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Discover all the steps and best practices to build a successful sales rep policy!
"Whether you're a CEO or Sales Director, the sales compensation plan is probably the most powerful tool you have to drive sales strategy."
Mark Roberge, VP Sales at Hubspot.
As Mark Roberge puts it very well, the construction of the sales compensation policy is a real strategic issue.
Indeed, designing or reviewing compensation plans is not only a powerful motivational lever for sales reps, but it is also a source of competitiveness for the company. According to a study conducted by Primeum, comment-remunerer.com and MeteoJob, 87% of managers believe that introducing variable pay is useful.
But where to start? What steps should you take? What elements of variable pay should be included? How should fixed and variable pay be divided?
Qobra is an expert on the topic and gives you all the keys you need to develop an attractive and effective compensation plan policy!
Among the many benefits of having a successful commission policy, the following are the main ones:
"There's no mystery about it, a good variable pay plan drastically impacts retention, motivation and performance."
Vladimir Ionesco, Director of Global Sales Performance at Doctolib
These benefits are easy to see for anyone wishing to implement or review the remuneration policy for the sales team. However, the question of which remuneration elements should be included often remains a complex challenge...
Initially, although different, the remuneration policy for sales teams should follow similar rules as for the rest of the company.
Among the basic remuneration elements that can be found in a global salary policy, here are the main ones:
However, these elements are not enough for the company to enjoy the benefits mentioned above, such as retention, attractiveness, motivation, etc. Indeed, sales force remuneration is a special case and has its own objectives.
Today, one of the first points of attention for salespeople is variable pay, in other words, commissions or bonuses. Determined according to their individual performance, it represents an important or even majority part of their overall remuneration.
"The first motivation lever for Sales Reps comes from the bonus. They are sportsmen at heart and this notion of reward versus effort versus merit is absolutely key."
Vladimir Ionesco, Director of Global Sales Performance at Doctolib
Before embarking operationally on the implementation or review of the variable pay plan, it is essential to find answers to the following questions:
"There is no magic formula for building a good variable pay plan. Instead, there are key principles to keep in mind, and the first is alignment with the business strategy."
Aude Cadiot, Revenue Operations Lead at Spendesk
The answers to these questions are therefore essential for shaping a variable pay plan. In particular, they will help to set a framework for its design.
Before going any further and getting to the heart of the matter, here are 5 essential rules to keep in mind when drawing up a variable pay plan:
As we will see below, commissions can vary between different populations and positions in the company. However, the rules we have just mentioned are valid and applicable to all.
For a variable remuneration policy to be effective, it is essential that it is adapted to its beneficiaries, and in particular to their objectives. Indeed, each sales team is composed of different teams, each of which has specific qualitative and quantitative objectives. It is therefore logical that their remuneration is structured differently.
In general terms, here are the different positions that can be found in a sales team, and their associated objectives:
Tailoring the variable pay plan to each team in the sales department therefore makes it possible to meet all strategic objectives. It is a way of rewarding each employee according to his or her performance, while maintaining equity between teams.
Although there is no single answer because the "risk-reward balance" is specific to each company's objectives, there are a few rules to follow to determine the ideal split between fixed and variable pay.
Firstly, it is strongly discouraged to go to extremes, either in terms of fixed or variable pay. In concrete terms, this means that it is unwise to spend 10% or less on fixed or variable pay.
Indeed, in the case of a variable remuneration that is too high, the majority of candidates refuse to join the company because it leads to too much pressure and instability. Moreover, it is difficult for them to project themselves on the feasibility of their objectives.
Conversely, a variable remuneration that is too low will lead to a loss of motivation on the part of the sales teams and therefore to high turnover.
To avoid negatively impacting the levers of attractiveness, motivation and retention, here are a few examples of the distribution between fixed and variable remuneration according to the different professions in a sales team:
It is important to note that the above variable shares are also to be adapted according to the following variables:
"The split between fixed and variable pay should be continuously reviewed in line with the maturity of the business and the products."
Vladimir Ionesco, Director of Global Sales Performance at Doctolib
Last but not least, communication. Indeed, in order to reap the fruits of the work previously accomplished, it is essential to communicate in a clear and transparent manner, without which, variable pay will have little or no impact on the attractiveness, motivation and loyalty of sales teams.
Here are some basic rules to ensure that variable pay schemes are well communicated:
However, without tools, following the above rules to the letter is very time-consuming and requires a lot of time and energy from the teams involved.
Today, too many companies still complete all the previous steps but manage the subject of variable pay with ill-adapted tools such as Excel or Google Sheet.
"Excel involves formulas that are sometimes broken, calculations that are sometimes a bit opaque since Sales didn't necessarily understand them and, above all, ergonomics that are not as obvious as Qobra."
Clément Bouillaud, Director of Operations at Partoo.
According to a study on variable commissions in France carried out by Qobra and Modjo, 68% of employees who use Excel or Google Sheets to calculate and manage commissions are not satisfied. On the other hand, 85% of employees who use commission calculation and management software are satisfied.
Indeed, there are many disadvantages to using these solutions: manual entry, opacity, no connections with the CRM and payroll software, lack of visibility, no sales emulation (SPIFS), time-consumption, etc.
Results ?
Lack of commitment and motivation from your teams, waste of time for people in charge of variable pay, high turnover and lack of attractiveness. In other words, the exact opposite of the benefits promised by variable pay (the cobra effect).
It is therefore essential for the company to have a tool that enables it to deploy and enhance its variable pay policy. In its selection, the company must in particular favor a tool that:
A set of requirements that Qobra meets with its commission calculation software.
"As we know, the best sales people pay a lot of attention to their variable, so they very often want to know where they are in achieving their goals. With Qobra, you can directly see in real time, as a Sales person, on your dashboard, how much you are going to earn."
Matthieu Saroli, Enterprise Account Executive at Didomi.
A successful sales remuneration policy is a source of attractiveness, motivation and team loyalty. However, there are several rules to follow to make it work, namely to create a compensation plan that is simple, linked to the company's objectives, fair, transparent and easy to implement.
It should then be adapted to each type of function in the sales team, i.e. Account Executives, SDRs, MDRs and CSMs. Then, depending on their function and other peripheral variables, the share of variable pay in the total remuneration should be determined.
Finally, it is essential to properly disclose and deploy this commercial remuneration strategy by following communication recommendations and using tools dedicated to the management of variable remuneration.
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