Menu
​Selling Cloud - Why it’s time to change the sales compensation

​Selling Cloud - Why it’s time to change the sales compensation

Channel Dynamics co-founder, Moheb Moses, believes Cloud computing calls for a new approach to sales compensation.

Moheb Moses - co-founder, Channel Dynamics

Moheb Moses - co-founder, Channel Dynamics

There’s a belief that sales people are coin-operated (i.e. they work purely on extrinsic rewards like their pay packet).

While this may be true for some, my experience is that the best sales people are driven by intrinsic goals and rewards (achieving results, recognition, helping customers) with an understanding that the money will follow.

Good compensation plans reward success while enabling companies to weed out non-performers. But, equally, they should reward sales people for doing the right thing.

There are countless stories of compensation plans that had unintended consequences from innovative sales teams finding shortcuts.

Now, when the sales process is established, the likelihood of that is lessened. But when the business model is untried or untested, the chances of this are much higher.

Which is what I see in companies transitioning to the Cloud but holding onto old compensation plans. In fact, I am aware of organisations where perpetual license teams poached subscription license clients (and convinced them to pay a lump sum to own the software) in order to achieve their targets.

So, in this instance, a compensation plan should really be about rewarding the behaviour that achieves results, not the results themselves. Consider the five different models shown in this article.

In the end, alignment is the key word. Your reward system must align with the behaviours you want, which must align with your company goals. And if compensation doesn’t change, nothing does.

5 different models, 5 different objectives:

  1. 100 per cent commission up front (e.g. the first month’s income as commission with no residual payments). This is ideal for new customer acquisition, but can create a culture that is not oriented to customer service or retention.
  2. 100 per cent commission on consumption (i.e. paying commission totally on a recurring revenue basis). This is ideal for customer retention and growth, but over time will mean that sales people are less likely to chase new customers.
  3. Mix with more up front (i.e. higher percentage paid as commission up front, with smaller percentage based on the customers recurring revenue). Main emphasis is on acquisition, but also drives retention.
  4. Mix with less up front (i.e. lower percentage up front, with higher percentage based recurring revenue). Some acquisition, but focus in predominantly retention and growth.
  5. No commission (i.e. reps on a fixed salary). This is better for customer retention, although it can also be applied to acquisition. This model reduces “bad” behaviour, but can be very challenging to manage.
Subscribe here for up-to-date channel news

Follow Us

Join the New Zealand Reseller News newsletter!

Error: Please check your email address.

Tags Channel DynamicsCloud

Featured

Slideshows

StorageCraft celebrates high achievers at its inaugural A/NZ Partner Awards

StorageCraft celebrates high achievers at its inaugural A/NZ Partner Awards

Revealed at a glitzy bash in Sydney at the Ivy Penthouse, the first StorageCraft Partner Awards locally saw the vendor honour its top-performing partners with ASI Solutions, SMBiT Pro, Webroot, ACA Pacific and Soft Solutions New Zealand taking home the top awards. Photos by Maria Stefina.

StorageCraft celebrates high achievers at its inaugural A/NZ Partner Awards
Kiwi resellers make a splash on Synnex and Lenovo RotoVegas road trip

Kiwi resellers make a splash on Synnex and Lenovo RotoVegas road trip

​Synnex and Lenovo hosted 18 resellers for an action-packed weekend adventure in RotoVegas, taking in white water rafting on the Kaituna River, as well as quad biking and dinner at Stratosfare​, overlooking Lake Rotorua at the top of Mount Ngongotaha​. Photos by Synnex.

Kiwi resellers make a splash on Synnex and Lenovo RotoVegas road trip
Show Comments