Jeff Wood: Hi, I’m Jeff Wood. I’m a principal with Alexander Group and co-lead our FinTech practice. And I’m joined here today with Brent Carter, a director at the Alexander Group who’s here to talk about some of the key trends that we’re seeing in the FinTech space relative to compensation.
Brent, thanks for joining us today. A couple of key questions, just to start out with what you’ve been seeing recently, how are you seeing firms in this space where they have a very product or GM-led organization maintain focus in sales compensation, where they just don’t make things too complex if they have many products.
Brent Carter: Thanks, Jeff. Some of the trends we’re seeing here are that when you have a GM and product led organization, you’ve got a lot of different objectives that are trying to be pushed to the sales team and the way firms best mitigate and best manage that is by really keeping a structure in a governance process in place to ensure that the GM leaders are only allowed certain components in the plans, and that we don’t end up with situations where there are 25 different things for sellers to focus on, in which case it allows them to kind of pick and choose their desired objectives and desired outcomes, which those which then does create misalignment between firm and company objectives and ultimately what sellers are trying to do from the ground up.
Jeff Wood: Brent, that can vary depending on the life cycle of the organization. If they’re more early stage emerging company where they’ve got 2 or 3 products, I’d imagine they probably have different issues that they’re probably going to wrestle with. And if they’re more mature with a platform and they have hundreds of SKUs. Can you talk a little bit about kind of how you see that or what some of those problems are? If you have hundreds of SKUs, versus maybe you have 2 or 3?
Brent Carter: When you start to get a proliferation of SKUs and focus areas there, you end up having situations where firms will want to try to make sure they pick the 2 or 3 most important things that align back to this year’s corporate objectives, align back to the firm’s growth strategy. And so being very clear with the sales team around what the real important things are. But there’s also considerations and levers that companies can pull to make sure that we don’t overemphasize or overfocus on things, but make sure that we balance that between what’s most important for the company, what’s going to drive behaviors for the sales team, and what’s going to ultimately create value for the organization as a whole.
Jeff Wood: Great, thanks, Brent. I know one of the things you and I have seen over the years with a couple of clients is it really helps if organizations can make sure that their C-suite and executives are very aligned on what’s the difference between strategic products that need to be emphasized versus how do we peanut butter spread prioritization. So having that kind of stacked hand leadership on where to focus really can help simplify and streamline so that it’s more focus. Related to that is to kind of pivot to maybe one of the other key issues. That’s a common trend here. Can you talk a little bit about how companies are thinking about balancing revenue and profitability within the organization and their comp plans today?
Brent Carter: Yeah, that goes back to a project you and I worked on together where the company made a pretty big paradigm shift between year one to year two, where they were entirely revenue focused one year and then the organization said, you know what, we really care about profitability this year. So the sales comp plan had a bit of a whiplash effect, where sellers for years built a pipeline focused on revenue, thinking every dollar was green for them and not really focusing on what was most profitable for the organization. So in that sales comp shift happened, the organization ended up with a bunch of pipeline, a bunch of sales teams who were generating low margin but high dollar products. And so from a comp standpoint, it’s being very clear about the transitions and the emphasis on what’s the desired outcome for the organization. When you have those big, big shifts, it’s imperative that we really balance in the comp plan both objectives to make sure that the sales team is filling the top of the funnel with high-value products, but also high-dollar products to make sure the company meets both top and bottom line goals.
Jeff Wood: I know one of the things that can happen if you have a product portfolio where there is a very significant difference between call it the revenue value that a product delivers versus the margin value, and you’re using different measures. Overnight, if you cure a whiplash point, if you were to change immediately, you can actually create a huge swing in sales behavior, possibly unintentionally. In some cases where all of a sudden your pipeline may immediately shift away from some products where you’ve actually over-rotate and your pipeline is not balanced. Can you talk a little bit about that, or maybe some things that you’ve seen or things companies can do to avoid that as they think about compensation?
