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Does your sales compensation plan inspire teamwork between inside sales and field reps?
Brent Holloway, senior manager of global inside sales, enterprise security products at Hewlett-Packard, shares the techniques he uses to motivate reps to work together.
Holloway recently discussed some of these best practices at the Sales Acceleration Summit. You can watch his presentation — “Growing Revenue Through an Inside Sales Strategy” — here.
He tackles sales compensation in more detail in the Q&A below:
1. How can you structure your comp plans so that they encourage teamwork between your inside sales and field sales teams?
For territories where quota-carrying inside sales reps partner with field salespeople to cover the same territory or the same named accounts, it’s important to ensure their objectives are aligned. In this type of a teaming model, field reps should earn credit for all opportunities in their territory or named account list, even the smaller ones where the ISRs (inside sales reps) do most or all of the selling. This policy encourages teamwork with the ISRs and enables the ISRs to engage the field reps when necessary.
Whether the ISRs should have a quota based on deal size caps or thresholds or share the full quota with field reps is a subjective issue, and each model has its pros and cons. For example, in the model where ISRs have deal size thresholds, they would be financially rewarded to keep opportunities under a certain size unless there is a mechanism that protects them when they grow an opportunity above the threshold. In the model where ISRs share the full quota with no deal size thresholds, their success will be much less under their own control or influence if the majority of the revenue comes from large, field-led sales.
For specific products or market segments that are sold to only by inside sales (assuming your analysis shows that teaming with field sales is not required or justified in these areas), the field should not see a conflict, assuming they did not take quota for these products or market segments. In some cases, this can be a good thing to keep the field salespeople focused on other areas.
Some companies deploy a mix of inside and field sales models, such as a teaming model for named accounts and an ISR-only model for the SMB market.
2. What kind of teamwork are you trying to foster?
Our goal is to align the optimal sales resources with the right opportunity types to maximize results. You can have a teaming model that encourages cooperation when needed even though the ISRs and field reps are generally focused on different types of opportunities.
Many call it “divide and conquer.” For example, the ISRs may manage the majority of the smaller transactions or smaller account types while the field reps manage the majority of the larger transactions, with some exceptions, and the teaming model allows this to work.
Deal size alone is not a perfect criteria for determining whether an ISR or field salesperson should manage an opportunity. Some smaller opportunities are very strategic and may make sense for a field rep to lead the selling effort, such as an initial pilot sale to a large strategic account. On the other side, some larger opportunities are transactional and may be closed successfully by inside sales without field engagement.
The size of the ISR target “threshold” is unique to every business, and depends on what types of opportunities can be successfully sold by inside sales, or by inside sales combined with channel partners.
3. What are the most common comp plan mistakes?
One mistake is expecting good teamwork when the sales team’s objectives are not aligned.
A second mistake is expecting salespeople to do the right thing for the business when it is detrimental to the salesperson’s earnings, such as penalties for growing the size of an order above a threshold.
Another common mistake is making the plan so complicated that the salespeople struggle to understand how much they can earn on an order or how to focus their time to align with corporate objectives. For example, if the company offers a spiff or bonus to sell more of a specific product that is falling behind to help it catch up, the incentive may enable the sales team to earn more commissions while producing less revenue, which is a double whammy for the business.
4. How do these comp plan mistakes hurt sales performance?
For example, if there are 20 ISRs on a sales team and each one limits the size of just one opportunity per quarter because of their concern about earning less if they grow the size of the order above a threshold, then the business really suffers by having 80 opportunities limited in size over the course of the year.
5. You recommend that comp plans should encourage teamwork, even if that means double-paying the ISR and the field rep because the additional cost can be offset by additional quota. What happens if the comp plan doesn’t double-pay or encourage teamwork in some way? How can that affect sales performance?
I experienced a six-month period several years ago where the ISRs and field reps shared the same accounts. Only the ISRs were paid on orders up to $75,000, and only the field reps were paid on orders above $75,000. This essentially made the ISRs and field reps competitors with each other in a shared territory.
