The Art and Science of Sales Compensation Plans with Dana Therrien
Download MP3Hi. I'm Warren Zena, founder and CEO of the CRO Collective, and welcome to the CRO spotlight podcast. This show is focused exclusively on the success of chief revenue officers. Each week, we have an open frank and free form conversation with top experts in the revenue space about the CRO role and its critical impact on BDD businesses. This podcast is the place to be for CROs, sales and marketing leaders who aspire to become CROs, and founders who are looking to appoint a CRO or wanna support their CRO to succeed.
Speaker 1:Thanks for listening. Now let's go mix it up. Welcome to this episode of the CRO spotlight podcast. This is Warren Zena. I'm the founder of the CRO Collective, and we brought back a great guest, Dana Tharian, who was here with us, when was it last year, talking about a lot of other interesting things, particularly related to customer success.
Speaker 1:But Dana is an expert in compensation plans, he's actually wrote, put together some research on it recently. And we talked about it and I was fascinated. So I thought, this is a really interesting topic. I'm welcoming Dana back. Dana, thanks for being here and let's get going.
Speaker 2:Thank you, Warren. Appreciate it. Thanks for having me back.
Speaker 1:I appreciate you coming back.
Speaker 2:Thanks for having me.
Speaker 1:Yeah, we're switching topics this time, because I'll say to listeners, Dana wrote a really amazing book about compensation plans. This is an area that is really, really important to my clients, particularly CROs who are struggling with the combination of payouts, quotas, incentives, and it's complicated. And Dana's got a really great perspective on this. So I thought we'd dig into it a bit.
Speaker 2:I wouldn't I wouldn't say I wrote a book. I've written a lot of research on it. And collectively, you could probably say it was a book, and it's a book that I should write.
Speaker 1:Okay. So talk about that a bit. I'm sorry. Correct me. Be a little more specific with what it is that you produced.
Speaker 2:Well, I was working for a company called Serious Decisions and later Forrester. We were a research and advisory practice that was advising CROs and other sales executives, including sales and revenue operations leaders on best practices, benchmark information, where the world was going, making predictions. I was also advising a lot of these sales performance management vendors like Anaplan, and it was a frequent conversation that came up. Everyone always had an issue with the effectiveness of their compensation plan, the complexity of it, the expense of it. So I just started to write a lot of research on it when I was with that firm.
Speaker 2:Eventually, I went back to an organization called World at Work and became a certified sales compensation professional, which I liken that to being an expert in the field and then going back and reading the book on what I've been talking about. And it validated a lot of the things that I accumulated through experience, but also gave me some really good theoretical knowledge to backfill so I could have better conversations. I was at the World at Work sales performance management expert expo in Chicago just this week, meeting with other people who have gotten that designation and having lots of great conversations about sales motivation. So I think it's gone beyond a technical conversation, and it's gone more towards human behavior, and how do we really appeal to people's sense of duty, as well as their sense of wanting to have control over what they're doing for a career. I think that's why people get into sales.
Speaker 2:People think they do it for the comp, but it's more for autonomy, and comp just happens to be a side benefit.
Speaker 1:Well, I should try. I like that. And I I agree. I think salespeople come in weird packages. Right?
Speaker 1:I mean, I think you get the salespeople whom I've I've hired and managed dozens and dozens of them. And you get some that are just money hungry. They like sales, they saw it as a really smart way to make money. And they know they do certain things well, they'll make money and they're driven by that. And they really focus on that.
Speaker 1:And then there are other ones whom, like you just said, see it as like, almost like they're opening up a small business that a company is letting them open up at their company, they're selling their product, they set up their own little shop and they go out and they make money, and they build this little marketplace for themselves. And they're doing it in a weird sort of agreement with your company produces a product, I'm going to go to the market, and I'm going to sell it. I'm going to make money on that. You guys do your job, I'll do my job, and I'm going have a little business of my own. Leave me the hell alone.
Speaker 1:Yeah.
Speaker 2:Mean, none of us do this for free, but the ones who do it exclusively for the money, you can see through them in about three seconds. Mhmm. Because their motives become so clear and they're they're more self interested rather than understanding that their self interest really aligns to appealing to the self interest of the people that they're trying to help.
Speaker 1:You know, that's absolutely true. And you could smell those guys when they get on the phone with you. But I would also say that that's the same thing with a company. I mean, companies have cultures like that, where they're just looking to try and get as much revenue as possible. And all the salespeople are managed that way.
Speaker 1:And so this gets to the point, right, which is the incentive plans. And how are they being driven to create what? Is the incentive equally as designed to get somebody to motivate themselves, but is also designed to make sure the customer gets the right value from what it is they're buying? And I'm interested in that because this is a problem I'm seeing how companies are having a lot right now. You know, is I want my people to make a lot of money, but I also want my customers to be happy because we're over the days of just trying to acquire as many customers as possible.
Speaker 1:Now, people have to be satisfied with the product they're buying or else it's endgame for us. So I'm just what are your thoughts on that?
