11 Dec 2012

The Three Worst Mistakes in Sales Development Compensation Plans

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This topic is important because if you make these three mistakes, your Sales Development Team will not develop properly and ,thus, your sales pipeline will not build quickly enough. A Sales Development Team’s main purpose is to follow up on inbound leads, or proactively cold call to your target accounts, and produce Qualified Sales Opportunities (QSOs) for your Field Sales Force. This is a critical team to help build your sales pipeline. If you want a Commission Plan for your Sales Development Team that produces results, then avoid making these three classic mistakes:

  1. Don’t Make Sales Compensation Based on Revenues From Their QSOs:
    The Sales Development Reps’ (SDRs) should get paid on results that  they can control. Their job is to produce QSOs and they are in almost total control of their ability to meet their quota of QSOs. They should be paid almost 100% on QSOs they produce. They CAN NOT control if their QSOs later close for revenue– the Field Reps have control over that. Also, the revenue from their QSOs will come later after the sales cycle is complete, which can be 3-12 months later. It is not fair to have the SDRs wait that long for their sales compensation. In one case, an organization that based its SDRs’ sales compensation on mostly revenues from their Qualified Sales Opportunities experienced detrimental turnover and this hindered the SDR Group from ever getting off the ground and later it was disbanded.
  2. Unrealistic Steady-State Quotas
    We have seen managers make the steady-state QSO quota too high because they want to have aggressive quotas for the SDR’s to prove a fast ROI of the team, or they are behind in building the team and believe they can “catch-up” by just making the QSO quotas very aggressive. This does not work. The QSO quota should be realistic given the market, product, company, and timeframe. When a manager sets the quota too high, then many SDR’s are not achieving their goals, are de-motivated or may be fired, and the group looks like it’s underperforming. It’s best to set the quotas realistically or even a little below that, let the SDR’s succeed or overachieve, and gradually raise the quotas as time goes on.
  3. Don’t make the new SDRs’ Initial QSO Ramp Too Steep.
    Just as new Field Sales Reps have to build their pipelines as they ramp their business, SDRs also need a few months to build their pipelines of QSOs. The usual 4-month quota ramp up of QSO for new SDR’s might be 0, 3, 5, 8 QSOs over the first 4 months. Again, making the ramp too steep will make the new reps look like they are underperforming , cause them to potentially be put on a performance plan, when in fact they may be actually ramping up appropriately.

If you stay away from these mistakes, the expectations for the team will be realistic. Avoiding the issues mentioned above also means that your sales pipeline will build predictably, and you will have a good chance to achieve your revenue goals. Keeping your team laser-focused is critical to meeting the goals set forth.

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