data and proof sources from within your company and use some creative problem solving to really adapt those benchmarks to your organization.

Yeah, you know, I get calls every day. I know you do too, Michelle. From companies that they want to know what other companies are doing about compensation, about quotas, about, you know, their sales, organization design. They're asking this thing down on the bottom, right. They don't want to know what are other companies doing. They want to know what should we do. Right. And so the danger here is that you take any type of insight like this and you say, well, that's what we need to do. That's what we need to be thinking about, because most companies are doing that. It's the thing that you see on top, which is, I'm going to use that insight to better solve the problems. We want to talk about that today as well.

That's right. So as we looked at COVID 19, the first thing that we did was we at Salesglove took a step back and said, wow. And this was the end of March. And we said, okay, so we've got this thing, COVID 19, that happened. And we developed white paper, which if any of you would like access to that, please let us know, we'll send it to you. But we developed and came up with four phases of COVID 19. And this was really to help our clients and even ourselves calibrate to the new environment. So, Mark, why don't we talk a little bit about these four phases and what was happening throughout.

In the beginning, it was March, and we were in this period of acclimation and everybody's trying to figure out what's happening, what's going on. And a lot of it, the activities were around messaging. Right. Communication. Yes, that's right, communication and trading on trust. So companies from a sales comp perspective were not making major changes at that point. They were basically saying to their teams, hey, trust us, we're going to take care of things. And here's what you should be doing just in terms of how you should be focusing. And then that gave companies time to think. Right. So the best thing, like in a lot of crises, the best thing you can do is not act right away till you understand what's going on. So we're having a lot of early conversations about that. And then several weeks later, we started to see the beginnings of planful action.

Which is really the first wave of.

Changes in comp and quotas and what companies are doing with, with sales. And the first things that started to adjust were performance measures on the comp plans.

Yeah. And what we saw was a shift away from just those standard measures. So if I was being measured on revenue, for example, but I wasn't able to sell, what is it that I was able to do? So we started looking at things like, oh gosh, account planning and even unusual things. Right, Mark? Like renewals and going out there and just understanding how you can help your customers based on where they, they were and where they are. So we did see that there was this whole planning beyond the curve. Right. So it just wasn't about revenue anymore because that wasn't quite happening. But other metrics and measures that were still going to be long term contributors to that revenue.

And there was a shift from Selling to helping.

Yes.

Right. So companies were saying, don't worry about selling anything right now because you can't sell anything right now. So how do we help the customer? And some of those performance measures started to shift as well about how do we measure helping? And so, you know, it could have been milestones along the way. So those kind of shifted. And then we got into phase three, building and adjusting. So companies were reforecasting. They continued some of those actions, those comp and quota actions. The big areas that they were working on were slight adjustments to quotas, performance measures and adjusting thresholds on plants that people were earning earlier. But only about two or three changes on average for companies in the plan. So they weren't changing a lot of stuff. And now we find ourselves in phase four.

That's right. So we're planning for the recovery and looking ahead, and that's really what we're going to be focusing on today.

So let's talk about the picture.

Yeah. As we look at 2021. So, Mark, why don't you. Let's kick us off.

Yes. We're going to be a little predictive here. So we're going to talk about what we're seeing and we're going to talk about what we see ahead. So business decisions, like said before, are going to be driven by fear and financials. Right. So how long is it going to last? What's going to happen? How long do we have to keep people out of the field? The financials? Gosh, we don't have to have people in all this commercial real estate anymore. They're working fine at home. Right. For the near term. And I think that's going to be tempting in the near term to pull back on cost for travel. It's going to be tempting to pull back on cost for real estate. And I was on the phone with somebody this morning and they said, oh, we're doing just fine. Well, they happen to be kind of in a hot sector, but we're doing fine with everybody working remote. But what we're going to see is that's going to start to shift.

