XaaS Sales Compensation Symposium Highlights
The Alexander Group along with over 50 participants from leading technology companies gathered at DocuSign headquarters to discuss the latest industry trends, share best practices and network with their peers.
The event opened with a discussion on Rule of 40 to show how sales compensation plans need to support company growth and profit goals in order to support its strategy. Sales compensation is one of the most important levers leaders have to drive sales strategy and goals. However, knowing how to align compensation to sales strategy in the XaaS world is complex because companies have a myriad of focuses.
The discussion continued with a panel of sales compensation leaders including Ely Lai from DocuSign, Peter Lukens from Snowflake, Brent Corbett from VMware and Diane Lista from SAP.
They delved into six common strategic challenges on how to align incentivized pay to:
- Revenue Prioritization (New vs. Expand vs. Renew)
- Strategic Offering Focus
- Hybrid’s XaaS Focus
- Multiyear Treatment
- Consumption Compensation
- Payment on Services
Panelists shared a variety of solutions—including refined job design and rules of engagement; separate farmer and aggressive hunter plans; separate measures (software vs cloud or growth vs. renewal), hurdle (new logo hurdle), add-on bonus (services, new logo, new product sales, multiyear), credit uplifts (cloud, multiyear), and new product credit with no quota.
We then facilitated six breakout sessions that dug deeper into the challenges of compensating new and emerging roles. Key takeaways included:
Compensating Changing Core Sales Roles
Due to the importance of the customer relationship beyond the initial sale, there has been an evolution back to a holistic AE responsible across LAER (land, adopt, expand, renew).They act as the quarterback bringing in relevant resources for customer success, renewal or specialty sales. To support this behavior, the majority of companies incentivize AEs on renewal (at a lower rate) and frequently leverage various compensation tactics to specifically drive growth in new logos and cross-sell.
Compensation Specialists and SEs
Companies use different types of sales specialists. The deployment can vary significantly between organizations. It is increasingly important to justify headcount investment, prove ROI and continue to try to mainstream those jobs to manage their cost of sales. Pay mixes vary from 50/50 to 80/20 and depend on whether the specialist is brought into opportunities or has responsibility for developing their own.
Sales engineer level of technical persuasion depends on their focus. Most companies put these roles on a sales compensation plan with 80/20 to 70/30 pay mix.
Where specialists and SE teams are widely deployed: While not optimal, most companies use large “galactic” measures; however, some use key sales objectives (KSO’s) to track and reward individual sales efforts.
Compensating CSMs and Measuring Adoption
All companies use the CSM to lead or support the adoption motion, although some are adding renewal and/or upsell responsibility. Participants are experiencing rules of engagement challenges after the initial sale and expansion opportunities. Approximately 40% of participants put CSMs on a sales incentive plan with team-based sales targets and/or MBOs with the goal of driving alignment and reducing friction between CSMs and AEs. The role of the AE is under pressure from digital resources and the CSM with revenue-generating activities no longer the exclusive domain of the AE. Measuring adoption remains a major challenge and ‘simple’ measures such as daily active users are being used given administrative challenges of more complex adoption formulas.
Compensating for Channel Roles
The channel ecosystem is becoming more complex with partners playing multiple roles (sell-to, sell-through, sell-with), making it hard to place each partner in one box. Additionally, more business is coming from and more partners are playing a part in a sell-with motion (e.g., SP, MSP, SI, OEM). Companies in the forefront of this trend are merging their internal partner manager jobs as well as their partner incentive programs (e.g., rebates and MDF funds). Visibility into partner pipeline remains a challenge. To encourage deal registration some companies are using deal-registered channel measures and/or gates in their sales compensation plans.
Compensating the Renewal Role
The majority of companies focus dedicated renewal rep roles on mid-market and SMB accounts. No companies were utilizing partners to own subscription renewals. More companies face a resale motion vs. a reorder, so there is a need for a strong sales team, especially in consumption models. This is driving more direct involvement of core sellers with renewals. Rules of engagement between the AE and the Renewals Team can be problematic. Most companies are addressing this through policies on rules of engagement, but a few are also coming up with innovative ways to give renewal teams some credit for large upsells or cross-sells that come out of a renewal event.
Compensating New Digital Roles
Participants identified a desire to move from traditional forms of outreach (SDR, LDR campaign activity) to a more social, digitally-enabled approach, but only a handful of companies cited success in building and harvesting communities of social interest online to create incremental sales. Limited definition around “digital jobs” is causing issues when it comes to benchmarking comp structures and levels across similar roles. Most attendees agreed that digital roles should not be compensated on a Sales Incentive Plan because they have little power to persuade. 70% of session attendees agreed that a derivative of a Corporate Bonus Plan should be used, despite HR challenges over the plan’s typical inflexibility.
Increasingly, companies are considering ‘hybrid’ plans where digital reps are not quota carrying but instead have MBOs on a 70/30 pay mix.
If you did not get a chance to participate and would like a briefing on the topics discussed at this Symposium or other topics that are challenging your organization, please contact us for more information.
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