Ask the MSPmentor: Tina Gravel on Compensation Models
…knowledge required for the job. These folks are special animals (I say that with all the love in my heart), and the good ones are worth their weight in platinum. Why? Because the very best sales engineers are very savvy regarding sales and often possess terrific “soft skills.”
The sales engineer compensation model for large firms can be a salary plus a variable of 25% to 50% (generally). I have also seen smaller companies offer variations on this for the same reasons I illustrated above, but, as a rule, they will not attract the best SEs when doing that because the SE knows he or she will do better elsewhere.
There are business development representatives and inside sales representatives that also have variations on the model. Some are paid for tactical actions like appointment setting in addition to percentage of revenue or, in the case of rainmakers whose work is front loaded before the first sale is made, may require an MBO type of arrangement or higher salary. At Cyxtera our MBOs directly tie to the overall company KPIs. (Editor’s Note: If I am taking you to Acronym Madness here, check the definitions at the end of this article.) There are also the folks that are measured on the base of the existing territory with bonus tied to percentage of churn or increase to the base. The people that are normally paid that way are “farmers” or those responsible for customer success. I have seen the bonus as a percentage of salary vary greatly depending on role, experience and company situation.
501er: What about vendor compensation for the indirect channel? Why do incentives vary so much between providers?
TG: Traditionally, the channel that I have been exposed to (former telco agents, real estate brokers, VARs) encompasses individuals that are paid in several different ways:
- Real estate brokers with contracts and state regulations that require them to be paid in a certain way are one example, normally a percentage of monthly fees for contracted period, paid up front.
- The former telco agents already used to a residual commission are paid as a percentage of monthly revenue for the time of the agreement (and in many cases renewals)
- At the VAR, the salesperson is compensated by how much gross margin they can keep. One variation that occurred when VARs were dragging their big box sellers into services involved providing upfront payment based on the MRR or a multiple of the MRR. That seemed to work in the situations I observed, but I can also testify to where it did not work with big box sellers that were not interested in changing.
There are also SPIFFs (Special Incentive Funding Formula). No one really knows what this means; there have been many variations on the definition of SPIFF. My definition of what the letters signify is only one of the various definitions, but it works for me. Special incentives in big companies are usually done when companies want to incentivize salespeople for a short time and prefer not…