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Sales Comp Guy

How to Compensate for Windfall Sales

183:906269490 • June 27, 2023

What to do when your salesperson lands a big sale you weren't expecting.

Bigger is better, right? Well, if you’ve ever had a salesperson land an unexpected, out-of-scope sale, you probably fall into the “more money, more problems” camp. Sometimes large deals cause issues, especially if they weren’t planned for in your compensation plan design.


What’s Wrong with a Bluebird Deal?


A bluebird sale is another name for an unexpected, large sale. Now don’t get me wrong, I’ve known many sales people that resent the term entirely, but there are a few potential problems with this type of sale:


  • Large deals generally require the efforts of a larger crowd of players. If your comp plan doesn’t account for splitting the rewards, one person may receive disproportionate amounts of credit or compensation while others are left with little or nothing.
  • The profit margin on large-scale sales may be smaller than other sales due to the expenses involved in getting the deal closed and servicing the larger transaction. Bigger revenue doesn’t necessitate a bigger margin!
  • The sale may not have taken any longer time or any different work effort on the salesperson’s part than the usual sized sales, making their potential commission out of alignment with the amount of work put in – meaning it was out of the scope of the design of quota or the sales process expectations.


So if you haven’t accounted for this particular scenario, now’s the time.


Best Practice: Amend Your Compensation Plan to Account for these Out of Scope Transactions

 

Ultimately, compensation for a windfall sale needs to align with the role, level, and plan. So if your plan doesn’t yet account for this eventuality, it’s a good idea to make some changes. There are a few additions you can make to your incentive plan, including:


  • Modifying payment timing or defining a maximum payout ensure that the reward is commensurate with the financial contribution to the organization.
  • Include rules for a deal team to make sure that the unique or special group of participants is compensated for their efforts (likely special deals require special effort).
  • Create and document a “bluebird clause” outlining the definition of and parameters for a windfall sale as well as the compensation procedures.


What to Do if a Bluebird Sale has Already Occurred


If your compensation plan doesn’t include any verbiage on what to do in the event of an unexpected, large sale, you may be feeling stuck or frustrated.


In this case, it’s important to remember your organizational values. No matter what those values are, it’s a fair guess to say that they are meant to promote a profitable, efficient workplace with low turnover and high employee satisfaction.


That being said, if a large sale has caught you by surprise, the best practice is to pay your salesperson according to the agreed-upon comp structure, even if it hurts. If possible, compensate the deal team as well.


And then, as soon as it’s over, make an amendment to your sales compensation plan and communicate that change to your team.


Remember, this isn’t a penalty for successful salespeople; it’s financial protection just as much as it is clarity of operations and resetting expectations on how normal sales activity is to be paid.


By 183:906269490 December 16, 2024
In my first Best Practices post, I talked about the importance of knowing what you can pay for your sales roles before worrying about what the market is saying. In my second post, I covered ways to utilize culture in a sales organization . The following Best Practice in sales compensation involves job content. Job content plays several roles in your compensation plan: 1. It gives your salesperson a guide to what success looks like in their role. 2. It gives you a guide to evaluating the performance of your salesperson. 3. It rationalizes differing levels of variable pay outcomes for varying performance levels. 4. It provides your organization with the structure needed to comply with any reporting, pay transparency, or other regulations. Hopefully, that’s enough to convince you of the importance of taking the time to define your new roles and revisit the definition of your existing roles. Now, here’s how job content actually does those things. Defining the job The first role of job content is to define the who, what, where, when, and how of the function. It can be tempting to borrow a job description from LinkedIn, Glassdoor, etc., with the assumption that the content will be similar enough to fit your needs. However, the way a specific role performs is unique to the organization it’s acting in, which is why it’s important to take the time to define the job from scratch. Here are the questions you should be answering in your job content: What does the person need to do on a daily basis? How does this individual pursue sales, and in what segment or with what type of customer? Where should they focus their time and attention when building a pipeline of deals? Who should they be interfacing with, both internally and externally? When do they engage with customers and/or prospects? What portion of the sales process do they own or support? How do they interface with and influence decision-makers? Now, even though I said to write your job description from scratch, that doesn’t mean this is the time or place to get too creative. Job seekers are going to be searching by job title or category, so it’s essential to stick to the common vernacular regarding industry jargon and expected job titles. Job Description: A Byproduct of Job Content Another positive outcome of creating job content for your roles is that you will have generated much of the information needed for a job description if or when you’re ready to hire. Information such as: Job duties and responsibilities that clarify the type of work and engagement with customers. Qualifications/Requirements that are both minimum and desired. Those include education, knowledge, skills, capabilities, and competencies. Performance measures of the role include items like achieving sales targets, new logo acquisition, development of pipeline, accuracy in forecasting, etc. With all of this information on file, it will not only be easier for you to prepare to hire for the roles you want, but it will also be easier to evaluate existing employees in those roles. Beyond all of that, you’ll be well prepared for competitive market research and establishing your variable pay program. I’ll be posting more best practices on the blog, but if you’re anxious to dive deeper into the subject of sales compensation, you can grab a copy of my book Starting Simple: Sales Compensation and consider working through the companion Workbook to build a sales compensation plan from scratch.
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