Yes, we do believe that. And we also believe very strongly that the field sales role, it's never going to be the same again. Now, we do not believe, and we can be pretty strong about this. We don't believe field sales has gone away. We've had people ask us, should everybody just continue to work remote? Right. Is everything going to an inside sales model? Stop right there. Because inside sales is not working remote. Working remote is working from home. Or some other place. Right. It's not inside sales. So we believe that the field sales role is going to change. They're going to be less in front of their customers. So it will be less face to face than they are today. But face to face will still be important. So what happens when I'm face to face? Well, I need to be able to solve my customers problems. I need to be talking to him and her about not just selling a product, but solving for the problem they may have. It may be they need to increase their revenue. It may be that they need to improve their communications. Whatever it is, you need to be meeting them where they are. So uncovering the story of where they are is going to be a lot more important than just trying to sell a particular product and service.

Yep. And so what you're going to see mechanically though is efficiencies are going to increase in terms of contact efficiency.

We're seeing that right now.

So people aren't on planes and trains anymore. It is actually easier and more efficient to get meetings and do meetings versus having to sit on a plane for three hours, have a two hour meeting and get on a plane again. You can just do a call right now and have that done. The geographic boundaries are going to start to melt away a bit.

Matter less employment.

But the relationship building is going to be challenging. Back to the point you just made, Michelle, which is the problem solving ability is going to become really important as relationship building is being challenged.

Yeah. So let's look at the flip side of that. Right. We're hearing about all this productivity potential increases we're looking at. People are not on planes, trains, automobiles, you know, as much as they were before. But what we do predict and see is that teams are going to lose collaboration. We've already heard about it and productivity is going to wane. Recently there was an article in the Wall Street Journal and they were talking about Amazon has come out against what Facebook, but Google and a lot of others are doing. They've come open and they're going to be opening up hundreds of locations, office locations, for people to work in for the very reason that they said that collaboration, innovation and productivity is waning. So the cautionary side on that is don't believe you're going to get that one for one improvement in your capacity. So talk a little bit about what does this mean to sales capacity, Mark?

Well, a couple things. So you mentioned, you know, productivity waning factors like bunny slipper fatigue.

Yeah.

So people can only work so long in their bunny slippers in their living room before they start to get mentally fatigued. And we have homeschooling happening at least right now. So we have parents that are trying to homeschool and work at the same time. And they're not good at homeschooling.

Who can do that? I mean, that's really hard to just put you in that position. Yeah.

I talked to the president's company about a week or so ago and, and he said, what I'm concerned about is all my reps, all my people are working from home. And I know that they're in homeschooling and I know I'm not getting 100% of their attention anymore. So the productivity is going to go down. So when you talk about sales capacity, like you're saying you've got productivity going up in terms of efficiency of contact, but it's going down in terms of effectiveness. And so we're going to have to recalibrate sales capacity to understand what we expect our sales roles to really do and what we're going to need for those roles. And then you're going to see a change. And this is, we're kind of predicting a little bit to probably coming back to commercial real estate because I think companies are going to realize that, hey, we can't get everybody to collaborate the way we used to when they're not apart. When they're apart. And the employee value proposition is going to change as well.

Yeah, that's right.

I can only work so long in my living room or my dining room or whatever. Then I start going, you know what, this is not really what I wanted to do in my career. I may need to start to look at something else. So retention of employees will become a consideration.

You know, I was talking to a senior level person at one of the big four consulting firms and she actually happens to be one of those unique people who has been working from home for 11 years and was telling me how it really does though, take a certain breed or type of person to work from home. So she did it and here's what she said. When there is an expressed need that you're answering, that's a good reason to work from home. But just to work from home because we believe we're getting improved productivity or saving money right in the footprint of real estate may not be the right reason for your company.

Yep. So back to the big point you were making before. Future sales is uncertain. Having the ability to creatively solve problems in a data driven way as we start to learn more is going to be critical for Leaders for you to understand where your organization is going and plan that. And also for salespeople to be effective with their customers when they can't just rely on relationship anymore. I think we're going to start to see organizations having more data resources available to equip salespeople to be better informed during their sales conversations so they're more effective and can create more meaningful solutions for their customers. So take all this information and put it into your problem solving head and think about how you're going to start to use this as you work in your organization.

All right, so now, Mark, why don't you talk a little bit about sales comp diamond, which was really the foundation for a lot of the work that we did with the survey.