Brent Carter: When those big shifts happen which again they may based on corporate-level objectives or market trends. But from a sales comp standpoint, we want to make sure is that the comp plan tries to really create that balance, which is when we have an organizational goal shift that the sales team is focused on the right activities, the right outcomes. Because what can happen to your point, Jeff, is we make a shift from revenue to profitability as the gold standard within the organization. And so sales team members might say, okay, you know what, i’m going to go out and generate the most profit margin that I can. But if I’m not still focusing on products that create large revenue dollars, so it’s more about the quantity of revenue dollars more so than any percentage points or, or marginal gains around there. And so making sure that sales teams are still generating the right dollars and the right outcomes from that standpoint.
Jeff Wood: I know one of the things that we really stress to clients remind folks that are asking this about this when we’re talking about this in briefings, one of the things that they’ve got to be prepared to do when they’re facing this is they’re going to have to really make sure that they have a team available or that they do a deep dive analysis on scenario planning and modeling to understand what the impact is, not just to the seller, but expected impacts to the organization as you begin to rotate and shift from revenue to margin or balance, depending on the direction that you’re going. Let’s shift a little bit. We know it’s fairly common in FinTech. It’s not always the guiding role, but um, they’ll be bifurcated coverage models. Right. So you separate and you have hunters and then you have farmers. And that works for much of the market, but it’s not always going to be the case in every situation. You really have to look at the strategy and the market that they’re in. Brent, can you talk a little bit about what you’re seeing with hybrid deployments and how that impacts coverage and compensation?
Brent Carter: A lot of organizations will have pure hunter teams. They’ll have pure farmer teams or some balance between those two. And it’s really down to what territory the seller owns, what customer set, what subsegment they’re focusing in on. When you have situations where you’re trying to drive consistency and simplicity in the comp plan, but also trying to manage across those hybrid deployment differences, those situations where one size fits all plan is not going to end up driving the right behaviors. So, in order to balance simplicity with specificity in what a salesperson’s paid to do, there’s a lot of levers that organizations can pull. What ends up being an easy thing to do is consider SPIFs. But that creates a lot of downstream implications and a lot of confusion and misalignment of dollars and objectives. And so what we’ve seen a lot of organizations do in this space is be very clear about what the primary measure in the plan is, what the right objective for the salesperson to drive to is. And there’s a lot of other levers that organizations can pull to provide additional credit or to provide additional focus in certain areas when maybe one territory is more greenfield than another’s, but still allowing those two people to have the same comp plan structures for simplicity. The implication that is that we have to be very clear from an organizational standpoint on what the right quota setting methodology and rigor is to ensure that we don’t have overpayment or underpayment in situations where attainment ranges do differ.
Jeff Wood: Those are great points, Brent. SPIFs can be very powerful and a lot of companies and certainly sales often loves the SPIF programs. To your point, you can’t overuse it. You can’t let it cannibalize your core plan in the true sales behaviors that you’re trying to drive at the core of the plan. So you have to have the right budget. You have to have the right, call it vest or market practices that you’re following to make sure you use Spiffs the correct way, If anyone is interested in that, at Alexander Group we see this quite a bit. We do have a briefing that’s available on best practices. So if you’re interested, feel free to reach out to us on our website and contact us. We can make sure we can give you a briefing on best practices. What do you think that right balance is so that you don’t cannibalize that plan and the actual space you use will of course vary. But there’s some certainly guiding principles, principles we can provide. And then in closing, I’d just like to say if you come to our website, if you have questions on sales compensation, if you have questions around a briefing topic that you’re interested in, feel free to reach out to us. We’re more than happy to have a comp expert or a team sit down with you for 20-30 minutes and talk about your specific issues and what you’re looking at, and happy to cover any briefings and questions that you have. Brent, thank you so much for your time today. We really appreciate the insights.
Brent Carter: Thank you. Jeff was great chatting.
