#028 Sales Comp Strategies with Graham Collins
Fair Pay for Sales: Closing the Gender and Racial Pay Gap
Guest & Host
Graham Collins & Steven Morell
Welcome to Speak Revenue, the podcast where we emphasize that revenue is not just a goal; it's a result. In this show, we shift our focus from the output to the inputs. We engage in conversations with sales leaders and entrepreneurs about their remarkable journeys. Our mission? To uncover the true root causes of success. In this episode of Speak Revenue, host Steven Morell delves into the world of sales compensation strategies with Graham Collins, Chief of Staff at QuotaPath. Graham shares insights on designing sales compensation plans that are simple, logical, and fair, the impact of compensation on achieving revenue targets, and the importance of standardizing plans to address gender and racial pay gaps. Tune in for a compelling conversation on steering your sales team to success while ensuring fair compensation practices.
October 26th, 2023
Steven Morell: Welcome to our new episode of Speak Revenue. Remember, revenue is not a goal. It's a result! But a result of what? In this show, we turn our eyes from the output towards the input. We speak with sales leaders and entrepreneurs about their journeys. Join us on our quest to uncover and learn the root causes of success. Let's find out what works for them and what didn't! Today in my show is Graham Collins, Graham, so nice to have you. Welcome to my show.
Graham Collins: Thank you Steven. Wonderful to be here.
Steven Morell: Graham. Real quick, for our audience, who are you? What do you do? Who do you do it for, and what makes you guys so successful?
Graham Collins: Yeah, absolutely. That's a lot of questions in one. Let's see if I can remember all of them. Who am I? So Graham Collins. Chief of Staff at a company called QuotaPath, and we'll talk a little bit about what Chief of Staff means here in a second. But QuotaPath, we're a commission tracking platform, so we give visibility to the RevOps, Finance, and Sales organizations within companies for them to all be on the same page about how much commission they're earning, how much commission they could earn, and how much to pay out in those commissions.
Steven Morell: Super important for every salesperson because compensation is the steering wheel for every sales team. You can really create certain behavior by adjusting comp plans. I think we're gonna talk about comp plans in a moment. Tell me a little bit, how is QuotaPath different from others, from how is it different from an Excel file?
Graham Collins: Yeah. Yeah. That's you've called out our number one competitor there, which is Excel, which is or spreadsheets in general. It seems like most people are using Google Sheets nowadays, but
Steven Morell: just call them
Graham Collins: yeah, I know. It's one of those things where you're just still, it's like a Kleenex, right? And so that is our number one competitor. About 76% of companies actually are using spreadsheets to calculate their commissions currently, and the major ways that we differentiate from there is around transparency. So everybody is looking at the same numbers. So the sales rep, the sales manager, the VP of sales, the RevOps, the finance, everybody's all looking at the same numbers. And then we also have the ease of use so you don't have to know all of the Excel formulas and "sum", "ifs" and "vlookups" and all of that stuff. And then the other thing is that Excel spreadsheets can break because somebody fat fingered a plus instead of a minus, or forgot to include leap year or what have you. So all of these different things that can happen within an Excel spreadsheet that break or somebody leaves the organization, the person who built the Excel spreadsheet leaves the organization. I've been in that position before. And so it's a scalable, easy to use, transparent solution.
Steven Morell: So I'm certain there's a number of others who are swimming in the same pond. What sets you guys apart? What were the drivers of success for QuotaPath? It's a quite known brand.
Graham Collins: Yeah.
Steven Morell: Probably if somebody would ask me, would be the number one that comes to mind. How did you get into pole position?
Graham Collins: Yeah, absolutely. And I'm glad to hear that you think of us in pole position, that's wonderful. There are a couple of legacy providers out there that are . That has been around for a long time and tends to go more up market. And that's a big thing for us is giving organizations of every size the ability to automate the commission process. Just because you only have five sales reps doesn't mean that you don't need to automate the commission process. We give everybody the ability to, with scalable and transparent pricing. We give everybody the ability. The other thing is that oftentimes in smaller organizations and in really any organization, it isn't necessarily the VP of Finance. You may not have a VP of Finance or Head of RevOps who runs the commission process. They may not know SQL or Excel or be able to do all of that technical component. And so we give you the ability through a straightforward wizard to be able to build those compensation plans within QuotaPath, map that data directly to your CRM in a matter of just about 15, 20 minutes. So that you're up and running and automating commissions for everyone. And that's the other thing is that when I say automating it for everyone, we really focus on the rep standpoint. A group of us, actually many people who work at QuotaPath, worked together at a previous company, an entirely unrelated company, but we all worked on the sales team. I ran a 45 person SDR team, and rep transparency and rep experience is incredibly important to us because we know that, like you said, reps are the people who close the deals and they need to understand how much they're being paid on those deals in order for it to motivate them.