Right. So this is our view on sales compensation at Sales Globe. And it's a complete look at all the major areas you need to be concerned about with sales compensation in terms of evaluating the plan and also in terms of designing the plan. And it's really 12 critical areas, 12 key points and alignment to what we call the C level goals and the sales roles. And C level goals just very simply are what are the big objectives for the business around customers and products and organization and talent and financials. And then the big areas we look at in sales compensation are plan framing. So understanding target pay and pay mix and upside, linking pay and performance together so your performance measures and your levels and timing and mechanics. And then aligning the team and financials so making sure the plans are congruent, they work together when people need to work together as a team, your objectives or your quotas, and then finally operating for results. So how we're going to be operating the plan, the policies we're going to have and the evaluation of the plan. So in the survey we looked at a few areas here and these are all in the complete survey results. We're just going to touch on a few today. But we looked at areas like roles and payments, upside and caps, thresholds, measures, quotas and technology. So we'll hit a few of these today.

Yeah, and the big point here is that everything, all these points you see there, it's all changing and not changing the way it has in the past. It's changing in a whole new way.

So there's a big story here that we're going to share. We are going to go through each one of these pieces and give you some highlights. But they go from the challenges around quotas to how compensation is being simplified all the way to some shifts in strategy. And then we'll sum this up at the end, and you'll be able to take a look at the story yourself in terms of the details behind the story.

So let's talk about quotas. What we know is that 39% of companies are saying that less than 25% of their sales team is going to be at quota, that they're actually going to reach their quota numbers. That's pretty huge. That's double the number it was just last year to 19%.

So basically, a lot more underperformers.

That's what we're seeing, a lot more underperformers. Yes.

Yeah. So let's take a look at the trend behind this and see what's behind these numbers here. And we asked about three time periods. We asked about 2019, what happened in 2019. And just to pull a couple of key points out here, 58% of companies said that at least half of their sales team would be at or above quota. Now, if we look at the benchmark, Michelle, and really the best practice of where you want to be, you want 50 to 70% of your sales organization at or above quota. So you've got 58% of companies saying, yeah, we're doing that. We're in that range, which is really healthy.

Right? Yeah, that's good.

And, you know, some of that probably was due to the economy. The economy was very strong until Covid came along. But now we're looking at the first couple quarters of 2020, and that number's gone in half. So you got 30% of the companies saying that half their sales team is at or above quota. And then a little bit more optimism as we look to the end, through the end of 2020, about 36% of companies, I think, because they're getting a little bit of visibility on what the rest of 2020 might look like.

I would agree with you on that, Mark. We're starting to hear that and see that ourselves. So people are at least understanding what we're dealing with, as opposed to a couple months ago where they did not. But big point here is still conservative as they look through 2020.

Right. So what are they doing regarding quotas? And this is from information that we've gathered as we work with clients over the past several months in terms of what are their actions around quotas. And we sorted this from kind of more conventional approaches to more divergent or broader approaches that they're taking. And a lot of companies on quotas are doing nothing right now. And it's almost half of companies are doing nothing. And that's I think, because they're waiting to see what's going to happen through the rest of the year. And they're still playing on some of that trust. You've got a number of companies, about 25%, they're using discrete quota periods. So what they're doing is they're saying, well, we're not going to look at 2020. We're going to break that into a couple of pieces. Maybe it's first half and second half or maybe it's breaking it into quarters. And the idea is that the market's changing, it's moving, it's uncertain, so we're going to break it into smaller pieces with less risk behind those pieces. So kind of an interesting approach on the surface, but you've got to watch the other side, which is your plan. Accelerators. And this sounds technical, but I've watched a few companies get stung by this, which means that if you have accelerators in your plan and people can hit high levels of earnings for overachieving goal. If they're doing that within a quarter and then they're not doing it the next quarter, what you're doing is you're paying out accelerators for over performance in one quarter, you may be getting underperformance the next quarter. So that can come back and get you. So you got to watch that.

Yikes. So what you're saying, Mark, is even though you may be changing your quotas and not wanting to make a lot of changes to your plans and you're going to change quotas, you better see how that aligns to your plans and what the impact is.

Yeah, yeah. You can't just change one thing.

Right, right.

