Sales Compensation Blog

I am very interested in hearing your stories about the unintended consequences of your incentive programs. I think we all have them and we can benefit from sharing them. As the mother of two daughters who have just made it through the teenage years, I believe we are all much better off if we talk to others about the ways they (teenagers or incentive programs) can act out. It gives you perspective, lets you laugh at the absurdity and helps you know what to watch out for.

My Story - Teamwork

So, I'll start. My story happened at an enterprise software company. The company sold expensive software that required expensive service implementations. It was imperative that the company operate as a team between sales, service and engineering. We were constantly making tradeoffs between product features and services, frequently opting to defer features we felt could be ‘managed' by the services team. Services and engineering needed to work together. Similarly, sales needed the services team to help make proposals to clients that were realistic yet within the client's budgets. Teamwork was essential all around.

But it didn't happen. Turns out much of the problem lay in the sales incentive plans. The services team was compensated on margin while the sales team was compensated on software sales. And just to add a nasty twist, the head of engineering was also being compensated on new sales. What happened? The service bids would come in too high (because they wanted the margins) so instead, the sales team got quotes from engineering and gave away the services component. Much friction ensued and I would estimate close to $2M was lost in revenue while customer satisfaction dropped.

Moral of the story: look at the metrics across job roles and make sure your teams are incented to work together.

Do you have a story? I'd love to hear it.