Steven Morell: Step me real quick through... You say you're a bunch of salespeople working there who have been working together for a long time, and I'm loving that. You spoke quickly, briefly about the different types of people for whom this is a problem. How do you do lead generation? Do you do, is this an inbound motion? Outbound motion? Walk me through how you get somebody to come in to take that demo caller meeting.
Graham Collins: Yeah, absolutely. It's a number of different things. So, inbound meaning paid Google Ads is a major component of it. That obviously in every business is going to be a major component of it. We also have organic we dedicated a lot of time and resources early on into content and into creating valuable resources for people where they can learn about comp plans and how to build comp plans and how to run commission. And then it's a natural fit to pull into QuotaPath. We spent a lot of time building a tool called Compensation Hub, which is totally free to use ungated resources that allows you to model and create compensation plans based on industry standards. . We also do a lot when it comes to partnerships. Partnerships, so HubSpot is one of our important integration sources. Meaning we pull data from HubSpot Sales CRM, but they're also an investor in QuotaPath. We're a HubSpot Ventures company and they're a wonderful partner of ours as well. So we work very closely with a lot of the CSMs and the salespeople over at HubSpot who refer a lot of business over to us. And then the last part is community. We've invested heavily in, in the community, whether it's Pavilion or RevGenius or RevOps Co-op, all of these different communities. And once again, being seen as a resource within those communities. We're not there just hawking our wares every time, you know, promoting ourselves any opportunity. Instead we're being a thought leader and a resource within those,the community. And they say, does anybody know how to build a compensation plan for a brand new SaaS startup with million dollar contracts or whatever? And immediately QuotaPath comes to mind for those folks, which means that commission and compensation is inherently tied to our brand. And when they then need a tool, we're tied to that community.
Steven Morell: You touched on a lot of topics. You touched on marketing. You touched on paid traffic by injecting yourself into community conversations. Technology partnerships, as well as sales partnerships. You know that because you've touched all of this. Your role is Chief of Staff. I think you're the first Chief of Staff I ever had in that show. Usually we have a Head of Sales, VP Sales, Chief Sales Officer. But talk to me real quick, what does the Chief of Staff in a SaaS company do?
Graham Collins: Chief of Staff is a fun title because it can mean any number of different things. I talked to people who are Chief of Staff who are, essentially, an executive assistant. I talk to the Chief of Staff who are essentially the COO of a company. And so it really is a unique role because it has so many different things that it can mean. For me, what chief of staff means is that I jokingly tell people that I do a job until we hire someone who's better at it than I am. But what that really means is that I fill gaps within the executive organization as needed. I feel I'm the 0 to 1 for a lot of organizations, so we're kicking off our marketing initiatives. This was years ago when we were kicking off our marketing initiatives, so I stepped into that role and I spun up our first Google ads. I did an okay job with it, but then we hired someone who was quite a bit better at it. I started our RevOps, I built out our tech stack, our CRM and our call recording tools and our outbounding tools. Then we hired a Head of RevOps to come in and do that. So the same thing has happened with marketing.
Steven Morell: You describe beautifully why startups are so much fun.
Graham Collins: Yeah, absolutely. I wear a lot of hats, literally and figuratively. I wear a lot of hats within the organization, and I've become specialized for periods of time. I've been running our sales organization for about 9 months now. Prior to that, I ran the marketing organization for about six months. And as things crop up I'm the first person generally to step into those roles.
Steven Morell: Talk me a little bit through your sales process.
Graham Collins: Let's go through this. You described where you get leads you route them, it looks to your compensation hub and to your website. What happens next? Do you have an SDR team qualifying them and then an AE team? What's the buyer journey here? Yeah, absolutely. So we also have two different buyer journeys where they tend to start. So we do have a product-led growth motion as well. So we have a free trial, which allows folks to get in, build their compensation plans, and really get access to everything that we offer for 30 days. As part of that, along the way we have to talk to sales or upgrade prompts all along the way. If they want to do more of a full implementation or they have questions about each of the different tiers or what have you. That's where a lot of that comes in. Some of it is product led, some of it is from our BDR team reaching out to those folks as well during the trial using product signals. And then there are also people who come in to request a demo. We are big proponents of just not requesting a demo, just booking a demo. It's a big thing that I see a lot on people's websites nowadays. I do some advising for startups and I go and the first thing I do is see how quickly I can talk to somebody in sales. And oftentimes there's a 12 part form that asks me, what the name of my firstborn child is and all of these various questions in order for me to book a demo and start out, one of the things that...