I mean, you can, but you'll find out later what's going to happen.

Right, yeah.

This is where it's good to learn from others.

Yes.

Shifting seasonality. So this is kind of kicking the can down the road saying, well, we're not doing that well at the beginning of 2020. So what we're going to do is we're going to back end, load the goals. We're going to push that toward the end of 2020. And then that's leading ultimately to the possibility of adjusting quotas as we get closer to the end of the year. And I think because we're not at the end of the year, we're not seeing a lot of that yet. But like we said before, a lot of companies just saying we're holding off and we're waiting. And even in regard to quotas, sometimes they're coming at it from the other direction, which is to say we're going to do something on the compensation front to put a floor on compensation. There are some protections that are happening there.

Yeah. So I just want to make that one point on that trades on trust piece. So they weren't doing anything. That's not a bad thing, what they were telling their organization. Again, it goes back to communications. Right. We're not going to do anything because we don't know, but we're working on something and we're working on that. Which could be most advantageous for you. I mean, that's really what the messaging is that we were hearing.

Right, right. Simplifying. All right. I love this one. Because what's happening, and this is over time, this is looking back to 2016. As we look back on performance measures in companies, what we're seeing is on average, organizations are using only one to three performance measures in their plan right now. And about a quarter of them are using only one measure in their plans. That's about 70% from 2016. So what's that saying? It's saying that the compensation plan designs are simplifying, which I think is a great thing.

It's wonderful. And it's really almost 100%. There were about 30% of companies way back there in 2016 that were doing that. Right. And now it's like just about everybody is in that one to three range.

Yep, that's right. That's right. So, you know, we do a lot of benchmarking here at Sales. Well, we do a lot of what we call rapid insights, where we go out to companies and we help companies understand what other companies in their industry are doing. And more and more of those conversations, Michelle, we're asking, okay, well, your account manager, what's the measure, the performance measure, first performance measure for that plan. What's revenue?

Yes.

Okay. What's the second performance measure? Well, that's it. And so we're hearing more and more it's a single measure in the plans, which means that they're simplifying and they're managing two things rather than just just trying to put it all into plans. So when you look at how the performance measures structure out, this is in the book what your CEO needs to know about sales compensation. We look at three different dimensions on performance measures. Look at the measure itself, that red side. We look at the level of the measure, meaning is it going to be at a company level or a team level or individual level, and then we look at the frequency. So how often do you measure and Pay is it monthly, quarterly, annually, that type of thing. And what we advise is that on the performance measure side, that red side, that you're pushing more toward the financial measures, which are revenue and profitability and bookings. And then if you need to go to the customer measures or strategic measures, which are, what did you sell out of that revenue? So did you sell certain product groups or sell to certain segments or new customers versus current customers? So the majority of the measures we're seeing are in financial, which is a good thing. But we're seeing a lot of them coming up in those bottom two categories, the forecast measures and the qualitative measures. So milestones and key sales objectives. And this is not for all sales jobs. This is just kind of a broad observation across all the different roles that we've been looking at in the survey, which is a little concerning because we tend to look at that as kind of the swamp of performance measures. We don't like to have a lot of smarmy stuff at the bottom there. We like to have things that are highly quantifiable. But just keep that in mind. What we're seeing.

Yes, but we do believe that it has to do with the current environment. Right. Where revenue may not be the best measure. So it's not really a best practice, but it's a practice now if you want to at least drive behavior, if revenue can't be your top one. And just a note on the measures where I said, oh, yeah, that's one to three measures. The reason that we believe less measures. Right. Because it's so much bifurcated focus or gosh, focus is all over the place. We've done plan designs that have five measures, seven measures. And the rep is saying, what do I do? So the more they can focus on one or two things, that is what's going to drive the behavior.

Yeah. You do not want a Buffet plan, right?

No.

You would rather have.

No, that gives you a digestion. Harper, in the buffet.

I don't like simple dog food versus a buffet plan.

I don't like buffets. So revenue. Revenue leads in performance measures. So 60 to 79% of organizations are saying that they're paying on revenue. The next metrics would be key sales objectives and product unit volume. So revenue. Just think about things like billings. It also could be shipping and it could be invoiced revenue.