Speaker 2:I think, well, you touched on a couple of different subjects. And one of them, think, alluded to the idea that salespeople, their processes are getting more managed on a daily basis where they have little autonomy left. I think it's probably one of the most micromanaged professions on the planet. And I think the evidence of that is an announcement that came out at the beginning of last week, I think, where Clari, the forecasting company is merging with SalesLoft.
Speaker 1:Yep, I saw that.
Speaker 2:And I think that that's a direct indication that we we are now viewing the sales profession as being purely transactional, that it can be managed down to the interaction level that you can score conversations on a second by second basis. You can keep score, and it's always in favor of the customer or in favor of the company. And we're gonna track it down to the minutest levels. And we're gonna micromanage you down to not just sales stages now, but sales place conversations, follow ups, and where you are in that process. So I think that we finally succeeded in taking call center metrics and expanding them into enterprise sales.
Speaker 2:And it's really, I think, deflating to salespeople, and it's probably one of the greatest frustrations that they're encountering today. And I didn't mean to take it down that path, but we're talking about motivation.
Speaker 1:No, it's a perfect place to take this conversation. Think it's all related. And you're right. I see the job of sales for a long time was an art. And now it's only a science almost exclusively become a science, you know?
Speaker 2:Yeah. And what I find amazing is that these technologies like this are almost exclusively developed by non salespeople who have an opinion on how sales work, who generally have never done it themselves. And they think that it can be broken down into a series of micro steps. And as long as you follow the prescription, it's gonna achieve the outcome that you expect.
Speaker 1:Well, that's what happened in the music industry. Yeah. So in the seventies and the eighties and sixties, you had people that were just brilliant and they wrote beautiful stuff and they were just brilliant artists. Then the pop industry in the nineties and the late nineties and February was like, alright, but they did. I know this.
Speaker 1:Universal Music did this. They deconstructed every song that was a pop song. And they figured out what is it the elements of a pop song that make it sell. And then let's go into a little room and create a machine that makes songs like that. They did it.
Speaker 2:They did it with movies too. I mean, now movies are unwatchable.
Speaker 1:Yep.
Speaker 2:For the most part and pop songs. I mean, I'm sure there's an audience out there for it now, but it's we sound like the old guys, Warren.
Speaker 1:We are. About the good old days. We are the old guys. Yeah. Okay.
Speaker 1:But here we are. Right? So let's talk about where we're at because we all you and I are in agreement here. I know because we both from a generational perspective, etcetera. Yeah.
Speaker 1:But here we are today. Right? So you've got people whom take these jobs. Right? There's different various ways in which these companies are getting funded.
Speaker 1:They have money to deploy to grow the company. They hire And again, we haven't even gotten into this, which we will. It's also you have to incentivize more than just salespeople now. Got to incentivize all the people in the company to do things, whether it be financial. Now you and I had a conversation about this.
Speaker 1:Yeah. Which I want to talk about that. So you're a CRO and you have to sort of create not only find the right people, right competencies in general that they have that artistry, but now you have to manage them and you have to provide them with the right incentives and compensation. So what were the findings that you had from that perspective that kind of translate to what's it like today? And what are some things you're seeing that work and don't work?
Speaker 2:The most successful compensation plans are the ones that are the least complicated, the ones that the salesperson can read, understand, really track what actions need to be taken in order for them to be successful, and then take those actions on a daily basis. So generally, the principles of that is you want to try to have one quota, definitely no more than three. And the rules for retiring that quota have to be very simple. You book a deal, you get paid on that deal, and then you move on to the next deal. Or if you happen to be a company that's more focused on revenue recognition, revenue growth is more important to you.
Speaker 2:Maybe you're gonna have one that's tied to revenue. The ones that start to get into margin and other, I call them triple Lindy rules, where if you do this but not that, then this and then you get paid that. Once it gets beyond that point, it becomes too complicated. Then you start to lose those more aggressive people who prefer to work in a simpler environment. Now, I've seen it a long time in my career.
Speaker 2:You've got salespeople who gravitate towards these startups where they know the territories are broad, undefined, compensation plans are simple, almost as simple as just getting a percentage of everything you sell. And then they run that play until the company reaches a certain stage where they get the next level of investors, and then they start to bring in people like me who are going to manage their compensation plan and start to complicate it. Then they leave, and then they go to the next startup.
Speaker 1:Thank you so much again for listening to the CRO spotlight podcast. This podcast is an important plank in the CRO collective communication strategy, and we're really thrilled to have such great guests on here. So, listening and sharing the podcast with other people is really vital because we wanna get as many people listening to this great stuff as possible. Couple things to note. If you're a aspiring CRO or a recently hired CRO or even a old salty CRO, and you're looking to either become a chief revenue officer or improve your chops and gain some more insights and improve your competencies as a chief revenue officer, We offer the CRO accelerator course.
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Speaker 1:They have number of years under their belt as a revenue leader, whether it be a sales leader or a marketing leader or even rev ops leader. And they either want to move into the C suite or their CROs that want to just make sure that they win in the role. So if you are interested in being a member of the next cohort, please just write me a note on LinkedIn. Just DM me CRO accelerator, and we'll set up a time to talk. And then I can send you more information to give you a brochure of course.