Steven Morell: Part of the discovery.
Graham Collins: Yeah. And some of those questions are valuable, but a lot of times I then ask people, okay, what do you do with this information? And they go: eh, I don't know anything.
Steven Morell: Yeah, mandatory field in Salesforce.
Graham Collins: Exactly. When we first started our sales organization. We started and they said, okay, we gotta have this form and we have to ask for the phone number and the email address and the company. And I said, no, just put a Calendly up. Put a Calendly up. Let them select a time, give us their name and their email. And from there we can determine what their title is on LinkedIn and what their company is, and what they do, and how many sales employees they have. Like a lot of this data is
Steven Morell: Yeah.
Graham Collins: Determinable using
Steven Morell: Information is readily available everywhere these days. So how is your sales team set up? Who is taking those demo calls?
Graham Collins: So we then have to do a little bit of qualification now. So now you'll see, if you go to book a demo, we ask I think 3 questions. We ask what your name is, or, email those mandatory fields. And then we ask what CRM you're using and how many sales employees you have. So I guess 2 questions and then from there we route it accordingly. So depending upon the number of sales employees they have, if they have fewer employees we route it to the BDR, who then does some qualification and demos those people and can actually try to close those people. And then we, if it's larger than that, more qualified, it gets sent to our sales organization our AEs.
Steven Morell: I'm curious, what are the qualification criterias?
Graham Collins: So when we identify our ideal customer profile, we look at 3 major things. We look at industry, company size. And tech stack. And so what, when I say tech stack, I mean CRM and so without getting into the specifics here we then use CRM and how many sales individuals they have to send them to the correct people. So we have some senior account executives. They get the larger accounts that are more strategic, take longer to close, but are higher contract values. The more junior AEs get the smaller accounts. Quicker to close, easier to close. We can churn through those, but they're substantially lower contract value.
Steven Morell: It makes me ask why the industrial vertical, how does that impact compensation plans?
Graham Collins: So we actually don't, we don't verticalize by industry. So like We don't ask you what industry you're a part of, we determine that, and that's more about our ideal customer profile and trying to then see where did those people come from. Because we have a higher close rate with SaaS, I mean, but close we have, we have a funeral home that's a customer of ours. And so like we, we sell to every industry, but SaaS seems to fit our ICP because they close quickly. They tend to use the right tech stack. They have the right sales organization that fits us better.
Steven Morell: Funeral home. Okay. That's... sure what customer acquisition reads there, but sounds dangerous. Okay. That paints a picture of how this is going, and then I assume the standard, you close, you have an onboarding team, you have a customer success team. Do you have a land and expand motion there?
Graham Collins: Yeah, certainly. So we have a lot of times organizations pay commissions to multiple different teams within their company. So have your sales team, those are the obvious ones. Your SDRs generally are paid commissions, but then you also have sales engineers and account managers and customer success reps. And sometimes your entire company is paid a corporate bonus based on company performance. And so oftentimes we land with the sales team. And so we get your 10 sellers. Maybe your 10 sellers and your 5 SDRs, so 15 users. And then as soon as we roll that out, we expand it to your customer success team. And then as soon as we expand to the customer success team, we expand to the sales engineers. The other thing is that a lot of the companies that we sell to are growing and expanding and you don't have 10 sales reps by the end of the year. You have 12, you have 15. You, we have one company who started with us with 20 reps a few years back, and they've got like almost 200 reps now. And so have grown with them and expanded with them.
Steven Morell: Let me ask you this: I notice there some people have strong opinions about customer success and other than sales reps being compensated or with commissions, what is your take? I understand the more people get compensated by commission, the more users you get, the more, the bigger you are. But what is your take on compensating customer success with commissions versus I might have customer success who don't have my success in mind. They have my upselling in mind. So there is a conflict there?
Graham Collins: So I am a proponent of compensating people on what they have control over and what you want them to focus on. And so it depends on your organization. Oftentimes customer success teams are truly there as the customer success
Steven Morell: Mm-hmm.