Yep. So let's take a look at how these jobs. We just selected a few jobs.

We did a few jobs. And you know, we know that a lot of people, they talk about the hunter, farmer model. And we actually discuss what we call the canine model. And that's because hunters and farmers, it's like two choices, right? You're either selling, you're this hunter or you're maintaining. And Mark, you like to say you.

Could have a rancher.

Yeah, maybe you have a rancher guy.

So it was like a hunter that got tired and then became a rancher.

And becomes a rancher. So what we got, all right, this is just a few of the key roles that we show. So you've got this new customer seller that would be like the Doberman. And what they're doing is they're going out and they're getting brand new business. Right. So the Doberman is the one that'll like take your leg off. I've been told that I'm like a dog with a bone. And then there is the account manager on the other side, which is really maintaining your current business. And think about golden retrievers. What they do is they are actually out there mining in their backyard. And then you've got these blended roles, which I am a hunter and I am, well, hunter. I'm a Doberman out there getting new business and I'm also maintaining existing business. And you've got one of my.

I just saw this rep walking by here, right here.

But she looks a little tired. She must be working, but bunny slipping.

That's the problem with the blended rolls though. They try to do way too much.

They get tired out, don't they? You have said that before. So what does happen in that blended role is they look just like this one here, get a little too tired. Either that or she's been working remote and she's just been in those buddy slippers a little too long. Not sure. But let's talk about the measures mark across these three different selling roles.

Right, so let's start with the Doberman. Right, so the Doberman's out there. Take your arm off. What kind of measures do we have with the Doberman? Well, the two big ones are total revenue and new customer revenue. Right. So about 60% of companies are using those measures for their new customer sellers. Number of new accounts, about 53% of companies. And then we do see the KSOs or milestones, we think, because either it's the current period right now or some of these are for long sales cycles. So it may be that we've got a multi year sales cycle. So using key sales objectives or milestones kind of gets us along the way toward getting to that goal ultimately. And then new customer Bookings, which we would expect. You go to the blended role, that hybrid role, total revenue, 77% of companies, KSOs, 56% of companies. And then account retention because they're managing current customer accounts. And then you get to volume number of new accounts and new customer revenue because they're doing both current customer and new customer. And then finally, when you get to the the lab here, the current customer seller, that's my dog, Winston Bubba, by the way, out in the backyard, 78% of companies, total revenue. And then account retention, 59% of companies, I think is kind of interesting. That's a measure we look at a lot for the account management jobs is what are you keeping for not just your accounts, but also your revenue? Because that revenue retention is critical. And too often we see jobs that are just paid on new sales and not the revenue retention. Then you've got your milestones and your product or unit volume. So this gives you kind of a glimpse here. But for all the jobs that are in the survey, we have these breakdowns or these Personas, if you will, to see what kind of measures and what the different components of their plans look like. So this could be really useful insight for you.

Yeah, it's across, I believe, eight or nine different, most common roles, ranging from customer success inside sales to these field roles that you see here.

Well, upside, yes. Everybody wants the upside. So the good news is upside is strong. And I think you'll be really interested in these numbers. Over 60% of organizations have plans with at least 200% upside. Okay, that's 200% in addition to their target incentive. So if you have $50,000 of pay at risk, that's another 200% above that. So that, that's pretty handsome. That's for the 90th percentile performer, your top 10% performer. And then 40% of companies have over 200% upside, which is on top of the target incentive. So if you look at it here and you break it out by these roles, you can see your Doberman companies at least 100% upside above target incentive. You can see about 78% of companies have that upside for the Dobermans, about 80% for the blended roles and about 70% for the current customer sellers. And then if you go to the high end and you go at least 200% upside above target incentive, still pretty large numbers. 61% of companies for new customer sellers, 64% for blended, and 56% for current customer sellers. So what that's saying is that we're seeing a lot More upside. And I think we're going to talk about this in some of our predictions. We're going to start to see that increase as well as we move ahead into the near future.