Speaker 1:So, again, CRO accelerator course, fifteen week program for aspiring and newly hired CROs. Take advantage of it. It's been great, and, you'll see some more information about it on the website. Thanks. Why do you think it is that companies make them complicated?
Speaker 1:What's what is the is it just because people have to tinker? Is it lawyers? Is it like is it bureaucracy? What what? Because you're right.
Speaker 1:I mean, it makes sense. It should be simple. Why is it not?
Speaker 2:I think as companies start to evolve, they start to get a little bit more conservative. This becomes more about protecting what they have rather than growing what they want. And then when they start protecting what they have, they start to introduce additional elements of bureaucracy to try to think of every scenario that could possibly happen and to protect themselves against those scenarios.
Speaker 1:So it's fear and risk mitigation.
Speaker 2:I think so. Yeah.
Speaker 1:Okay. So you need someone whom has some, let's say, authority to be a stopgap on that. Right? I mean, if I'm running a sales organization, if I'm a CRO, what are ways that you would advise someone as a chief revenue officer who's running more of a larger revenue operation to mitigate against the, you know, the entropic, you know, push to everybody. The the CRO probably has to present his his his compensation plan to the CFO.
Speaker 1:CFO is like, no. What are you doing here? No. It's it's too simple. You got it.
Speaker 1:What about this? What about that?
Speaker 2:Yeah. You're you're working with people who generally go to some very large corporations, and one of the things that they're gonna see almost immediately is the number of compensation plans that are out there. So for for a company of, let's say, a billion dollars and three fifty to 500 salespeople, if they've gone to the level of complexity, you might see 30 or 40 different variations of compensation plans. That's an indication that things have gotten entirely too complicated. Generally, you should have one sales role with one sales compensation plan, and then they should all be calling from common elements to that.
Speaker 2:So if you've got an account manager and an account executive, they should both be paid on bookings, perhaps. And then the account executive, the hunter, should be 60% on bookings and 40% on retention or whatever that might be. And if you're more focused on retention, it should be the inverse. But they should share commonality between the compensation plans. Should There be a very limited number of compensation plan, one for each job role, and then the number of rules inside those compensation plans should be very, very limited.
Speaker 1:Well, mean, I don't disagree. I just I never see it that way. I look over people's compensation plans, I can't believe it. It's like a legal paper and you know, I can see how it makes none of your eyes get crossed but it doesn't motivate. It it does the opposite.
Speaker 1:It demotivates and as a result, people don't even get paid out a lot of times on their compensation plans because they don't really know when they're supposed to get paid out on their compensation. They don't know what to ask for. You know?
Speaker 2:So some of the advice that I gave to CROs to help mitigate that problem. Yeah. I I I created a model when I was at at Forrester around sales compensation design, And the first step of it was to decide on the plan charter. What is it that we are trying to do? And that was generally like a broad mission statement for the sales organization, which might be grow sales by 30 next year, or achieve a billion dollars in revenue by 2028.
Speaker 2:That was the goal. And we looked around the room of all the people sitting around to help advise on the compensation plan. It's the HR leader, it's the CFO, it's the CEO, product leaders. Everybody has an opinion on how the compensation plan should be designed. That's how it ends up becoming too complicated because it gets designed by committee and consensus rather than by what needs to be done.
Speaker 2:So start with that plan charter. The second thing is create some guiding principles. And three guiding principles. What behaviors are we trying to have our salespeople exhibit? We want them to focus on growth.
Speaker 2:We want them to focus on new product initiation. And we want them to focus on retention. These are the three things. So if you can get all the 10 people sitting around that table that have an opinion about how things should be done to agree on those two things, the plan charter and the guiding principles, when you start having more complicated conversations around the types of quotas, and plan mechanics, and payout curves, and hurdles, and links, and all these types of things, and people start to introduce ideas that conflict with those first two things that you've already agreed to, you come back and say, well, does that fit the guiding principles that we agreed to? And if the answer is no, then you ask the question, do we need to go back and revise the guiding principles?
Speaker 2:Because it conflicts with that. We can't allow this into the plan. So it sort of shuts them out automatically.
Speaker 1:I understand.
Speaker 2:It's a better negotiating technique rather than fighting with them about it.
Speaker 1:Yep. No, it's a great idea. And I could see that I don't think many companies even think that way. They don't know the answer to a lot of those questions. They don't put the time into creating those guardrails, and it leaves it open to anyone's ideas, particularly when the big issue I see is when without those principles, you bring on a new CRO, you bring on a new sales leader, and they come in with a comp plan that they use their last job and they go, this worked great.
Speaker 1:I'm gonna let's use this one and and it just changes over and Yeah. You know, the the the hiring manager or the CEO is like, alright, fine. I I hired Jack. He's a good dude. I'm a let him use the complaint he used before.
