Outbound Lead Generation: 3 Key Concepts for Compensation Plans
April 9, 2013
A few months ago Anneke Seley wrote a great article on the OpenView Labs site with some tips on designing lead generation compensation plans. In the article she gives some great high-level advice and offers five tips that are really fundamental to building a good compensation plan for lead generation reps:
- Strike the Right Balance Between Base Salary and Lead Generation Bonuses
- Attribute Reps’ Bonuses to the Right Metrics
- Avoid Tying Compensation to Things Reps Can’t Control
- Pay Commissions & Bonuses as Often as Possible
- Get Creative!
If you haven’t already, you should read that article before continuing on. Since I focus mostly on outbound lead generation I wanted to add my own thoughts on the topic, and highlight three key concepts that Seley touched upon in her article that I felt are particularly important for managers to understand when designing compensation plans for outbound lead generation teams.
- The Cap
- The Cliff
- Incremental Pay Out
The Cap
Sometimes called the ceiling, the cap refers to capping the amount of incremental money a rep can make by overachieving on their goals.
Setting a cap on compensation might save you a little bit of money if your reps are really killing it, but overall it hurts your business more than it helps. If you cap your reps’ income they will not have any additional incentive to keep working hard after they’ve hit their goals, and it actually gives them an incentive to sandbag appointments slowing down the sales process.
In the chart below, the red line with triangles represents a capped compensation plan at which reps stop making money when they reach 20 appointments, while the green line represents an uncapped compensation plan. Placing a cap will punish your top performers, and worse, it can instill a culture of complacency on your team. On the other hand, keeping your outbound lead generation compensation plan uncapped will help create a sense of urgency and a drive to overachieve by putting your reps in control of their own destiny.
The Cliff
Sometimes called the wall, the cliff refers to setting a target at a point short of the goal below which reps will earn no incentive compensation. This incentivizes reps not to dilly dally at the beginning of the month, and ensures that they meet at least the minimum expectations to make it over the cliff, or they won’t get their bonus.
The cliff is typically set around 50-60% of plan, so that it’s not too overwhelming, and so reps can still make some money even if they go on vacation for a week or take need to take a sick day. In the example above, reps don’t make any money until they hit their 13th appointment.
Incremental Pay Out
This is just another way of saying how much you are going to pay your reps per unit that they deliver. For instance, in the chart above reps will make $1,000 for delivering 20 appointments. That means that the reps will make $50 per appointment above the cliff.
This is nothing fancy, but often managers and reps talk about compensation in percentage terms — i.e. if you get 75% of your target, you get 75% of your bonus. This is fine, but getting your reps to think about setting appointments in terms of cash can be a powerful motivator. That way instead of just being another appointment, every appointment they get is a new pair of shoes, a night out on the town, or extra money towards their down payment on a new house. So do the simple calculation and share it with your reps!