How to Build a Millennial Sales Compensation Plan

Recently, I co-hosted a sales compensation planning webinar with two sales experts, Howard Brown CEO and founder of RingDNA and John Kosturos, VP of Enterprise at RingLead. (Stay tuned for more content from the webinar!)

While much of the webinar focused on the elements of sales compensation plans and how to appropriately roll them out, we would be remiss if we didn’t think about who exactly we’re creating these comp plans for: The Millennial Generation.

Now, any good BDR or sales manager will agree that while sales compensation planning isn’t their favorite part of their job, it’s a necessary evil.

And when we work with leaders in our portfolio to build out or redesign a comp plan, we often encourage them to think not only about the role of the person the designing the plan for, or the KPIs they want to include, but more specifically, the profile of the person in the seat.

The Millennial: Your New Sales Hire

So, ladies and gentlemen, I’d like for you to meet the millennial, your new sales hire. Across our portfolio, millennials have stood out as key players on business and sales development teams. Why?

  • They are open to change. As we know by now, at the expansion stage things are always moving and ever-changing. Given that upon hiring, a millennial usually has little to no work experience, they’re comfortable rolling with the punches. These “fresh outs” are also a blank slate and have yet to develop many bad habits. And better yet, they are coachable. They want your advice. They want your input and they’re willing to apply it to the work they’re doing.
  • They are genuinely curious. I always look for candidates who show genuine curiosity. These people aren’t satisfied with the status quo or blanket answers. They dig deeper to get the information they need.  And, this type of curiosity has likely already lead many millennials down successful paths. They have a track record of winning — be it on the field or in the classroom — they know what that feeling of winning looks like and they want to recreate it in the work environment.
  • They Are Hungry. Millennials are eager to make impact and please their managers. They’re also the ultimate stalkers. Millennials have grown up with technology and are avid users of social media. If there’s information you need on a prospect, just ask a millennial to go dig it up.

What Do Millennials Need Out of Compensation Plans?

When it comes to compensation planning, millennials are after two things — simplicity and structure. Often times, millennials are in their first full-time jobs and don’t really know what to look for or ask when it comes to their compensation. Simplicity is key. Millennials want to know exactly what is expected of them and what they’ll get in return.

And they need structure. The millennial generation is the generation of after school activities. Down time is scary. Implementing structure will make team members feel secure and give your organization a leg up on the competition.

What Millennial Compensation Plans Drive Success?

Now that we’ve outlined the millennial persona, let’s look at what type of sales compensation plan will drive success.

First, every compensation plan should include the following three elements:

  • Base: What you see in your regular paycheck.
  • Bonus: Additional compensation for achieving specific goals.
  • Kicker: Any additional spiff or bonus outside of what’s in the sales rep’s OTE plan that is tied to closed won deals or competition.

With this in mind, let’s design the compensation plan.

The Bonus

When it comes to structuring bonus, we you should focus on two elements: appointments and opportunities.

In order to ensure reps focus on lead quality over quantity, we typically advise that the bonus is structured as follows:

  • 40% of the bonus is tied to all new appointments
  • 60% of the bonus tied to all new opportunities

This structure ensures the rep has a hand in their success, but that the main focus remains on opportunities, not just appointments sourced — which ensures some level of quality control.

Let’s take a look at how this structure works in practices. If a rep is getting paid out $1,000 monthly and their goals are 16 appointments and 8 opportunities, that means each appointment set earns them $25 where as an opportunity created amounts to $75 each.

As always, we want this number to be uncapped.

Some compensation plans also include cliffs. So, a rep might need to hit at least 50% of their goals in order to get the full commission payout.

What’s the Breakdown Between Base and Bonus?

If we go back to the millennial persona, many hires will be living paycheck to paycheck. They’re recent grad who’ve not yet established a cushion. And, since this particular role is so competitive right now, we’d recommend applying more weight to the base compensation over any bonus. So, 70% of a reps total OTE is on base and 30% is on bonus.

Once this is set, you can give each rep an additional kicker for any closed won deals or 10% of any MRR that they’re creating or 0.89% of any ARR.

Remember, designing a comp plan is a lot like closing a deal. You need to remember who your target audience is. You need to know know exactly what it is that you want them to do. You need to show them how to get there by creating structure. You need to tell them what the results are simply and be consistent in your delivery. That’s how you deliver a compensation plan that drives success for the millennial generation.

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