Speaker 1:He seems to like it. Let him do it. And then it becomes codified and it's hard to unseat once it's in there, you know? And
Speaker 2:there's those 10 people sitting around the table, all those different professions that I just mentioned, but the one who stands out is the CRO. Yeah. And he's the person or she is the person who's asking for whatever it is they're asking for in the compensation plan. And everyone else is gazing at the CRO with a slight hint of suspicion that you are self serving. You're just trying to do this to enrich yourself and to enrich your people.
Speaker 2:And that's not the case most of the time. What they want to do is they want to attract and retain the highest level of talent they possibly can to achieve these really aggressive goals that they've been given. And they know that they don't have a lot of time to make it happen. So yeah, okay, it looks self serving. Salespeople aren't doing this for free.
Speaker 2:They're in there to earn commissions, but you need to make it simple. And I think if you can get everyone to agree on those first two items that I mentioned, it takes that that level of suspicion out of it.
Speaker 1:Yeah, I love it. And I think if I may get your opinion on this, I mean, my feeling is too that, you know, bringing a customer into that framework is not a bad idea either. Like, is the compensation plan one that's going have an impact on the way that we go to market, or the way that we sell our product or the way that we get people to buy our product? And is that good for the customer? What's the prospect experience going to be like?
Speaker 1:And how do our compensation plans cascade towards that endpoint when we talk to a customer? I see this a lot. I know we talked about the beginning of this conversation. I could tell when I'm speaking to a salesperson that they're being managed to talk the way they are to me. Yeah.
Speaker 1:You know, their their incentive plan is actually forcing them to have coerced me into giving them specific answers that are driving incentives that they have, as opposed to just wanting to know what it is I want. And I think that if you build a compensation plan with that in mind, a question that should be asked is, a, how is this comp plan going to affect the way we go to market? And is that good for the customer or not? And that should be another principle, I think.
Speaker 2:It's true. I just when I was at World at Work, I had a conversation with somebody who's been out there for a very long period of time, worked for all the premier companies that you would ever imagine, leads compensation at a juggernaut of a company now. They've gone through their huge growth spurt. They've made billionaires, and they're revising their compensation plan. I was surprised that I had never thought about this myself.
Speaker 2:But they understand, especially in the SaaS based market, you sell licenses to a customer, if they're not consuming those licenses, it's gonna be a it's gonna be a difficult conversation when it comes time to renewal. And we've we've typically the the model has been for, like, the last fifteen years to outsource that problem to customer success.
Speaker 1:Yep.
Speaker 2:I'll sell it. You make sure they use it. But this company, they've they've done all the math. They've done all the analysis. They understand that the success rate for a customer is very low if they're not consuming at least 80% of the licenses that they bought, and if they're not doing it within eighteen months.
Speaker 2:So they've decided, and I can't tell you the name of the company because I can't give away their secrets, but they've that they're going they're going to bifurcate compensation for salespeople, you're going to get paid on bookings, but there's going to be a second payment within that eighteen months based upon whether or not those customers are consuming those licenses or not. And I bring that up, Warren, because you mentioned that oftentimes the compensation plan is not designed with the customer in mind.
Speaker 1:It's not.
Speaker 2:Rarely. If I'm incentivized to oversell licenses to a customer,
Speaker 1:then
Speaker 2:you're gonna have all these things sitting on the shelf for a very long period of time.
Speaker 1:100%.
Speaker 2:And not only you're not gonna preserve the ones you're using, you're probably gonna lose those because they're so disenfranchised for having spent so much money on all these unused licenses for the last three years that they're gonna penalize you for it. So I thought it was a brilliant, brilliant idea. I had never thought of it.
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Speaker 1:Wanted to share information about a program that we offer called the CRO Masters Council. The CRO Masters Council is a bimonthly group of six season chief revenue officers who are looking for a chief revenue officer board of directors, so to speak, that they could share what's going on with them, collaborate with ideas, get some feedback on what's going on in their current role. And these are great conversations. I facilitate them. The CRO Masters Councils, again, they're twice a month, and they last for at least six months to a year.
Speaker 1:So if you're interested in having your own CRO suite, your own board directors of Chief Revenue Officers, it's a private, confidential conversation that we have. It's infinitely useful. Imagine having a room full of other Chief Revenue Officers you can talk to and say, hey, I'm working on this, or have you guys figured that out? Or I'm having this issue right now with my business or my my results. These are just invaluable conversations with chief revenue officers.
Speaker 1:Chief revenue officers have a very, very unique role. It's a very lonely job, and only other CROs understand what you're going through. So that's why we created this program. So if you're interested in being a member of the next CRO Masters Council, which we have a number of them being put together right now, just go to my LinkedIn and DM me masters or masters council, and I'll follow-up with you and set up a call or send you some more information about it. Looking forward to seeing you there, and thank you.
Speaker 1:It's a great idea, and I'm curious to know, like, the the problem or, let's say, challenge that that brings to the floor is this one. Let's say I have really great bunch of salespeople that I know are really good at getting those license packages sold. Okay? And maybe, you know, if they're coerced, probably they can get really big ones. And you and I both know there might be a problem certainly lurking in there because if they're not used, blah, blah, But let's just say that we know they can do that and that we like that because those big licensing deals are good for the bottom line and they hit our goal.