Graham Collins: Their job is just to ensure that the customer is using the tool and actually getting value out of it. And so actually paying somebody a variable compensation there. Based on those metrics, I think it is entirely fair. So I see this as NPS or as customer usage or as some of those leading indicators. Of course the lagging indicator is do they renew or not? The retention rate that is lagging is an indicator of how well they are succeeding with you. But you can also compensate based on those leading indicators, if the customer success organization doesn't necessarily have control over those lagging indicators. So I
Steven Morell: It sounds like you're saying compensate them with a variable commission based part of their income, but don't necessarily connect this to monetary values. Connect this to whatever success the customer needs.
Graham Collins: For a customer success organization. Yeah, I think that's often. Now customer success can
Steven Morell: Customers should pay the commission.
Graham Collins: They are essentially right. They're paying the company and then the company is paying. Yeah. And the other thing is that as you stray further away from true monetary value, the portion of your on target earnings that variable makes up decreases. So in a sales or in a sales role, I'm very close to the actual revenue. A 50/50 split between your base salary and your variable. Makes sense. In a sales manager role, maybe it's a 60% base, 40% variable because they're a little bit removed. SDRs maybe 60/40, 70/30. And then as you get into the customer success team, or like an onboarding team, maybe it's an 80/20 or even a 90/10. So it's less variable because they have less control over the actual dollars that in.
Steven Morell: Yeah. We already segue deeply into what I wanted to ask you. My observation, especially in not so late stage startups and organizations, is that you have a historically grown landscape of compensation plans. There's this one sales person who has been like, who replaced founder sales, and they get 25% and somebody else gets 5 and somebody else gets 10. And this has grown historically. If I'm a VP Sales taking on a new role or if I'm a VP sales, simply in that situation. How do I even start to go about building a compensation plan?
Graham Collins: Start from scratch. Is the advice that I have there. The worst types of plans that I see. I ask, why do you pay your reps this way? They say, Because that's how it's always been done or because that's how I paid them at my last company. Every company is unique and companies change over time. And so that's how it's always been done is a terrible answer for why you're paying somebody the way that you are. Not to tell you to every year, take a look at your comp plans and totally rip them out and change them. That's not the right answer. But in a situation where you have yourself, everybody's on a different compensation plan. Everybody has different targets. One person is targeted on ARR and the other is targeted on total contract value, and the other is on MRR. Like by starting from scratch, determining the style of structure you want for the compensation plan, and then slotting the people into that compensation plan, that's the best way to go about it.
Steven Morell: What's the first sentence in a conversation that I need to have with a team? How do I start? That's a super sensitive topic.
Graham Collins: Yeah, absolutely.
Steven Morell: I went through actually switching a team with individual, historically grown compensations and Commission plans and different times, time spans into team commission plans. That was not an easy journey. What's your advice? How do I start having this conversation with the team? When I still need unity and motivation, because I still need to finish the quarter.
Graham Collins: Yeah. So let's see here. This is... I'm trying to make this not be a long-winded answer, but I believe that compensation plans need to revolve around 3 rules, that they need to be simple, logical, and fair. So
Steven Morell: Simple, logical, fair. Okay.
Graham Collins: So simple means reps can understand what they are paid for. It doesn't necessarily mean you just pay them 10% commission off of every deal, but your reps understand this is the structure. If I close a two year deal, I get paid this amount. If I close a one year deal, or if I'm above my quota, I get this amount. Simple plans. , easier to understand, achieve more results because they drive the behaviors that you want. Logical meaning you can actually trace exactly why it's built the way that it's built , every plan has a quota to OTE ratio of 5 x. Meaning if the rep is earning a hundred thousand dollars on target, their annual quota is $500,000. It follows the right logic and you can back up exactly why it is that way because... we want to motivate over performance, therefore, we are compensating 1.5 x. We want you to close two year deals, therefore, you get an extra 5% on closing a two year deal. So there's logic . And then finally there's fairness. Plans that are not standardized. If you're an organization that doesn't have a standardized compensation plan, statistically you're underpaying women and people of color on your team. And so by standardizing those compensation plans, you're creating more equity within your and fairness within your sales organization.
