Creating Competitive Advantage… Killer Commission Plans

George Roberts

August 24, 2010

We are now over half way through the year, so 2011 is just around the corner when it comes to putting together your strategy, budget and, in the end, the commission plan to drive the behavior of your sales teams to help you achieve your economic goals for the year.

As a former Executive Vice President of North America at Oracle, I have had a little experience in structuring compensation plans to drive sales force behavior to achieve the Oracle’s revenue and margin objectives. Now, as an operationally focused venture partner in Boston based venture capital firm OpenView Partners where we invest growth capital in expansion stage software companies, I still spend a fair amount of time with the founders, CEOs and management teams when it comes to structuring compensation plans.

I was doing my weekly reading when I came across a blog by Jim Keenan (writes a blog called “A Sales Guy“) discussing how to build Killer Compensation Plans that I thought did a really nice job of simply explaining the process you should go through to build your commission plans for the upcoming year.

The killer commission plan starts with two critical questions:

1) What do you want to sell?
2) How do you want the sales team to behave?

The questions Jim Keenan states that your team needs to answer are:

  • Where do we need the business to be? 
  • How much revenue do we need?
  • How much margin do we want? 
  • How many new customers do we need?
  • How much growth are we looking for?
  • How do we define success at the end of the year?

Once you have theses questions answered, you then need to build a plan to align and incent your sales team to do exactly that.

A few things Jim says to remember

  • Make the plan “simple stupid”
  • Don’t cap the sales plan
  • Include accelerators
  • Once you put them in place, don’t mess with them

So file this nugget away and pull it out at the right time when you need to build your plans for 2011.

All the best!

G

Venture Partner

<strong>George Roberts</strong> is a Venture Partner at OpenView. He enjoys partnering with companies and helping them achieve their goals through strategy, focus and operational execution. From 1990 to 2003, George spent 13 years at Oracle Corporation, most recently having served as Executive Vice President of North American Sales. While at Oracle, George was responsible for over $1 billion in revenue and more than 2,000 employees, reporting directly to the company’s CEO and Chairman, Larry Ellison.