Kevin Dorsey is known for mic drops. And big entrances.
— Matt Amundson (@mattya56) March 13, 2019
In this episode of the Hey Salespeople podcast, PatientPop’s VP of Inside Sales has a very frank discussion with Jeremey about sales compensation. In short, he thinks we’re doing it wrong. Kevin and Jeremey dig into what’s broken in sales compensation, and how it has created lazy managers and pushy salespeople.
This conversation is sure to change the way you think about sales comp… or at least make you think harder about your philosophy.
Listen to this episode for answers questions like:
- How did Kevin get away with charging kids for using the drinking fountain in school?
- Why does a commission-based comp plan lead to lazy management?
- Should we be paying someone to do their job, or making someone do their job to get paid?
- Can you change the sales comp structure so that just 80% of your reps get you to goal?
- Is there a case for giving reps a choice about how they’re paid?
Listen here, and keep reading for some of the highlights from this episode.
Jeremey: It’s my pleasure to have as a guest longtime friend, Kevin Dorsey. I’m going to refer to him as KD. He is the VP of Inside Sales at PatientPop. They help good doctors get found by the patients that need them. So welcome to the show, Kevin.
KD: More and more I believe Commission’s are played out. I don’t believe that they actually create the behavior that everyone thinks that they do. I believe commission plans lead to lazy management, where managers are hoping that the comp plan gets the behaviors that they want.
It doesn’t allow reps to truly do what they’re supposed to do, which is sell in the best interest of the person they’re talking to. So I am really looking into how I can lower commissions increase bases because I think it’ll lead to not only better results, but also better culture better people better lives for the people on my team.
Jeremey: Why does a commission-based comp plan cause lazy management?
KD: The fact that managers are even afraid that their people would not behave the way that they’re supposed to that commission-based plan means they’re not managing their people. That lets me know everything I need to know. I said the same thing as at a conference about a year ago. People lost their shit, you could never do that.
What other profession pays their people like this, but also sees these results? If commission plans worked, if they got the behavior that everyone says that they do, why as an industry, do 40% of people not even get there?
The Right Behavior
KD: Does the majority of your team do the things they are supposed to do on a day-to-day basis? Forget quota for a second. Do they do the things they’re supposed to do day in and day out? If you talk to a lot of sales leaders, most of them are gonna say, “Well, not really. I still fight to get them to do the things that they’re supposed to do.” Isn’t that what’s commission plans are supposed to incentivize?
Jeremey: They’re very outcome-based. Managers assume that you will do the right thing in the service of the end goal, which is booking revenue. But what would you classify as the right things to do?
KD: We can walk through them. Are they always making their dials? Are they adding enough people into their Salesloft cadences? Are they doing their training? Are they role-playing? Are they prepared for their 1:1s? All the things that go into a salesperson’s job.
Most managers spend most of their time trying to get people to do what they should already know how to do.
Pay for Overperformance
Jeremey: Let’s say that half your reps are at 50%, half your reps are at 100% of goal. Which basically means half your reps are earning $100K, half your reps are earning $75K because they got their 50 base and one’s getting halfway there. So you’re in that 87.5. average.
What if you paid everyone at 87.5? Now here’s the problem, which is that all the reps who would earn less than 87.5, stick around, and all the reps who would earn over 87.5 bail on you. That’s the concern with that sort of strategy,
KD: For sure. That’s what the next step in this is – I will always pay for over performance. There are bonuses plans in place. If you’re overperforming, I’m going to pay you more than the person who is not. So it’s not that we just pay everyone the same. It’s that 50% of their pay isn’t based on just getting to their goal.
I have a rep right now that she just crushed it. She had like 200% of her goal. So I’m going to pay her like she paid 200% of her goal! I’m gonna reward her, I’m going to shout her name from the rooftops, and she’s gonna get a big check from it. The people at 200% aren’t the problem. It’s the middle. It’s that hundred percent mark that matters. And I would love to be able to sit across from a rep and say, “hey, your OTE on the 50/50 plan was $100K. Now your base is $90 K.” They’ll hit your quota.
Jeremey: I think your top people are conscientious, they’re intelligent, they’re highly skilled. They care about their personal achievement; there’s that deep intrinsic motivation. They’re going to work hard no matter what.
KD: I wish more people would realize this – a small percentage of people are actually money motivated. They want money, but a very small percentage of people are truly money motivated. I think it’s like a 3-7% range that has money as a motivator. And most of those people actually aren’t in sales.
Yes, everyone wants some money. But Jeremey, you’ve been in this game long enough to see how hard it is to get people to do the things they’re supposed to do that would lead to getting the money. People don’t make decisions off money. They just know they want a thing. The super successful woman on my team, she is money motivated. She is straight-up waking up every single day thinking, “how do I make as much money as possible?” And her behavior shows it.
Jeremey: Let’s say you do this. All of a sudden you shift from the commission + base to a lighter or commissionless plan. What’s to stop people from getting lazy? This is the big worry, right? If you make this change, how do you make sure you don’t fall off the rails in terms of your overall company hitting its performance targets?
KD: If I walked out there tomorrow and took everyone’s based from 65 to 95, I hope they start to slack. I would love that because I’ll get them off my team. It means I don’t have the right people.
No, I don’t believe that would happen for the majority but there some people that could take advantage of the option. If they also knew they’re being held to a higher standard now and truly could lose their job because the new job just gave them a $95K base instead of $65K… I believe performance would go up. They’re not worried about paying their bills. They’re not worried about a comp plan. They’re not worried about gaming something so they can live.
They can enjoy their job. In the past 16 years of my life, I have not woken up and know what my paycheck is going to look like.
THERE’S A LOT MORE AFTER THIS! Listen to the full podcast for more on value engineering and engaging a value consultant.
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