Most sales departments are organized around different roles, such as:
- SDRs – Sales Development Representatives
- AMs – Account Managers
- AEs – Account Executives
- TSMs – Territory Sales Managers
If we can clearly understand expectations associated with each role, then we can design successful incentive programs which promote the right sales behaviors and incentivize payees correctly. Watch this 1 minute video to learn more about each role, and how to structure each commission! Our goal should be to promote specific behaviors and pay for performance (vs. paying commissions as a “tax” on the business). That’s also how we can increase motivation and transparency.
First, let’s recap expectations for each role. This is our first step towards aligning commissions with roles and responsibilities.
SDRs are responsible for generating and processing leads. To generate leads, SDRs may use cold calling, telemarketing, emails, internet inquiries, etc. SDRs frequently also book demos and appointments. They have a “produce leads” function.
AMs are responsible for maintaining good relationships with existing customers. Their goal is to increase sales volume for accounts they manage, facilitate renewals, and reduce churn. They have an “account maintenance” function.
AEs are responsible for assessing needs, closing opportunities, answering questions from customers, and facilitating the sales process. They represent the bulk of the workforce. They have a “close deals” function.
TSMs own either a region (ex: South East) or a vertical (ex: all government sales). They are responsible for growing their territory and facilitating sales (ex: shipment, fulfillment, etc.). They have a “grow territory” function.
Desired Behaviors & Commissions
Now that responsibilities are clear, we can identify specific sales behaviors to promote via sales incentives.
SDRs should be paid commissions for generating many high-quality leads or appointments. SDRs should have count-based goals, such as 10 qualified leads per month, or 25 booked demos per quarter. They can have accelerators and bonuses for reaching certain milestones. Often, the amount paid in commission per lead is fixed (i.e. $50 per lead, not a percentage of revenue). Some SDRs may receive commissions across multiple components, such as a/ their number of leads generated, b/ their number of qualified leads generated and c/ their number of demos booked. In some cases, SDRs may receive a small percentage of revenue from opportunities they generated. Finally, payouts may be larger when a lead originates from a new customer / new logo, because those represent expansion.
AMs should be paid commissions based on key metrics such as renewals, churn, and account growth. Indeed, those metrics best measure customer health. For example, if a customer under AM oversight renews a contract, this AM may be eligible for a commission. This helps ensure AMs are motivated to encourage renewals. AMs are also responsible for NOT losing customers. Therefore, penalties or bonuses may be applied based on calculated churn rates. Note that calculating churn can be difficult because one has to decide after how much time a customer is expected to renew. Revenue growth over a large customer base is another way to measure AM performance. Finally, growth can be measured using quotas, which increase over time, or by comparing a current period’s revenue with a previous one. All AMs should have quotas or milestones, so they know what is acceptable performance vs. great performance.
AEs should be paid commissions for closing opportunities. The opportunity count typically doesn’t matter, but potential revenue does. Note that marking an opportunity as “closed won” does not guarantee that you will receive actual payment from customers. For this reason, many organizations use a “pay when you get paid” approach, where closing deals drives attainment & accelerators, but commissions are only paid when payment is received from customers. Many AEs have quarter-to-date or year-to-date attainment. Indeed, it’s often difficult to set a quota for a single month (ex: December can be slow, a rep may need to take time off, etc.). This helps smoothen things and better measure AE performance.
TSMs should be paid commissions on all sales in their territories. Their percentage is typically lower than AEs who own opportunities and close sales. If TSMs facilitate sales in their territory, they could receive an “override” commission, such as 0.5% of revenue on all sales. They may also have a quota they are expected to meet for their territory. Some TSMs may act exactly like AEs and own individual opportunities, but are labeled as TSMs only because different organizations use different terminologies.
In this blog post, we described:
- 4 key sales roles
- Responsibilities and desired sales behaviors for each role
- Commission structures which promote those sales behaviors
- SDRs = count generated leads & appointments
- AEs = measure closed won opportunities
- AMs = measure renewal, churn, account growth
- TSMs = pay override commissions
Using Sales Cookie, you can automate your entire sales commission process, and all types of commission structures. You can increase commission agility and ensure that your team is rewarded based on the right sales behaviors. Reach out for assistance!