Speaker 1:So we're going to incentivize to do that. So then they come across the problem that you just referenced. And they're seeing that there's a lot of lingering licenses that aren't being used, and then they have the problem that you and I have just exposed. So what they do is they make the change that you just promoted, and they incentivize this guy to do two things. Now, that activity that that person was doing, which was getting them that bottom line revenue, that person's now being pulled off that to go help be account manager.
Speaker 2:That's a real problem.
Speaker 1:That exactly. So I'm curious, like, you know, I think it's a good idea to do. But the pressure from the organization is like, what are you doing? Steve's better at selling. Why is he managing this account?
Speaker 1:You know, give it to these people. We need them out there getting more business. Yeah. But, you know, Steve gets really good deals, but he doesn't follow through and get them to use the product. And customer success doesn't really do that.
Speaker 1:They're not in the position to do it because they weren't involved in the sale and they don't have the relationship to make that happen. So it's not working. It's more important to us that we get licenses being utilized. And that's a really hard conversation to have with a bean counter who's saying, I understand, but we have a forecast model and I got to hit it and Steve should be selling. So make them get them selling again.
Speaker 2:Know, they've they've thought that through and they understand that there's going to be people like Steve who are not going to stick around. Like Steve loves selling new licenses, couldn't care less whether or not the customer wants to use them or not. And he likes to make a lot of money doing that. So they have thought that through. They'll probably reach a point where they've seen a dip in their bookings, and they get really nervous and maybe they'll scrap the whole idea and they'll go back to the way that it was.
Speaker 2:But I think philosophically, Warren, I mean, I can think of any kind of problem that I've had or any kind of problem that most of us human beings have. It's always the fulfillment of short term desires over long term goals.
Speaker 1:No question.
Speaker 2:It's know, almost the the whole jelly donuts, but he's sixty pounds overweight. That's it's what we do. We like to indulge in the short term satisfaction of things, and we do it at the expense of the long term health.
Speaker 1:No doubt. And I and in fact, this the SAS business model was successful because it turned it into billionaires. And, you know, it kind of codified it as being a good thing to get wealthy on. And I think this is sort of like an interesting problem we've backed ourselves into. And I see this a lot, you know, the issue that I'm resolving with my clients mostly is exactly this one is, what's the way My that I
Speaker 2:dad joins me on every call.
Speaker 1:Yeah, it's okay. Totally fine. I got one next to me too. So it's how do you balance the short term and the long term, right, objectives effectively enough that you give just enough donuts to people that they feel satisfied while you're working on, you know, building up, you know, your your your grass fed beef reserves, you know? And that's not an easy thing to do.
Speaker 1:And I think I'm curious to know from incentives and compensation plans, have you found ways that you can construct incentives across the organization where that stuff's a little bit more achievable?
Speaker 2:I did it. So here's of a strange example. Okay, I'm a comp mad scientist. I think about this stuff all the time. I actually put a post up on LinkedIn a couple of months ago called the kid compensation plan.
Speaker 1:I saw that. I love that. Was loving it.
Speaker 2:It's got 30,000 hits on it. So apparently, parents are having a hard time with their kids over consuming like online content. They're addicted to their shoes.
Speaker 1:Please walk us through that for Flowswhip and Heard it. It's really great.
Speaker 2:So there's my nephew. He lives in New Hampshire. He comes my wife and I live up in Maine on a lake and he comes and spends every summer with us. And last summer, he came and spent the summer with us and he was just constantly coming down into my office asking if he could get on his iPad. So I devised an incentive system for him that I carried forward into this year.
Speaker 2:And the way it works is that he can earn screen time for physical activity. He doesn't earn screen time for doing anything that he's expected to do, like any kind of chores around the house or just being a good citizen. But if he wants to come and do some push ups in my office, some sit ups, if he wants to, I got him running five Ks with me right now. He's 10 years old, by the way. Doing exercise programs with me and my wife, he earns them like fifteen minutes.
Speaker 2:And then I gave it to him in the form of a golf tee because I found if I just wrote it down, it wasn't tangible to him. So if I could hang a golf tee in front of his face, he would work to give me that golf tee from my hand into his hand. And then what I did this year that I didn't do last year was I said, if you earn six eighty tees, we're going to take you on a trip anywhere you want to go. We'll take you to a water park. We'll go away for a weekend.
Speaker 2:We'll get you an awesome Airbnb with a pool inside. So now I've introduced a long term incentive on top of that short term incentive that he had. The difference between last year and this year was that he didn't want to consume any teas at all. Like he doesn't he's not cashing him in for any screen time. The kid doesn't watch TV once this summer.
Speaker 2:He hasn't been on his screen at all. I mean, than what we allot is family time. And I could see the change in the psychology, and I would actually ask him if he wanted to watch TV. He said, No, I don't want to spend it. So I balanced short term with the long term, and I think that example that I gave you about bookings versus license retention is a pretty good example of that.
Speaker 2:We have to have courage to do that inside of a company. You have to be willing to go through that. That's Yeah.
