Every organization should determine the right compensation plan for each individual sales role upfront using a proven target-setting model and a multitude of other factors. Companies should consider how to structure base and variable pay and then set forth the responsibilities of the role and the terms of compensation clearly in a sales incentive plan. […]

Every organization should determine the right compensation plan for each individual sales role upfront using a proven target-setting model and a multitude of other factors. Companies should consider how to structure base and variable pay and then set forth the responsibilities of the role and the terms of compensation clearly in a sales incentive plan.

Compensation in Sales Positions

The first step in providing fair compensation to each customer-facing role in your SaaS sales organization is the analysis of the following positions, duties, and experience required by each:

• Sales Development Rep (SDR): Prospecting. Positions may range from a first SDR job (Junior) who is focused on inbound sales to a Senior SDR with one to four years of experience who calls on key accounts (Account Development Rep).
• Account Executive (AE): Sales Acquisition, also known as a Sales Manager (SM). Positions may range from a first AE job (Junior) to an AE with three to five years of experience (AE), or four to eight years of experience (Senior).
• Customer Success Manager (CSM): Focused primarily on onboarding and enabling the client to use the product to create recurring value. Often with one to three years of experience.
• Account Manager: Focused on the company’s key accounts or driving new/more revenue from existing accounts. Often a former AE with three to five years of experience.

Step 1: Basic Guidelines

As a general rule, there are some basic, practical guidelines that you should follow as you plan and negotiate compensation with your sales organization team members:

• Keep it simple. Your compensation plan should fit on a single page of paper.
• Show causality. Make compensation directly related to the desired effect you wish for the team member to achieve.
• Think short-term. Keep the time between the activity and the compensation less than 60 days.
• Make it fair for everyone. All compensation must be fair and equal for everyone.
• Make it easy. Compensation should be easy to measure and easy to administer.

Step 2: Establish Levels of Experience

Begin by establishing three levels of roles within your organization: 1) Entry Level, 2) Baseline, and 3) Experienced/Top Performer. See Table 8.1 for descriptions of important sales roles and their accompanying levels of experience. There is an organizational need for three layers of experience in order to create a difference between an entry level position on one end of the spectrum and experienced on the other. Employees want to see progress early on in their careers, and these micro promotions answer that request and allow you both to make small adjustments accordingly.

Table A. Overview of sales titles and job descriptions

Step 3: Start with On-Target Earnings