Sales Compensation Trends in 2021
By: Korrin Bishop
In sales, compensation generally consists of an annual base salary plus variable pay like commissions and performance incentives. Together, these establish the on-target earnings (OTE), or the expected compensation if the employee meets their sales targets.
However, in a tight labor market for sales talent, teams need to get bolder with their compensation models to recruit and retain the right people.
Below, we look at three sales roles—sales development reps (SDRs), account executives (AEs), and sales leaders—and offer creative suggestions for how we can leverage your compensation package to incentivize them to join our team and succeed.
Sales Development Reps
SDRs are entry-level sales positions. Their work includes tasks like:
- Prospect research
- Cold outreach through phone, email, or social media
- Setting up appointments for AEs.
Historically, SDRs have to set between 8 to 12 meetings per month and get paid variable compensation per meeting or an overall bonus for reaching their target.
According to The Bridge Group SDR Metrics Report 2021, SDR compensation is rising while experience at hire is falling, a sign that SDR recruitment is a priority for companies.
But challenges arise when using compensation to motivate SDRs and attract new talent, such as:
- Long sales cycles: Multi-month sales cycles cause a gap between activity and reward, weakening SDR motivation.
- The luck of the draw: Certain SDRs may have better accounts upfront, while others might hand over higher-level prospects to AEs who request they be the ones to set the initial meeting. These tactics can create inequitable compensation variation between SDRs.
Here are some ideas to curb these challenges:
- Pay SDRs weekly: For meetings held or opportunities created. More frequent, regular payments communicate a sense of stability and encouragement.
- Use non-cash incentives: These offer fun, memorable ways to engage your team that can boost overall morale. Think gift cards, concert tickets, travel vouchers, or the latest tech gadget.
- Pay SDRs as a team or offer team-based bonuses: Team targets help level the playing field in the “luck of the draw” dilemma. Team incentives also encourage collaboration between frontline sales departments to create the best possible relationships with prospective clients upfront.
Account Executives
AEs are responsible for closing sales from SDR leads or otherwise. To do so, they’ll conduct product demos and discovery calls with prospective customers.
For AEs, compensation typically consists of 50% base annual salary and 50% variable commission.
Two challenges that arise in compensation plans for AEs include:
- Delayed purchase: If prospects interact with the first AE, that seller may do a lot of the upfront work. But if the company ultimately makes its purchase later while working with a different rep, this delayed sale can complicate giving due credit to AEs and SDRs.
- Onboarding process: An effective AE needs to know the product they’re selling well. Product education takes time, making hitting sales targets during the first few months challenging and demotivating.
To counteract these challenges, sales teams can:
- Recognize omnichannel sales efforts: When prospects punt their decision and buy at a much later date, ask how they found out about the product and look at their digital footprint with the company (e.g., webinars or product demos attended, email history with an AE, etc.). Give spot bonuses to AEs who assisted in the previous effort or "split the opportunity" in the CRM.
- Pay AEs immediately after a deal is sold: AEs often wait 90 to 180 days once the customer pays to receive their commission. Keep AEs motivated by paying commission when they close a deal, linking action with the reward.
- Guarantee commission during ramp-up: During an AE’s first 3 to 6 months, provide a full OTE so they can focus on learning and becoming an expert in selling your product or service.
Sales Leaders
Sales leaders include sales operations managers, sales enablement leaders, and those who oversee entire sales organizations or teams of reps. These roles focus on driving team performance.
While compensation for sales leaders varies greatly, a common approach is receiving a bonus for getting the sales team to hit its overall targets. For example, sales leaders may get a certain percentage (from 1–5%, typically) of the sales team’s total revenue booked. On average, OTE is between 50–70% base annual pay and 30–50% variable pay.
Some challenges to consider in compensation for sales leaders include:
- High stress: Sales leaders aren’t just responsible for meeting team targets but also for their team's overall job satisfaction and engagement.
- Competitive market: Companies will be vying for the same top talent in a tight labor market. You have to make your offer stand out.
Potential compensation solutions for these challenges include:
- Give equity or stock incentives that vest immediately: Remove some uncertainty by allowing equity and stock incentives to vest immediately. A vesting period helps sales leaders feel like they’re a more significant part of the company.
- Pre-negotiate severance packages: Moving into a new role can be a risk. Data from the sales networking group Pavilion shows 20% of US-based sales leaders have pre-negotiated severance. Recruit the best sales leaders by letting them know they'll be covered if it doesn’t work out. You can also offer retention bonuses to encourage them to stay through changing and challenging times.
- Look at additional measures for spot bonuses: With a growing need to improve the job satisfaction of SDRs and AEs, consider other variables to reward leaders, such as employee retention rates, improved sales rates over time, and shorter sales cycles.
Structure Sales Compensation to Recruit and Retain
The critical takeaway from sales compensation trends following the economic and social turbulence of the last two years is a need to structure it to both recruit and retain sales teams. Consider how our compensation plans attract new talent, inspire team members to meet targets, and maintain a strong culture of support and appreciation for sales.
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Korrin Bishop is a freelance writer and editor with publications in The Motley Fool, Sierra Magazine, Shelterforce Magazine, and Fodor's Travel, among others. You can learn more about her work and contact her at: www.korrinbishop.com.
References:
“The Bridge Group SDR Metrics Report 2021: Post COVID-19 Reality,” CIENCE, Mar. 3, 2021
“5 Sales Compensation Trends You Should Be Thinking About,” The Brevet Group, n.d.
“Compensation Overview for SDR, BDR and AE Careers in SaaS Sales,” Aspireship, n.d.
“Structuring Your Sales Leaders Compensation Plan,” Menemsha Group, Apr. 12, 2017
“Sales Incentives That Boost Growth,” McKinsey & Company, Oct. 19, 2018
“6 Steps to Designing a Sales Development Compensation Plan,” Salesloft, Oct. 30, 2018
“Sales Incentives Programs: How to Choose One that Galvanizes Your Team,” Pipedrive, n.d.
