Quang Do: Hi everyone. This is Quang Do with Alexander Group, principal in our media practice, and I’m excited to share some insights along with my colleague Yang Liu on what’s happening in AdTech and how you, as commercial leaders, can plan for successful 2022 and beyond. Very excited to introduce Yang Liu director who focuses his time in media, to talk about a topic that I know is top of mind for all of you: the Race for Talent, how are organizations attracting & retaining top talent they need in order to deliver the results that their customers are demanding.
Yang Liu: Thanks, Quang. Today, I think some of the top issues in talent that we’re seeing are both satisfaction with the job, also, some thoughts from the community around sales compensation plans that folks are participating in, as well as things like target total compensation and equity. So we’ll talk about a few different things, but I want to highlight really what we’re seeing in the AdTech space with regards to productivity, revenue productivity that is and as well as the pay for performance philosophies that we’re seeing.
Quang Do: You mentioned comp, you mentioned equity: what are some of the other elements that may be coming into play? Are people are they being fatigued with the pandemic now going on it’s third year? Are they moving because of titles and a different career path? Are those things you’re seeing as well?
Yang Liu: Yeah, definitely. I think job satisfaction and job equity, as well as fatigue, are really top, top issues right now that we’re seeing in the market. With regards to fatigue, you’re definitely feeling the strain that people have of, as you said, entering the third year of a global pandemic. But with regard to job satisfaction, I think one of the biggest drivers we’re seeing is career pathing. So if folks have a good sense of career mobility and transparency and they understand how they can take their jobs from where they are today to maybe a future leadership path or a future senior individual contributor path, that really helps when that is used in concert with a strong compensation program. All right. From a data standpoint, I think some of what we’re seeing that’s pretty interesting in the AdTech space is that seller productivity, so the revenue per rep is going up and it’s been going up pretty steadily for the last four or five years. Now, what’s also interesting alongside that is the efficiencies are improving as well, meaning the expense per seller is going down as that revenue is going up. But it’s not all expenses. In fact, we’re seeing sales compensation expenses going up quite dramatically actually at around 14%. So what that tells us is as seller productivity increases and overall efficiency increases, the focus for what we call pay-for-performance is really poignant, meaning we want to create differentiation for low and high performance, and we want to reward that high performance at the top of the market.
Quang Do: The job of a seller in the world of AdTech is it the same job as it was five years ago or even, say, three years ago?
Yang Liu: Ah, the job, I wouldn’t say that the job is transforming too much. I mean, the role of the AE is still your sort of priority role to go and get new business into the organization to going out. And traditionally we’re calling them hunters, right. I think what’s changing in the role is that the amount of time that the AE spends with that new customer before we kind of consider it an existing customer is a bit longer than what we’ve seen before, as well as when that AE brings on the next point of sales, which is the customer success or account management role, that’s becoming really important in that role, I think is actually changing far, far more than the AE as well as helping to really drive this pay-for-performance differentiation. Meaning traditionally speaking, if these roles in account management or campaign management were a bit more technical in their nature, meaning, hey, I’m just worried about pulling levers, making sure optimization is working. Now they have to take that story and translate it into Well, Mr. and Mrs. Customer, we’re optimizing your campaign or your optimizing your co-managed self serve, can we get more of your dollars? So, so those account management roles are a lot more what we call revenue accredited. So one quick thing we want to talk about with regards to sales compensation is it’s a bit of a misnomer in the industry when most people talk about, hey, what’s wrong with my sales compensation program, what’s broken in my sales compensation program? And I think folks tend to drive directly to one of these component guideline issues, which is, oh,
Yang Liu: I don’t know if I have the right payments or I don’t know if the right roles are on the right plans or if we have the right amount of upside. We typically hear a lot of times: I’m worried that we pay our top performers too little and we pay our bottom performers too much. And so they’re particularly worried about leverage and upside. But as you can see from this material here, you know, Alexander Group’s point of view on sales compensation is a bit more holistic. It’s more of a program management. And we like to look at this from a few different valences, starting with what’s the goal of the program and the next layer being: what are the guiding principles? So when we look at sales compensation program assessments, we like to assess anyone’s program based on how well the sales compensation plans are delivering against the guiding principles that you’ve set for yourself, as well as how do they fare against market practices.
Quang Do: Yeah, I can’t help but wonder, especially looking at that second row around guiding principles. There’s so much in there, right? When you think about the alignment of strategy, keeping it consistent, making motivational market competitive, who needs to be at the table to make those decisions? Is it sales? Is it sales maybe HR and finance? Who should be involved in laying those stakes in the ground, as we’ll say?
Yang Liu: That’s a great question. And our typical project will involve what we call a steering committee that actually reflects a lot of different functional leadership because it really takes that collaboration to establish the guiding principles. So that means sales leadership is involved, finance leadership is involved, HR leadership is involved. And that really, again, helps an organization set the North Star for design. And the last topic I want to talk about is what we call a pay-for-performance philosophy. So again, on the topic of differentiating between high and low performance, well, the first thing that I think AdTech companies are really grappling with today is really defining what is high performance? What is that top-level performance that we’re striving for? And sometimes it begs the question, is a dollar, a dollar? We tend to ask that a lot in media when you especially have competing streams of revenue. So in the AdTech space, I think the biggest streams of revenue that we see right now are managed, co-managed, and completely self-serve. A lot of companies are actually trying to move from a managed-services environment to more of a self-serve or more of a mix between co-managed and self-serve.
Yang Liu: The reason being that those two revenue streams, self-serve especially, has a much stickier relationship with the client. You tend to get a much higher volume and better retention of the customer. So, as we look at these different pay-for-performance philosophies, the thing I might call out is that during the pandemic, what we saw was a lot of flattening of pay curves in the market, meaning that companies took the risk out of plans. But in doing so, they also took a lot of the reward out of plans. And you can see that line right there, the sort of what we call “nice place to work effect” because of that. Now, as we move into kind of phase two of all of this, we’re actually noticing companies are purposely designing for plans that align more to that market tracker type philosophy that you see on there. Some are even moving more into that Darwinian type of philosophy. And again, it’s because they want to drive that top, top performance, and they want to create differentiation in the plan once again.
Quang Do: Is there a preferred model for those that are really aggressively trying to combat some of the attrition drivers that you mentioned earlier?
Yang Liu: I think a pay-for-performance philosophy is extremely important in the context of attrition and really retention of talent. Sometimes organizations are going to struggle with their pay levels when they compare to some of the other organizations that just simply say from a target total compensation perspective, we’re going to pay at the top of the market. We’re going to aim for above the 75th percentile of the market for total pay. Some of the companies we work with just simply can’t do that, but what they can do is take their pay-for-performance philosophy and apply it to their sales compensation programs and say, we’re going to drive for really great differentiation in our low, medium, and high performers. And our high performers are going to have the chance to earn really, really market competitive upside, leading market competitive upside. And that can offset some of the issues that incumbents see with regards to total target, total compensation. We actually see companies apply this pay-for-performance philosophy almost regardless of what industry we’re playing. These are just prevailing pay-for-performance philosophies across different sales organizations. As we dig in a little bit further into I’ll start with that media or digital media layer, typically we’ll see more companies deploy the again, market tracker type philosophy we’re seeing some to that Darwinian. AdTech especially I think is an industry where the growth has really pushed some of our bigger players in that spot to go from ‘nice place to work’ to market tracker.
Quang Do: Yang, thank you again for taking the time to walk us through this to share insights. I know others will have a lot of questions and I welcome to reach out to you and the rest of the media practice. And thank you again for your time.