Now let's talk about the opposite side, right, to upside. Upside means I can earn and earn a lot, but then there are limits. Right. So 56% of organizations say that they've got either a cap. And a cap would be a point at which the plan doesn't pay, it stops paying. But they've either got a cap regressive rate or a megadeal policy to govern upside pay. So let's dig down a little bit deeper into those. So what we've got is 35% of companies said that they've got caps on attainment or payout. And that means that. So out of these 56% of companies that said they've got something, 35% cap the plan and say we'll stop paying at a certain level. And the downside about that, especially as you get into Q4, if I've hit my quota and I'm getting close to the cap, I may just hold off on orders and hold them into the next year and drag that order from closing simply because I know I'm not going to get paid on that deal. So what's my incentive? So we don't really like playing caps very much, do we, Mark?

No. You know, and when we do interviews of reps during sales compensation projects and there's a cap in the plan and we ask them about the cap, we ask them two simple questions. Have you ever hit the cap? And they're usually like, no. Do you know anybody that's hit the cap? And it'll be something like, well, last year or maybe a couple years ago.

It must be like five years ago, seven years ago. Yeah.

So caps are more of a psychological factor. In fact, it's kind of like free range chickens. You ever wonder why free range chickens are so healthy and everybody wants to eat them versus the ones in the cages?

Oh, boy.

It's not because they have aspirations. It's because the chicken in the cage has a cap, Right? The cage is a cap and that chicken looks at that cap all the time. But the free range chicken goes out there and. And he doesn't see the cage, but there's a fence out there somewhere, right?

Yes, there is.

So he feels like he's got no limitations and he's got aspirations and he's a happier chicken. Right. So think about the chickens next time you want to use caps.

So think about the chickens and think about our canine model. I bet everybody will remember caps, Mark. So let's say a word about regressive rate. That simply means that once you hit certain levels of quota attainment, you just might bring that rate back a little bit. So if you pay 2%, I'm just making up a number. And it might shift to like 1.5% once you hit these higher levels. And then Bluebirds and Megadeal policies, again, we do believe you'll be seeing more of those. But 28% of companies say that they have that in place, which is a surprising low number, especially for those that when we consult and they have on cap plans. But Bluebird and Megadeals simply means that if I hit a deal of a certain value, and we do know that one of the standards is about 2x quota, a lot of companies do something like that and company reserves the right to look at what the actual payout will be.

So again, keeping in mind 56% of companies are doing at least one of these things right. Doesn't mean it's a good practice, but that's just what people are doing.

What they're doing today may not be.

The best for you. And then when we get on to communication, communication for sales, compensation, face to face is key. 90% of organizations said face to face or small team communications is the most effective method. Communications for compensation followed by individual one on one conversations. And that's going to be a challenge in a virtual environment because we don't have the ability to have those face to face conversations anymore.

Yeah.

So let's take a little bit more detailed look at it here. And you can see the ranking of these communication methods in terms of effectiveness and what we're seeing in terms of that future trend off on the left hand side there that your face to face is going to go down. Obviously we're not going to have as much of that. So it's going to take some effort to keep that communications quality up. The use of sales systems like CRM and SPM is going to become more important. But we'll talk about technology in a minute. But a lot of companies are not using these systems. And also the use of web platforms, web conferencing or different video applications is going to become more important. So you're going to have to make a more concerted effort at communications. And for the companies that are using CRM or SPM applications, thinking about how you can leverage those more for better plan communications.

Yeah, that's right. Just a word to Leaders about that. Right. So the whole thing is that communications are becoming even more important and it's really easy, particularly this environment to push off those one on ones. But I gotta tell you, it's ever more important that you have them. And communicating the incentive compensation plan, it's going to be really important to determine how you make those personal connections. Now I wanted to talk a little bit about technology adoption. So spm, Sales performance management, those are tools that are used to do things like administer compensation plans. They also do things like segmentation, territory management and quota management. So only 32% of companies are using a third party sales performance management tool and almost half, 47% use CRM. Think about something like customer relationship management, Salesforce, for example. So we do believe that these may, we believe they will become more critical in a Covid world. Just as we saw before, how communications are going to be more important when you think about the manual methods that companies use. And a lot of times, Mark, we know that they don't even really, can't really report out very well to the teams right now on performance as teams are now working remotely and trust can go down a little bit, the use of technology to assist and help them understand could be even more important. Moving ahead, right?

