The Channel Sales Commission Conundrum
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Here's a trick question: What do salespeople do? What is their role in a solution provider's organization? Ah, you're right. They sell. They sell your products. They sell your services. They sell your expertise. They sell your brand. They sell your reputation. Now, what's the role of a sales engineer? If you say to consult and design systems that fit the customer's needs, you're half right. Increasingly, the role of the sales engineer is more about selling the engagement than simply answering technical questions and providing design specifications. Whenever the customer waffles, the sales engineer is the ace that swoops in, impresses with knowledge and, in effect, helps close the deal for the salesperson. Sounds like the perfect arrangement for the solution provider, since the synergies of skill lead to more and bigger deals. It's perfect until it's time for someone to get paid. Over the past few weeks, solution providers have come to me talking about compensation conflicts with their sales engineers or sales support teams. The conversation sort of goes like this: "I worked on the deal; I put in a lot of time and effort to help get the deal. So why is it that I'm not getting any of the commission or credit for closing the deal? Why is it that the salesperson is the only one who gets paid?" It's a fair question. The line between sales representative/manager and sales engineer is increasingly blurred as salespeople lean on their geeky counterparts to make deals happen. Sales engineers have the technical expertise to not only impart the specifications and benefits of a particular implementation, but also to cite in detail the comparative differences to competitive products. They are the "aces" in the sales equation. But there's a big difference between sales engineers and sales representatives: risk. As the CEO of one Midwestern solution provider recently relayed to me, one of his sales engineers recently asked for the same compensation as the sales reps that he supports. His argument is that he works just as hard on the sale and has near equal exposure to the client, and therefore deserves a piece of the action. The CEO offered to put the sales engineer on a commission plan that would have resulted in a substantial increase in his potential gross pay, but would require a 50 percent reduction in his base pay. This is pretty much the standard compensation arrangement for sales reps. The sales engineer declined the offer. He opted to keep his comparable higher base pay rather than risk the variable pay that comes with commissions. The idea behind commissions is to give sales reps an incentive to always be closing business. And commission plans are often lucrative to compensate for all the work that goes into proposals and deals that never come to fruition. Those fat paychecks--as well as contests and special promotions for sales staff--often cause dissention among non-commissioned staff for all the obvious reasons. What non-commissioned staff members don't often understand is that bonuses and commissions come with risks; sales reps don't get paid if they don't sell, and they only collect commission if they hit or surpass assigned revenue thresholds (or quotas). But here's the conundrum: Sales engineers don't get the entire risk-rewards equation. As this CEO relayed to me, the sales engineer who wanted commissions but didn't want the risk understood the pay dynamics until the next two seven-figure deals came in. That's when he returned to the CEO's office looking for a piece of the deal. This is not an uncommon issue, but it's one that solution providers will likely see with increasing frequency because of the changing nature of channels sales. Many vendors are looking to push the sales engineering burden (or presales support) onto their channel partners to save costs and increase the reach of indirect sales. Further, the introduction of cloud computing, professional services and holistic IT systems will mean greater dependency on sales engineers to complete sales. So how should sales engineers be compensated? Do they deserve a piece of the deal? Or do we need a whole new system for compensating sales reps and engineers? ![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=56d015b5-cc20-4308-aa17-89ca47e7ebf6) |
Comments (6)
Team compensation is always important. When an individual contriubutes to the bottom line of the organziation, it should be taken into consideration.
So many times the scenario arises similar to the Midwest CEO, who did a great job addressing he scenario.
But there is a points system that could be developed in a firm for those that contribute and help exceed expectations. Those points could be used as a factor to determine a quarterly team compensation for a team goal set by the CEO. The points could easily translate into a % and applied to an overall pool set aside if the goal is achieved. This could also be part of the annual bonus structure allowing not only sales engineers but other sales support members to participate in the compensation and overall success of the organziation.
So Yes, sales support should be included in a variable comp plan, but not at the same structure as a sales person for the reasons mentioned by the MidWest CEO.
Posted by Pete Busam | October 13, 2009 9:16 AM
No.
No commissions for technical staff, whether they assist in the sales process or otherwise.
Rather, include the technical staff in a bonus for the company's (or sales team's) group performance.
Also, the pre sales technical role ideally should be rotated among the technical staff on a monthly or weekly basis. Rotation is always a good thing for the technical staff and it allows ALL staff to cheer ALL salespeople.
If the sales team does X, then all members of the technical team get Y.
Everyone on the team is motivated to assist "Sales." There is no more (or less) "Us versus Them" mentality between salespeople and technical staff. And finally, ALL staff is aligned in the direction that bringing on new customers is good for all.
Since salespeople and technical staff have hugely different motivations and personalities, commissions should never be applied to a technical staff member - in rarely, if ever, has the desired effect of putting the "carrot" in the proper place.
Matt Makowicz
Matt@AmbitionMission.com
Posted by Matt Makowicz | October 13, 2009 10:02 AM
The Sales Engineer must not, in that case, have been much of a mathematician. Or, for that matter, much of a student of human nature.
Salespeople maintain their high compensation, and insure their routine tracking into even-more-highly-compensated executive ranks, in part by hyping the risk associated with what they do. And they build cultures around themselves (ie., VPs, SVPs and CEOs who are former salespeople) that validate this worldview. In fact, any high-tech product whose sale requires a 'Sales Engineer' is substantially being sold by that Sales Engineer, who answers the critical questions that arise after the customer says: "Sounds great, but will it work with my ...?"
Meanwhile, a trivial examination of the health of any company, the market viability of its products and its recent sales history will determine if, in fact, there's real risk associated with the sales job. Put simply: if the company is closing sales and meeting goals, the risk of being paid on commission is negligible. Otherwise, you wouldn't have any salespeople, or the salespeople you do have would have negotiated higher base pay. In freakshow economies like we have at present, this rule may not hold under all conditions, but its value for prediction is nonetheless remarkable. In any stable economy or growth market, it's like gravity.
Further, with respect to freakshow economies, the engineer might well consider the alt-side risk associated with _not_ being paid 'to help insure the success of the company.'
Posted by John | October 13, 2009 10:52 AM
I believe Pete and Matt are both right.
Sales Engineers are without question vital to the sales process and deserve an incentive.
In my opinion, since they are part of the 'sales team', they should be compensated on the success of the team and company.
I also feel that regardless of the size of any organization, every employee should be on an incentive program of some kind and that includes the 'Director of First Impressions'...the receptionist.
The fact is that the sales team is just one important component for any organization. Yes extremely vital, however so is the Logistic Manager in a 'just in time' environment, or the Marketing Director who could advance or destroy a product or brand, directly impacting the sales team and their pursuits.
Believe me, I have experienced this more then once, unfortunately.
The more incentives... the better in my opinion. Happy staff.. Happy clients.. Happy growth!
John D. Herrington
johndherrington@switchpoint.ca
Posted by John D. Herrington | October 13, 2009 11:14 AM
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Posted by Krish Mattel | October 13, 2009 1:17 PM
Terrible question -- because there is no right answer. If you feed the rep, you're always in a position to lose the tech. If you feed the tech, the salesrep might take off on you. Every environment is different and hence not one answer fits all.
Posted by John D. Marks | October 14, 2009 11:30 AM