Since the start of COVID-19, Insight’s Sales Center of Excellence has held a series of calls with Sales and Customer Success leaders in Insight’s portfolio of ScaleUp companies. The goal has been to share best practices on how to adjust sales strategies and tactics, and to learn from different companies’ response to market challenges.
With 2H, 2020 underway, our most recent session discussed the ability of sales teams to achieve their original annual quota and the impact on sales commissions. In Q1, as the full implications of COVID-19 became clear, most companies - 84% - did not make changes to quotas or compensation plans for Q2 because they had limited data to know what to expect. (There were a handful of companies – depending on their end-market buyers – who were severely impacted and who made immediate changes).
Now that we have a full quarter of results serving as a baseline, sales leaders are making changes to 2H plans, or are in the process of assessing which options make the most sense.
The following data from sales leaders highlights some salient points about how ScaleUp software companies are approaching 2H. Below this information, we discuss the levers to pull to drive better results, sales engagement and growth in the latter part of the year.
“Through 2021, the single
most impactful enterprise
activity to improve security will
be mitigating vulnerabilities.”
- Gartner
Gartner Security and Risk Management Summit 2018 Presentation, Fix What Matters: Provide DevOps Teams With Risk-Prioritized Vulnerability Guidance, Dale Gardner, June 4-7, 2018.
50
%
of companies have started making changes for 2H 2020 via SPIFs, quotas or compensation plans
84
%
+
There are numerous ways to drive engagement during an economic downturn, but we’ll focus on the top 5.
Key Approaches
If you have recently reduced headcount or had sales reps depart, you can re-allocate accounts to bolster other sales rep territories.
Redesign Territories
Below we review the levers discussed during our sessions with ScaleUp sales leaders as they’ve managed through uncertainty and continued to motivate and effectively manage their teams.
Insights
Reduce Headcount
1
+
+
Change Quota or
Compensation Plan Structure
2
+
Deploy Other Motivating Tactics (e.g. SPIFS or President's Club)
3
+
Communicate Frequently and With Transparency
4
+
1
91
%
A big problem
Although it’s unlikely that many PClub trips will happen this year, we explore other options for Club awards in our blog. PClub can continue to be a highly motivating factor to reward your top reps.
President’s Club
Special Incentive Funds (SPIFs) are ways to drive short term performance and make up the gap in compensation due to the economic condition (e.g., earn X for achieving a specific Q3 target)
SPIFs
60
%
Have suffered cyberattacks
had two or more
+
91
%
of organizations surveyed have experienced at least one damaging cyberattack over the past two years
16
%
Only 16% of companies have had material sales headcount reductions thus far (greater than 10% reductions)
Reduce Staffing
+
It’s always sound policy for sales leaders to upskill the talent of their teams and move out underperformers. However, leaders considering reactive sales headcount reductions need to carefully assess the long-term implications. It takes time to recruit and ramp up sales reps (especially in enterprise sales); in addition, if demand recovers faster than expected, companies won’t have enough resources to meet that demand.
Across Insight’s portfolio, headcount reductions have been limited through Q2. In conversations with sales leaders we recommend constant monitoring of the early warning signs (pipeline creation, change in marketing leads, conversion rates and win rates) so that leaders can make decisions on when to reduce or add headcount in advance of major trend shifts. That is a tricky scenario for most mature companies, but it’s particularly difficult for ScaleUp companies with limited historical data.
Insights
+
2
14
%
of survey respondents state communicating with their boards of directors about cyber threats is a key 2019 priority. Only 14% of companies made compensation adjustments through Q2
50
%
of companies have no plans to make any changes to quota
Changing compensation and quota implies effectively changing company budget and growth rates for the year. Companies reluctantly do this when they have no choice given weak demand and they need to continue to motivate sellers by setting more attainable targets. Companies experiencing the most severe impact from COVID-19 made some adjustments to quotas by reducing quotas across the board, or selectively adjusting quotas for the most impacted individuals (e.g., in specific regions or for vertically-focused reps targeted at hard hit markets like hospitality, CPG).
Leaders discussed that another common way to balance change vs. status quo, is to maintain quotas, but to adjust the payout curve of the compensation plan to provide some relief for performance below 100%. If you go this route, we recommend that you hold any true-up payments until year-end to ensure that the reps stay engaged and employed until the year is completed. Some companies are offering higher incentives for overperformance to reward and incentivize top producers to achieve even more, thus helping to balance out the underperformance from reps struggling to achieve quota.
Balancing select quota changes, rewards for overperformers and compensation offsets for underperformers can be challenging and costly. Any changes to quota typically requires Board approval and involves evaluation and collaboration to ensure alignment between the CEO, CFO, and head of Sales.