Yeah. I mean your spreadsheets, while they may be accurate, they're not going to be an online communication tool in most cases for people to understand what's going on with the plan.

Yep. Future impact. So we asked this question about what do you think moving ahead are the things that you're going to be most focused on? So it was macroeconomic changes. So think about, you know, global influences, think about government influence, whatever it might be. They believe that that will have the greatest impact on their business. Technology and natural occurrences are also top of mind. No surprise. Macroeconomic changes. We know that with COVID 19 the impact that it has had on the economies globally, of course that's top of mind technology. Interesting how we interpreted that is how technology will influence and help enable them moving ahead. So there was a study that McKinsey did a little bit earlier this year, Mark, and it said that companies are about three to five years ahead in the adoption of technology on platforms like this in using things like CRM and other methods than they would have been had we not been in this current environment. So it's just a few things to let you understand what companies are thinking about what's ahead for their business.

And then, you know, some shifts in strategy. Michelle, Surprising early on, not as big as we would have expected. So 22% of organizations saying they're going to revise their approach to sales coverage. 20% they're going to say they're going to revise their approach to sales compensation. I think this for a couple reasons. I think it's still early days before we get to 2021.

True.

And they're still waiting to see what's going to happen. We predict there's going to be a lot of changes in coverage. I mean it's completely necessary because the whole sales model is changing and to go along with that requisite number of changes in sales compensation. When we're doing our own sensing, our own conversations, our own client work, we're seeing a lot more than changes. I think that number is going to go up.

Yeah, I'm getting questions almost every single day about coverage, Mark. In addition to what should we do in 2021 on the sales comp plan. So they're actually becoming two big priorities. So I guess I was a little surprised too. And I think it was probably that wait and see because suddenly here we are in Q4 and everyone is realizing 2021 is in front of us and those two big topic areas we are being asked to talk to companies about.

So it all winds up in a big story.

Yes.

This is in the survey and you can see all the details behind this. We put it together in a story format and that's really. Because that's going to be easier to follow and understand the flow of the information. You can drill down on any one of these areas and see the details behind it. By the way, I'll put a plug in for a session we did with World at Work recently called Story Based analytics and explains to you why you use stories especially for complex information like this. So check out the survey, you'll be able to see all the details behind it.

Yes. So as we look ahead there are some really important things. So Mark, I'd like you to talk a little bit about quotas, like what we do believe is ahead.

So before we took a look ahead at the sales strategy and big factors and we want to get into sales compensation and quotas right now. So we talked about geographic boundaries are going to matter less, especially for the non strategic accounts. So that may have an impact on quotas. What do the boundaries look like and what kind of deployment are we going to be doing? And they're going to become more account opportunity driven. So history is history for those companies that are using history as a quota setting method. And that's about 40% of companies that are using history in some way, that's going to become way less important. And what's going to become important is more account level information, bottom up. And it's not just about market potential. Looking at dollars per FTE or dollars per white collar worker and our customers, it's going to be looking at the health of each of our customers and their spending trends, their buying trends in different categories especially obviously your category. So where a lot of you may not have done this yet, it's going to be extremely important. Ask us, we can show you how to do it. We can give you some free information on how to do that and even give you some free data cuts. I think you'll find it really, really enlightening. The industry targeting. We've talked on prior roundtables, Michelle, about looking at industries separately and we've tracked retail and wholesale and manufacturing and other industries. But you're going to need to find the healthy industries and probably do your deployment and your quota setting around those industries, not just look at industries in general anymore. And quotas may become shorter term. We've seen this in some tech companies historically is that they do shorter term quotas because the market is moving so fast. Well, the market's moving fast and unpredictably now. So it may be that doing short term quotas make sense. When you look into 2021, my question would be how can you predict an entire 2021 from December or January of this year or January of 2021? You can't do it for the entire year. So companies may be looking at shorter term.