Speaker 1:It's like playing the stock market. You gotta play a long game. And as the dips go down, you gotta hold still and not pull out because Yeah.
Speaker 2:I just don't look.
Speaker 1:Exactly. Just don't look. That's true. It's true. But that's again, that's the same thing.
Speaker 1:I like this. I want to walk about that a bit because I really like this thing. So the dynamics there just to kind of help pull it apart are that these kids have ultimately, the behavior change came from them being more excited about the longer term outcome as opposed to the shorter term outcome.
Speaker 2:That's true. Yeah. And like tomorrow is the last day of the program. He's going home after tomorrow. By the end of today, he will met his goal.
Speaker 2:And tomorrow, he said he's going to blow through his goal. He wants to get into accelerators.
Speaker 1:Gotcha.
Speaker 2:And I guess I just use it as an example is the rarest, most pure form of human behavior is the child is that the behavior you see in a child. Don't they're not wearing the persona yet. And it just works so effectively. So I was like, this would really work. But I think the problem, the difference between doing it with him and doing it inside of a corporation is that the executives in the corporation are pretty much all on short term bonuses themselves.
Speaker 2:Every single quarter is a vote on whether or not they get to stay or not. And they're trying to stick in, stay in there for as many quarters as they possibly can to invest as much as they possibly can and walk out the door. They're not they're not vested in the long term interest of the company for the most part.
Speaker 1:I agree. I think it's a major issue. And I think that the I don't know, there's no answer. But I see more and more and more companies whom they're built to be sold in two or three years or bought or have an exit event. And that drives the culture of the organization.
Speaker 1:There's a client I'm dealing with right now who they built a product. And it's a brilliant product, probably ultimately will become a revolutionary product, but it's just not ready yet. But they wanted to get it out the door and get some revenue on it, so they're offering it to people at a cost that is fine, but the product isn't ready. And so people are disappointed. And, you know, I'm trying to explain, like, look, I understand you guys wanna get revenue.
Speaker 1:I do. But if you put a product out early with a promise and the promise isn't there, then you lost those people. And you might have gotten some revenue from it, but at what cost? Not only do those people, but they're not advocates for you now. And now also, they're probably going to cancel.
Speaker 1:So they're not going to advocate for you. And now you created distrust. And, you know, it's all driven by someone who's like, look, we need to get this number up. I got to get this number up by the end of the year.
Speaker 2:It's a cultural thing, isn't it? One of the things that drives me crazy, I don't remember the exact phrase, but they're always saying something like, excellent is the enemy of good, which to a degree, I understand that because I'm a little bit of perfectionist and it takes me a long time to get things going sometimes because I'm so worried about making a mistake, maybe sometimes I'm missing the opportunity. But good if good is going to jeopardize the future of your company, the future of your reputation, Don't don't do it.
Speaker 1:I agree. I agree. But you know, unfortunately, there's a lot of people who are making a lot of money doing that. And you know, they're it's weird. It's a very strange, very strange time.
Speaker 2:Well, there's a lot of a lot of people that make a lot of money at the slot machine too, right? At the poker table or at the crafts table. Those guys and everyone wants to be them.
Speaker 1:Exactly. Everybody wants to win the lottery. Exactly. So I'm curious. We talked before a bit about that governance model, and I liked it.
Speaker 1:I was curious to know, like, what type of governance or decision making rights would you set up for like a sort of CRO and finance and CS and product can resolve those kind of short term versus long term trade offs without derailing principles? Like if you were advising a company on this, what might weigh that you'd set it up so that the compensation plan accounts for both the short term and long term?
Speaker 2:Well, as a sales ops leader, revenue operations leader working with a CRO, I had a lot of closed door conversations with the CROs about what that person was trying to do, what their goals were, and some of the crazy ideas that they had. And I thought it was important to be able to have that safe to say dialogue between a couple of individuals and brainstorm stuff, and giving them the ability to model these types of things out to say, okay, you want to put an 8x accelerator into the compensation plan. Let me look at what that would look like. So then I could advise the person, Okay, you could do it. This is what's going to happen, but you're going to lose 100% of your credibility with the CFO.
Speaker 2:They're not going to buy into this thing. I don't think you should do it. So I would say one of the things you need to do as a CRO is have that trusted advisor where you can have those closed door conversations and put all your ideas on the table no matter how crazy they are, model them out, test them out, and then go go forth with the ones that you think are the best.
Speaker 1:Gotcha. That makes sense. So bring them into a laboratory of sorts before you bring them out to the world and make sure you got some good, sound justification for them and some models.
Speaker 2:Yeah. Because, like, it's not worth jeopardizing your reputation with some of the other executives if you're bringing forth a really crazy idea. And I've seen some passionate CROs who really think that they're doing the right thing, and they might be doing the right thing, but they're also, they have to balance maturity, and the CFO is looking to maximize the ROI of the compensation plan. And the CRO is generally looking to maximize growth and retention.
Speaker 1:Yep.
Speaker 2:So you got to find the balance between those two people. It's the same way you would you would talk to your accountant before you go and talk to the IRS. Yeah, you don't want to be talking to those two people for the first time.
