Lead Generation Compensation: 5 Tips to Get the Price Right
When expansion-stage companies build their first lead generation teams, all too often they focus on establishing the right roles, responsibilities, strategies, and processes, only to neglect or glaze over a critical driver of both short- and long-term lead generation success: compensation structure.
Is your compensation plan both competitive and sustainable? Here are five tips to help you assess:
1. Strike the Right Balance between Base Salary and Lead Generation Bonuses
The exact proportions of this balance will vary a bit depending on the specific lead generation roles you’re hiring (i.e. inbound, outbound or hybrid). In the beginning of a company’s evolution, most lead generation reps are data gatherers and message testers. They validate a lot of the assumptions the company has made early on, while also attempting to fill the sales pipeline with qualified leads.
For more on this, see Former Stanford Business School professor and entrepreneur Mark Leslie’s article, “The Sales Learning Curve,” which explains the difference between “Renaissance Reps” and “Coin Operated Reps.”
In this case, a lead generator’s sales compensation structure should skew heavier toward his or her salary. For instance, a 60 percent salary and 40 percent bonus structure is a pretty reasonable balance.
Whatever you decide, it’s important to create your compensation structure contextually and align it to your business goals. Think about the activities that your lead generators will be responsible for, such as:
- Capturing market data
- Adding new qualified prospects to the pipeline
- Growing or renewing existing accounts
Create a compensation structure that will motivate them to perform those activities efficiently and effectively.
2. Attribute Reps’ Bonuses to the Right Metrics
Expansion-stage software companies often make their lead generation compensation plans more complicated than they need to be. Quite simply, the most successful lead generation programs tie a lead generator’s bonus to measurable, revenue-related results, not just call, e-mail, or social media activity.
Achievement of activity-based goals like reaching a certain number of prospects can be rewarded via SPIFFs or gamification, described below.
Activity-based metrics, in my opinion, may encourage counterproductive activities that reward reps on numbers that might inadvertently encourage ineffectual behavior – or worse, actually waste quota-carrying sales reps’ time rather than helping them close more sales.
In the case of lead generators — a group that, after all, is designed to serve as a company’s lead enhancer — bonuses should be paid out on a rep’s ability to deliver sales qualified leads that align with an agreed upon lead definition.
Ultimately, a person’s ability to do that will determine their true value to the business, so compensating them for it makes the most sense.
3. Avoid Tying Compensation to Things Reps Can’t Control
While it might seem advantageous and noble to compensate lead generators for a percentage of closed deals, it can be a dangerous sales compensation practice. Remember, lead generation is a front-of-the-funnel activity.
Some lead generators may be delivering high volumes of highly qualified leads that result in sales. Others might be delivering hoards of highly qualified leads that are either ignored or not closed due to an ineffective sales team.
Under the latter scenario, lead generators being compensated on closed sales could be punished if the sales team isn’t doing its job. In the end, this type of structure will likely cause intra-organizational conflict and generally unhappy lead generators.
That being said, you might consider giving lead generators a small additional individual or team territory bonus if the leads they deliver ultimately result in sales.
A bonus, unlike the salary and bonus based on a qualified lead quota that lead generators rely on to pay their bills, is more of a special, nice-to-have pat on the back that recognizes their key role on the revenue generation team.
4. Pay Commissions and Bonuses as Often as Possible
That’s not to say you should be cutting your lead generators a bonus check every week. You should, however, pay incentive compensation at least every quarter — if not far more frequently. As a best practice, I highly recommend delivering that income to your employees every month.
The truth is, lead generation is often an entry-level job. As such, the people you recruit will be fresh out of college and burdened by things like rent, car payments, gas, groceries, credit card bills, and student loans.
Assuming that 30 to 40 percent of your lead generators’ income stems from their bonus, then they’re likely relying on that money to pay their bills, not buy BMWs and fancy watches. As a result, if they work hard every day and deliver on the goals you set for them, it’s only fair to reward them as soon as you’re financially able.
5. Get Creative!
In the sales world, there’s a common term used to describe the little rewards that companies give their sales staff on top of traditional commissions and bonuses. We call it a “spiff,” which is typically a spot incentive that is handed out monthly or weekly, and rewards the team for hitting a specific initiative or goal.
A spiff could be a small cash reward, a trophy or special parking spot, or even an exotic trip (among many other things). Individuals and teams are driven by different things, so get to know what rewards your lead generators will work extra hard to win.
The idea is to offer something that keeps everyone excited, optimistic, and motivated. Lead generation is a hard job, after all, and offering spiffs is a great way to help your team forget about the day-in and day-out necessities.
Gamification is also gaining popularity across business functions and is especially applicable in a sales environment. Imagine applying the proven effectiveness and “stickiness” of game theory and game mechanics to business goals like adoption of technology, training, or pipeline generation.
Avoiding Conflict and Confusion
Without a fair and scalable compensation structure, you not only hinder your ability to recruit and retain top talent, you also risk creating unnecessary conflict and confusion within your organization. As you can imagine, neither of those byproducts are healthy for growth stage lead generation programs.
Compensation is critical when you’re assembling your first lead generation team. Get it wrong and it can disrupt everything from your competitiveness in the marketplace to your timeline for hiring and onboarding new team members to your corporate culture and employee retention rates.
Spend Money Wisely to Incentivize
Getting your lead generation compensation structure right isn’t simply about making sure you’re not undercompensating. After all, overcompensating on guaranteed income or “base salary” can be unsustainable, putting unnecessary strain on your business while making any attempt to scale your team nearly impossible.
It can also create a false sense of comfort, reducing your team’s sense of urgency and incentive to do the things you need them to do to drive revenue.
Performance-based income is another story. Capping bonuses for delivering qualified lead results puts unnecessary constraints on overachievers that are not good for your business.
Taking time to develop an appropriate compensation strategy for your lead generation team that aligns to your business goals and motivates and rewards the right behaviors, and helps you recruit and retain the best people.
This is turn will deliver something every growth stage company needs: a steady pipeline full of qualified buyers that leads to a predictable revenue stream.
“Data is the new oil,” has become somewhat of a trope in the tech community: a quippy statement to illustrate the vast amount of data in the universe…