Yeah, so big point there is that you're going to have to get little bit more prescriptive in quota setting and you were before and looking at things like account planning. So getting your customer involved even in the process and understanding how they can help you or how you can help them and that can translate into, you know, how you're setting your quotas. But history is history. We certainly agree on that. And we can't say that 2021 is going to look like 2020. So when we shift over to sales compensation, we do believe that we're going to have to recalibrate this productivity with compensation value. And that just means that we definitely do believe that there could be a shift in pay mix. And that just means that you've got two things. You've got your base pay and your incentive compensation pay. And what we do believe is that the payments will become more aggressive as we look at this recalibration, meaning that base pay may come down and incentive up. If you can't measure performance because you're continuing to work remote, you've got to trust that people can earn it through their incentive compensation. So relying less on base pay and a bit more on incentive, we do believe that that will happen. Revenue will still become, will still remain the key metric into 2021. We can't just continue to pay people for renewals or for those qualitative metrics that you talked about, because we got to get back to business. We do believe, though, that there will be an increase in the use of bookings. Now, why do we believe that? That's true. And that's not all of your pay would be based on that, but maybe a small percentage on bookings. And we believe that because we don't believe that opportunities are going to be as big as they are, we do believe that with budgets that companies have, sales may be coming in a little bit slower than we expected. So the bookings measure simply replaces something like giving people a draw or a guarantee. And you can certainly figure out, based on what your conversion rates are and using some of the history to determine that and factoring it, what that bookings revenue could look like.

And behaviorally, bookings creates action too.

It sure does.

So, you know, if we're looking at slower revenue uptake, bookings will increase the activity, increase the drive of the sales organization. But like you said, Michelle, we're going to have to look at how do we predict how much of the bookings will be realized and how fast we don't overpay on that.

Yes. So we also believe that upside is going to continue to be important. Gosh, Mark, we recently worked with a couple of clients, and they've got upside of 4 and 500%, something we've actually not seen too much of before. And they want to head right into 2020 with that number. And, and that is because they're compensating for this whole aggressive payments. Right. So if you. What you're going to attract are people that are looking for an opportunity to have. Yeah, they've got more risk but higher rewards. So you got to work on getting that quota setting right, though, because you don't want to give them upside opportunity that then just can't be realized. We also do believe on thresholds that we're going to see less of them. So a threshold is simply the point at which a plan begins to pay. And so just like where we don't see a lot of companies doing draws, for example, they may start paying for the first Dollar or lower these thresholds. We see a lot of thresholds at like 80%, but we'll see them lower them, we believe, into like 50, 60, even 70%. And then stepped rates. We believe that that will increase in usage as well, don't we, Mark?

Incremental performance. But rather than just having, you know, one rate above 100% of quota, getting people to continue to pull and even for that matter, below quota, rather than one rate, getting people to continue to pull without overly complicating the plan. So we've seen more companies doing that because when you think about the payout curve and say, just take the over 100% curve, you will pay more for just over 100% performance than if you have steps that bring people up on each incremental portion of that.

And finally, we do believe that technology investments are going to increase. So you're going to see things like SPM sales, performance management systems, increasing, anything that helps with communications and performance visibility. And we believe that you're going to see a lot more companies out there, data companies, you're starting to see them, as well as creative ways for you to measure performance of your team and, and help enable your team to do better. So a lot more small technology companies are coming to the forefront that are solving for big sales challenges.

Mark.

We're partnering with a few of those firms ourselves.

That's right.

So that we do believe that that's the future.

Yep. So you've got a lot of stats here. You've got some views ahead, some looks ahead in terms of what we see happening. We're going to continue to develop these things as we go along and as we learn more.

Yeah. So we're going to be back on September 11th, and we're going to be doing Incentive Compensation Insights part two. And that means that a few of the things that Mark and I have touched upon today, we're going to dig down deeper into. So, for example, measures and metrics. Right. When to use bookings versus billings and what that percentage could look like, we did say, yep, these are benchmarks. But we'll also be talking about creative problem solving and understanding how you can interpret what's right for your team. So we encourage you to register for our next roundtable. But we are here for you. We're here to help you. And we thank you very much for sharing your time with us today. We hope it was really insightful and valuable and we look forward to seeing you again.

Yeah. Thanks everybody for joining us and feel free to reach out as you have.

Questions thanks so much.