Speaker 1:Don't go in that room. Yeah, sure.
Speaker 2:That's definitely one of the things and then, like every product leader wants to ensure that they've got product specific elements inside of the compensation plan where, hey, can't earn any accelerators unless you sell my product. And yeah, I mean, jeopardizes the overall productivity of the entire sales organization. And I think if you've got an emissary, somebody like me that can go off and have a conversation with that product leader, or that product leaders people, and you guys can kind of resolve these things off to the side before they get into the boardroom. That's generally the best way to do it. You don't want two executives fighting about these things for the first time in front of the IRS in that example that I gave you.
Speaker 1:Yeah, that's great. I mean, sounds like sort of a prescription might be like set cadence and controls, do like a quarterly comp review, do like pre read the models before you make any changes, right? Redline anything that violates the principles, pilot tests before you put it out. Right? These are like little steps.
Speaker 1:Just don't think people think about any of this stuff to be fair.
Speaker 2:I mean, it's the same as negotiating a large deal, right? Like you give up on the you give it on the elements that you don't really care about. So you you send your your ops leader off to talk to the to the VP of finance that reports to the CRO. And you to negotiate away something that that the CRO doesn't really care about, like going there with a six x accelerator and walk out with a four, which is the one you really wanted.
Speaker 1:Exact go for the shoe for the moon.
Speaker 2:Yeah.
Speaker 1:Know, You might be an interesting idea is maybe a CRO starts the role. And when they come in, they propose building like a compensation governance council or something
Speaker 2:like that. That's a great yeah. Because I had one. A compensation review board. Yeah.
Speaker 2:I've done it many, many times.
Speaker 1:They have a CRO, a CFO, a CS product rev ops, all in this one team. Yeah. And they create these principles, and they all agree on the way incentives and compensation are going to impact each one of their respective businesses. And they create some guidelines around it. And then when changes are being made, the council needs to be kind of convened to make sure that
Speaker 2:Yeah, you just remind I've done that a lot of times more than especially if I walk into a new company and they have a backlog of unresolved compensation disputes. The first thing I'll do is I'll set up that CRB, I'll say, you know, we're going to meet every week until these are all resolved, resolved. And it's really like a courtroom.
Speaker 1:Yeah, it's
Speaker 2:and you bring it in there, but you have to do a professional job presenting the case.
Speaker 1:Yes, yes.
Speaker 2:And then the the head of RevOps can be the person who's doing the presenting as long as they're maintaining their objectivity and seeing things from both sides. And it can be a little bit difficult when your boss is the one, you know, determining whether or not you're gonna get a bonus or not. But I think for the most part, people are pretty reasonable.
Speaker 1:Yeah. And I think, you know, it per our earlier part of this conversation, the customer experience needs to be part of that. It does. You need to talk about that for them. Yeah.
Speaker 1:I could tell, like, it's haywire right now, you know?
Speaker 2:And the one responsibilities as the head of the CRB is to not let any of the cases come to the CRB, the compensation review board, that don't belong there. Because there's a lot of salespeople who just like to throw everything up against the wall to see what sticks. And again, they lose complete credibility. Nobody trusts those people anymore. You got to shut them down before their case even gets brought before the court.
Speaker 1:Hey, everyone. I to thank you again for listening. Get great comments across LinkedIn and other channels about the show, it's really gratifying to see that we're having an impact on you. Another thing I wanted to let everybody know is that we also produce events. About two and a half years ago, we started the CRO roundtables predicated on the idea that well, two premises.
Speaker 1:One is CROs are looking for other CROs to talk to, which is really true. It's a very lonely job. How do we get a bunch of CROs in a room where they're not being, let's say, disintermediated by panel discussions and sponsorship events and demos and stuff, and really give them a chance to talk to each other. So we created a roundtable event that essentially that it's a three and a half, four hour discussion between between twenty and thirty chief revenue officers. And these are amazing events.
Speaker 1:The format took off. People love them. And I get requests all the time as to when is your next CRO event. So to that end, I want to just let you all know that we have a roundup of them coming over the next number of months over the remainder of the year. So the next one is in Boston on August 20.
Speaker 1:Following that, we have two events in September in San Francisco, one on September 16, which is a dinner, and then we have another roundtable in San Francisco on the seventeenth. And then we're gonna have one in New York in October, probably mid to late October. And then I have one in November in Chicago, November 18. So if anyone is interested in attending any of these events, if you're a chief revenue officer working for a company over 150 to 200 people in your in your organization, just send me a DM on LinkedIn and ask me about which event, and I'll provide you with either the information or the links. But again, it's August 20 in Boston, two in September on September, New York in October, late October, and then again in November in Chicago.
Speaker 1:So sign up for the CRO roundtables. They're amazing events, and I hope to see you there. It's good stuff. That's really helpful. So I'm going switch gears a bit.
Speaker 1:I'm just curious about your thoughts on this. It has to come up in every conversation. But how do you see artificial intelligence playing a role in these things? Is there other models you're seeing being used to help with these things? Is it being helpful or is it a distraction?
