Much as we like to think we can exersize an iron grip on our own destiny and the destiny of the sales people in our team, some things are beyond our control.
When a macro event like COVID-19, or a significant economic downturn occurs, we have to adjust to a new reality.
Part of that reality in sales is compensation – it’s the clearest signal we can possibly give to our teams to indicate what the company believes is important and what we want them to do. If the macro environment changes so that the comp plan no longer reflects our priorities, or becomes unattainable due to circumstances beyond our control, we need to adjust it.
That’s where many of us are right now.
There are many unknowns about how this will play out – so try to adjust the plan in fairly small increments – months or a quarter …. If you try to re-cast the whole year, there’s a strong likelihood you are going to have to do it again as more information becomes known.
Here’s a framework I’ve used before to try and organise compensation under pressure:
- Start with your data – honestly – and I mean honestly – assess where you are right now.
- Then assess the impact of the crisis on your particular business, by region, by industry, by segment.
- List what you can do to mitigate the impact – what do you stop doing? What do you double down on? What do you start doing?
- Identify the business gaps after the impact of your mitigation tactics.
- Focus comp adjustments on closing those gaps.
For example, it may lead you to a framework that looks like this:
- Data shows that I need 3x pipe on new business (NB), and 1.5x pipe on add-on business. NB closes in 180 days; add-on closes in 90. I am entering the crisis with total pipeline coverage of about 75% of what I would need in normal circumstances. My gap is 25% in normal times.
- Assessment in my business is that the crisis will delay new business by approximately 90 days, but will have a lesser effect on my add-on business in the business segments which can or will survive. The majority of my business is in USA and Europe; our strongest segments have been in transportation and leisure, but we have seeded business in new segments like hi-tech and security which we were intending on expanding into.
- Mitigation could look like this:
- Stop short term demand generation for net new business in transportation and leisure
- Double down on short term demand generation for hi-tech and security – it may end up taking a longer deal cycle to close, but will be important in 6-9 months time
- Double down on contacting and listening to all your customers – you want to keep the ones you already have in troubled industries, and look for expansion in those industries less affected.
- Build specific package offerings to bridge customers through this period – this may include 12 for the price of 10 month contracts; or contract suspensions; or payment terms you’d normally prefer not to take – whatever these are, don’t fall for the ‘we’ll do this ad hoc as needed’ – put some framework in place so, that in trying to be flexible, you don’t actually put extra sand in the gears.
- The business impact even after mitigation may be harsh: pipeline coverage will likely fall to 50% of what is needed to hit near term numbers due to a combination of longer deal cycles and fewer deals in pipe likely to close.
- You make a comp adjustment to drive the behaviour you need, which could include:
- Next quarter targets reduced by 50%
- Spiffs on target industry deals
- Spiff on pipeline creation (I normally hate paying on pipe, but there are ways you can accommodate this … say by increasing commission on deals created in this quarter which close in the year…)
- MBO’s around retention/renewal – in a crisis, your existing customers are inevitably the ones who keep you in business
The most important thing is to recognise that a comp adjustment is needed – burying your head in the sand while your troops wonder how you got so out of touch is not the way to go. Value speed over internal shenanigans which involve folks who are not at the pointy end of revenue trying to boil the ocean, and create fully scoped risk free plans – they don’t exist in a crisis! Only bite-sized increments of forward momentum, which you can build on, to retain the spirit and camaraderie which is so critical in any successful sales team.
Board of Directors | XANT