Solving Sisyphean situations with sales compensation plan benchmarkingBy: Alexander Group Sales Benchmarking, Sales Strategy
King Sisyphus was extraordinarily crafty, but also devious. As a punishment from the gods for his trickery, Sisyphus was made to roll a huge boulder up a steep hill, but before he could reach the top of the hill, the rock would always roll back down, forcing him to begin again. The maddening nature of the punishment was reserved for King Sisyphus due to his hubristic belief that his cleverness surpassed that of Zeus. Accordingly, pointless or interminable activities are often described as Sisyphean. Sales organizations that grow really fast often develop a very unhealthy bi-modal performance pattern, creating a Sisyphean situation for new hires. Take for example a recent software client of ours who has enjoyed double digit growth for several years. The strong top line growth would seem to indicate a healthy, successful sales force. But when we examined their sales productivity at the rep level it told a very different story:
- 30% quota over-assignment from EVP to Rep level (industry norm is 8%)
- Only 30% of sellers consistently achieved quota (55% is best practice)
- One size fits all comp plans with steep ramps delivering low pay for under achievement and steep acceleration beyond quota, “feeding the eagles, starving the turkeys”
- More than 2 year ramp time to reach full productivity (industry norm is 6 months)
- 22% turnover (>2x higher than industry median of 8%)
Analysis of their sales performance distribution revealed the dreaded bi-modal curve – a sales force of “haves” and “have-nots”, where the more tenured reps consistently outperform while the new hires consistently struggle and eventually churn (see graph below). Managers treat their top performers with kid gloves, afraid that they might leave. And the top performers sell internally to maintain the best accounts and lowest quotas, leaving the new hires saddled with the least desirable “greenfield” accounts and the extra quota assignment.
Unlike Sisyphus who was sentenced to his lot in life by Zeus, new hire reps are lured in by the impressive top line growth and opportunity for huge upside pay achieved by the few top performers.
The result: new hire reps that are set up to fail, and a sales force that is costing the company 2x the industry average in sales E/R. This inefficiency is masked when companies are growing +25% a year, but the moment growth slows down this model become costly and unsustainable. Problems can also arise if there is a shift in the type of selling required. When the company grows through acquisition, and develops larger, more complex solutions (as is the case with this software client) even the tenured “high performer” reps may not be able to adapt to a more complex, collaborative solution selling model.
Our new service to benchmark sales compensation plans enabled us to reveal these issues to the client. To address this situation we offered the sales leader several recommendations. To start, begin ramping down the excessive over assignment and redesign the comp plans to align by role. Next, implement opportunity-based quotas. And finally, conduct a comprehensive evaluation of the sales coverage model, roles, and enablement needs to allocate investments appropriately. These steps are easier said than done, and the story about this client is not over. But if this client takes our advice, the next chapter will show how good sales leadership can equip the bulk of their sales reps to push that rock up and over the hill.
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Original author: Paul Vinogradov