Speaker 2:I was at the Gartner CSO conference a couple of months ago, and the keynote presentation was all about AI. And the way that they positioned it, and I thought it was a little bit risky at first, the opening line was that with AI, you have to move at the speed of COVID. And I'm like, oh, interesting that you're bringing this horrible event up that everybody despised and has got post traumatic stress problem. But their point was that when you're forced to act quickly, you do it. And every company had to turn themselves on their heads during COVID.
Speaker 2:They had to convert to remote work. They had to figure out new ways of doing things. We saw the explosions of Zoom calls and remote selling, and we saw the decline of travel expenses. And a lot of these travel expenses have never really recouped to where they were in pre COVID levels. It was a quick adjustment.
Speaker 2:It was very effective. And we got things done. And they're saying that we're at that moment now where AI is sort of an emergency for companies. And you need to figure out what you're going to do with it and how are you going to do it. And you need to do it very, very quickly.
Speaker 1:I agree.
Speaker 2:So with that, I agree.
Speaker 1:Yeah, I do. I think, you know, it's one of these things. It's actually, while I agree with you that it was maybe not the most, let's say, you know, delicate way to describe it, it's similar in that it is the kind of thing that you don't have a choice about. You can't just say, I'm not going to participate. I'm going to sit this one out.
Speaker 1:It's like, well, you can't. And the problem is that it's not like COVID in that well, in some ways it is, but it's not like COVID in that it's evolving in ways that we don't know. And we're building all of our models based on what we know today. And everything changes in so fast that the money that's being invested right now and a lot of things I see are going to be useless soon. It's a very weird thing.
Speaker 1:I've never seen this before. And while I know we're right now kind of touching on AI in general, I'm curious to know, are you using AI or any one of them LLMs right now for compensation plan, you know, strategies? And do you find it working for you?
Speaker 2:We're we're working on functionality that's gonna get incorporated into into Anaplan that's gonna advise people on best next steps that they should take with the compensation plans based upon what's happened so far.
Speaker 1:Yep. I mean, something I would do, I'm sure it's being done already. So I'm not saying anything that's too crazy, but just heard occurred to me. You know, if I'm a salesperson, and I'm doing pretty well, and I'm at a company that has one of those really complicated stupid sales, you know, compensation plans. Yeah.
Speaker 1:I'd load that into my LLM and I'd say, okay, here's my situation. Here's my comp plan. What the hell should I do? You know, and it probably would give you some pretty interesting perspective on your trying to navigate these things. Know,
Speaker 2:the second part of the of the presentation from Gartner was I didn't agree with. They said, Okay, now that you understand that you have to move at that speed and you have to act as though you have no retreat, which means you have to fight harder, let's map all of the processes inside of the company and figure out how you can do them with AI. I think that's a ridiculous proposal. Because I don't know if you're using it today, but I use it and I use it in ways that I never ever would have imagined me using it. So it would be like when they launched the iPhone, launching it for the idea that you were going that everybody in the world was going to play Angry Birds within the next twenty four months.
Speaker 2:Nobody saw that coming. No. Right? And nobody knows how we're going to use AI today and to what degree we're using it, and we're using it in some very surprising ways. So
Speaker 1:Yep. Yep.
Speaker 2:I guess it goes it's against the micromanagement argument that I made at the beginning of the call where we're telling salespeople what to do all day. Our salespeople are figuring out how to use AI on their own.
Speaker 1:I think so. It is.
Speaker 2:It's a
Speaker 1:really interesting sort of independently developing platform. Well, anyway, look, this is great. As I suspected, this is amazing conversation. So what are you up to these days? What do you want people?
Speaker 1:Do you want people reaching out to you? How could this audience serve you? How could you serve them?
Speaker 2:Well, I'm still working for Anaplan, and we're revolutionizing the platform with AI ourselves. We've got a solution we're calling co modeler. It's going to give you the ability to go off and and build the animal plan models using AI and take all the manual labor out of that. And then we're also increasing all that functionality that I just mentioned, where you're gonna have a co planner that's gonna work with you as a CRO and give you advice on some things that you should be doing based upon the things that it's observed happening. So no more stepping into the CRO seat and then bringing in an expensive consultant to tell you what's wrong.
Speaker 2:You'll be able to ask that question of Anaplan. Anaplan will be able to tell you. So I'm having a blast doing that and really enjoying being on the on the forefront of of what's happening.
Speaker 1:Yeah. I see a lot of people even my situation wondering whether we're gonna have a job soon. We probably won't. You know?
Speaker 2:Zero is gonna have jobs. I mean, if you've interacted with AI, you know that it can do some pretty funky things.
Speaker 1:Yep. And I
Speaker 2:know it's improving all the time. But
Speaker 1:Yep. I know. It's still crazy. Thank you for listening to the CRO spotlight podcast. The CRO Collective's mission is to help CROs succeed and help founders and CEOs build CRO ready organizations.
Speaker 1:You can find out more information about our services at thecrocollective.com. That's thecrocollective.com. And we look forward to having you join us next time.