Quota and Comp Changes provide additional flexibility but aren’t seen as optimal changes
+
Insights
+
3
63
%
of companies surveyed are either already doing SPIFs or plan to launch them in 2H20
Unlike compensation plan and quota changes that come with potential long-term risk, SPIFs (Special Incentive Funds) drive short-term performance and can make up the gap in compensation for reps who are unable to achieve quota due to market conditions (e.g., earn X for achieving a specific Q3 target).
If SPIFs are tied to measurable, provable activity then the downside risk is modest, and if SPIF contests are meaningful enough financially, they can drive underperforming salespeople to do everything they can to achieve strong in-quarter results. Since overperformers have as much potential to earn the payout, the incentive plan is motivating to everyone, and benefits the sales organization equally.
To drive near-term action and keep every salesperson engaged, SPIF contests need four things to be effective:
• Hype: There should be marketing power behind the contest so that everyone feels the excitement and energy. This is a chance to re-energize your team during a tough year, and it needs to be marketed to the team.
• Timebound: There should be a beginning and end to the contest which should align with your overall sales cycle times. Typically this means one contest per quarter.
• Finite: The sales team must know that this is a one-time contest, not the new status quo. Once the contest ends, so does the chance for payout – this is to ensure that reps don’t hold anything back.
• Meaningful amount: The financial amount or award must be meaningful in comparison to the overall OTE of the sales reps. It needs to get reps excited and focused.
Although it’s unlikely that many PClub trips will happen this year, we also recommend that you explore other options for Club awards in our blog. PClub can continue to be a highly motivating factor to reward your top reps.
Deploy other motivating tactics
+
Insights
+
4
73
%
of portfolio companies have regular sessions with their sales team to discuss the challenges and their plans to address them.
This is an unprecedented time and challenging to navigate. Employees realize that companies need to make tough decisions, but want clarity of information and to be kept informed of decisions that effect them. It is important to be transparent on any actions you take and communicate frequently to your employees.
Communication is more than just a conversation between a first line leader and the sales reps. Sales and Customer Success teams should hold more frequent All Hands meetings to reinforce priorities, talk about key wins, challenges, and ensure reps understand the go-forward plan for any changes. If the new plan involves a material change to go-to-market strategy or compensation, then leaders need to either give the team a chance to ask questions on the call or speak in smaller groups after the call. Through transparency and communication, leaders will set the tone for your relationship with your team going forward and strengthen the trust they have in you.
Communications and transparency are key to maintaining strong engagement.
+
Insights
Similar to quota changes, comp plan adjustments can be made to drive motivation and sales and renewal performance, however balancing how you help underperformers while recognizing the impact of overperformers is challenging.
Compensation Plan Adjustments
Making adjustments to the quota targets for your sales teams can drive improved morale and engagement, but also comes with additional risks.
Quota Changes
58
%
+
+
Only 19 vulnerability
management employees
58
%
state they do not have adequate staffing to scan vulnerabilities
in a timely manner
Lack adequate staff
+
of companies did not make quota or compensation changes through Q2, 2020
+
“Through 2021, the single
most impactful enterprise
activity to improve security will
be mitigating vulnerabilities.”
- Gartner
Gartner Security and Risk Management Summit 2018 Presentation, Fix What Matters: Provide DevOps Teams With Risk-Prioritized Vulnerability Guidance, Dale Gardner, June 4-7, 2018.
How to adapt to the ongoing next normal environment and how to keep teams motivated and engaged is an ongoing question.
This is critical as most companies expect challenges (drop in customer budgets and demand, along with remote selling environment) to continue through the second half of this year, with 24% anticipating challenges to be significant
24
+
%
of portfolio companies are expecting significant challenges to continue through the 2nd half of 2020
58
%
+
%
91
A big problem
+
60
%
had two or more
91
%
of organizations surveyed have experienced at least one damaging cyberattack over the past two years
Have suffered cyberattacks
+
58
%
state they do not have adequate staffing to scan vulnerabilities
in a timely manner
Lack adequate staff
+
Only 19 vulnerability
management employees
Adapting to COVID-19 and the next normal.
25
%
of companies are considering changes to comp plans or quotas for 2H20
2020 has tested company resilience, strategy and executive leadership. Many ScaleUps have made initial changes to weather the conditions; they are considering others.
A ScaleUp software company’s survival depends on sales team performance. Changing incentive plans, territories, and payout schedules are a few ways to ensure team motivation, and to mitigate any employee hardships as a result of underperforming versus original target quotas. In this situation, the balance of which levers to pull will differ by company. Insight Onsite’s Sales and Customer Success center of excellence is available to discuss your specific situation and work with sales leaders on a customized approach to your challenges.
Download the full report here
Download the full report here