It’s difficult to know exactly how much business was lost and how many opportunities could have been closed for a higher value, but it led to major sales team conflicts. Then, the executives approved a rare midyear comp plan change so the field reps would earn credit on all orders in their shared territory. There was a modest quota uplift to account for the change to make it cost neutral from a finance perspective, and it made a big, positive difference in the effectiveness and cooperation of the sales organization.
I have heard other sales leaders share similar negative experiences with a sales model where only the ISR or field rep earns credit on an order in a teaming arrangement where they share responsibility for the same accounts or territory.
6. How does it affect sales performance when you get this right?
Quota-carrying inside sales professionals can manage and close a lot of business from their desks, especially add-on/cross-selling orders to existing clients, which keeps the field focused on the larger, more strategic opportunities.
As an example, if a field salesperson has a $4 million annual quota, then the hourly quota equivalent is $2,000 per hour per business day, and that’s assuming the rep has 40 hours of selling time per week, which is aggressive. If the salesperson actually has 20 hours of selling time per week, the rep must close an average of $4,000 per selling hour. Field reps can’t afford to spend a lot of time working $5,000 or $10,000 opportunities to make their annual quota.
How much time are your field salespeople currently spending on opportunities that could be handled by inside sales? If each field salesperson sold one additional significant order per year, because they had more inside sales coverage to manage more of the small to mid-sized orders that do not require field sales, how much more would your organization sell per year? These are the types of questions that more companies are evaluating and help to explain why inside sales is growing faster than field sales.
Growing inside sales does not need to limit field sales, but rather it can make field salespeople and the organization more productive.
7. Can you provide any specifics on how to structure this type of comp plan effectively, so that it drives the right behaviors but doesn’t kill the business?
If the ISRs have deal size caps, it’s important for the ISRs to have some reward for growing the size of their opportunities, such as an “over the line” or “baton zone” where the ISRs are not penalized for growing the size of the deal. If an ISR has an “incremental” quota based on deals of a certain size and a second “total” quota that is shared with the field, then the “over the line” or “baton zone” bonus or program would credit the larger order against the incremental quota up to the threshold; therefore, the ISR is not penalized.
This generally involves an approval process with sales ops and sales management to ensure each exception is justified. Finance can make this type of a program cost-neutral by factoring it into the quota-setting process.
8. How does the math work on this type of comp plan? What kind of sales increases can you expect to see? How do these increases stack up against the increased costs of double-paying?
Let’s review a simple example:
ABC Software had a business unit with 20 field salespeople and minimal or no quota-carrying inside salespeople. The field was spending a significant amount of time working small to mid-sized opportunities that made it difficult for field reps to exceed their $2 million annual quotas.
But these small to mid-sized opportunities could not be ignored, as they often represented new customers that grow over time or add-on purchases from the existing customer base that are highly profitable.
ABC Software then made an investment in 10 ISRs in a team model to manage many of these opportunities, enabling the field reps to focus more time on the largest, most strategic opportunities. As a result, each field salesperson sold one additional “larger” opportunity throughout the course of the year. Each field rep then averaged $2.4 million in sales the following year. And each ISR produced an additional $2 million in qualified pipeline through various calling campaigns, which produced an additional $6 million in sales, based on a modest 30 percent close rate on that new pipeline.
Overall, the ABC business unit increased annual sales by $14 million, a 35 percent increase, from an ISR team investment of approximately $1.8 million loaded with benefits.
9. What other advice would you give to a sales leader who’s trying to create a comp plan that encourages teamwork between inside sales and the field?
There seems to be a fairly common misperception that double-paying a field rep and the ISR on the same order is expensive. But if the quotas account for this, it should be cost-neutral.
Also, in a teaming model, the cost of paying the ISR and field salesperson can be a small investment relative to the value of having a more effective sales model that keeps the field primarily focused on larger opportunities while having the flexibility to engage on smaller, strategic opportunities as needed. Run some what-if scenarios to evaluate the trade-offs between various ratios of inside to field sales and the resulting quotas.
About Brent Holloway
Brent Holloway leads the Worldwide HP Enterprise Security Products Inside Sales organization, with a team of six managers and 53 ISRs. He has nine years of inside sales management experience building inside teams for Blue Pumpkin Software, Verint Systems and HP.