Steven Morell: There's a lot of loose ends that I can't let go. You touched on the logic, and it seems to me that if the priorities for the company change. Then the compensation plan might change if we are going for the two year contract. If we stop doing this, then we will not incentivize this in the same way we did in the past. So are you advising in looking at the compensation plans once a year or when the strategy changes, this also needs, then you also need to check the compensation plan.
Graham Collins: I would say that regardless, company strategies shift and adjust over time. I don't like changing compensation plans more than once per year. Our own in-house research indicates that the more often you change your compensation plan, the less your sales team trusts that it's the right plan. So if you're changing your compensation plan every quarter or every month, God forbid, then your reps don't think that you know what you're doing. This is actually a very good time. It's currently CompTober, October. While we're recording this, I don't know when we're releasing, but we call it CompTober, which is the beginning of when it makes sense for you to begin reviewing your compensation plans. Maybe you're not gonna make any changes to those plans, but it's important to review them and ensure that they still align with company objectives.
Steven Morell: A lot of people are looking at reviewing the compensation plans now. You touched on 2 more topics: Gender Gap, fairness in compensation. Can you talk a little bit to me about how often you see this and I feel inclined the next time I have to do a compensation plan, I'm gonna call Graham and ask him dude I have this thing here. What do others do? But I don't have to because you are running a survey every year. So what's in the survey and do you see unequal pay in the survey, getting better or worse or remaining a problem?
Graham Collins: That's an interesting question. So... Yes, there is a gender disparity, gender pay gap and also racial pay gap as well within sales as there is in pretty much every industry. The advantage of sales is it's fairly easy to begin shrinking that gap. Obviously there are other things in play that can't fully shrink that gap, but there are ways in sales to begin shrinking that gap. I wish I had a good answer for you as to whether or not it is shrinking. I know that over the past several years, we have seen an increase in the standardization of compensation plans. Now given what I had said is that unstandardized comp plans create that inequity, by standardizing them, we would be more likely to see a reduction in that pay gap. I don't have the data to back that up though.
Steven Morell: But you do have a survey. Does a survey come out every year? And there is a fresh edition out there. Talk to me about this.
Graham Collins: There is. Yeah. So that just came out earlier in October, in CompTober . This survey is centered around who's involved within the compensation planning process, what you want to focus on, and how you can remedy it. And each of the surveys every year are slightly different. It's not identical every single year. The fresh stats that I love is that 91% of organizations are missing quotas and quota targets and compensation plans are at least partially to blame for that. Sales leaders and RevOps leaders believe that the exact number is that 39% of leaders say that their compensation plans don't align to their company targets. And so by aligning your comp plan to your company target and creating that structure where the sales reps know what they're being paid, why, and feel like it's fair, then you're more likely to hit those targets.
Steven Morell: So many more questions I'd like to ask, but we are running short on time. Final question. If I would have a time machine and I could send a postcard to the five year younger Graham with a warning on what to do differently or not to do it altogether, what would you write on that postcard?
Graham Collins: Yeah. This is especially important for me because my five year anniversary at QuotaPath is coming up in a week from today. So I'm coming up on my five year anniversary. So I guess this is an interesting question because we spent a lot of time and resources at QuotaPath building a tool designed specifically for sales reps. With the intention and thought process that sales reps would be able to build their compensation plans. Integrate their CRM and track their own commissions and then bring that data actually up to their bosses and their bosses would then come to us and buy. We really didn't see that as much as we were expecting to. Now, I don't regret building for the sales rep because I believe that building for the sales rep is incredibly important, but it's also important to build for the people who have the money to build for your buyers. It's important to build for your end users when, and this is a kind of a QuotaPath specific thing, but it's important to build for your end users, but it's also important to build for your buyers and ensure that they're brought along the way as well.
Steven Morell: I think this is great advice. Thank you, Graham. All right, everyone. That brings us to the end of this episode of Speak Revenue. I want to thank our guest, Graham Collins for joining me today and sharing those insights. Huge shout out to our listeners. Your support means the world to us, so please visit us : www.speakrevenue.com and you can totally leave out that Ws. You get a full transcript of this episode and additional resources, we are gonna link all the tools that you mentioned, compensation Hub and the study and everything from there. Then please go to Apple Podcast, Google Podcast Spotify, wherever you go for your listening needs. And if you like this episode, then please. Give us a great review. Give us five stars. It really helps to get the word out. Also, follow us on LinkedIn, on YouTube. We are not on Twitter anymore. But wherever you can find us, we are on Instagram. And keep coming back. Stay safe, keep learning and talk to you soon. Bye.