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A Holistic Approach to Compensation Structuring with Scott Barton

Sales Hacker Podcast - Holistic Approach to Compensation Structuring with Barton - Image

In this episode of the Sales Hacker Podcast, we have Scott Barton, VP of Industry Solutions at Varicent. He’s an expert in the sales world, particularly in revenue operations and incentive compensation. Join us for a great conversation about driving the right behaviors within your sales team.

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If you missed episode 218, check it out here: How to Make a Major Career Jump with Brandon Barton

What You’ll Learn

  • Building a compensation structure that works for both salespeople and the company
  • Holistic thinking about compensation, which includes development opportunities, benefits, advancement opportunities, and more
  • Best practices for managing your sales team through economic uncertainty

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Show Agenda and Timestamps

  1. About Scott & Varicent [02:44]
  2. Best practices for designing compensation structure [07:00]
  3. How salespeople are empowered to shape how they’re recognized & rewarded [13:00]
  4. Increasing productivity by lowering the bar for success [14:42]
  5. Advice to management teams navigating the current economic uncertainty [20:43]
  6. Paying it forward [22:29]
  7. Sam’s Corner [25:10]

Show Introduction [00:10]

Sam Jacobs: Hey everybody, it’s Sam Jacobs, welcome to the Sales Hacker podcast. Today we’ve got Scott Barton, VP of Industry Solutions at Varicent and a veteran of sales, revenue operations, and incentive compensation. It’s a great conversation about driving the right behaviors with your sales team and getting more productivity from your team by lowering the goal. Let’s hear from our sponsors:

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Scott Barton is the VP of Industry Solutions at Varicent, a leading provider of incentive compensation and revenue growth software applications for over 25 years.

About Scott & Varicent [02:44]

Sam Jacobs: There are folks out there that might not have heard of Varicent and so, in your words, what does the company do? What problem are you trying to solve?

Scott Barton: We’re trying to automate and optimize the common challenges in revenue or sales operations functions. Sales forecasts, territory design, quota management, and incentive compensation.

Sam Jacobs: Are those different modules? How does it all fit together?

Scott Barton: They’re all linked. We recognize these are unique practitioners working through these processes. We’re built on incentive and sales compensation, and that’s one of the more complex tasks within the sales ops stack. All the performance and paid data ultimately go through the incentive compensation system.

We had early success as an independent company, were acquired by IBM, and became a unit within IBM for years. Then there was an agreement with Varicent’s initial founders to spin it off and have a kind of second go as a startup.

I initially focused my career on marketing and sales, but I’ve always been driven to learn about a whole host of topics. I decided in my late 20s to go back to school and get an MBA and ended up being recruited by the Alexander Group, and I thought that made perfect sense based on my background and interests. I’ve had a long career in management consulting and as a corporate practitioner in sales operations and compensation.

Best practices for designing compensation structure [07:00]

Sam Jacobs: Tell us about the principles of incentive comp, where it works, where it doesn’t work, and what we need to be mindful of when we’re designing the right compensation structure.

Scott Barton: There’s no silver bullet and one size does not fit all. It’s a firm representation of how the business is using its salespeople to grow, and being very clear in terms of what they can expect for pay.

Businesses are very dynamic. There are a lot of changes, like how the company is going to market, new ways in which companies want to try to measure performance, and that brings complexity to the equation. There’s always some challenge that needs to be tackled.

Sam Jacobs: What are the top mistakes that you’ve seen companies make when it comes to this field?

Scott Barton: Lacking a long-term plan for measuring performance and motivating the salespeople in a cost-effective way. When new leadership comes in and has a particular point of view in terms of how to pay the salespeople. They say, “I’ve seen this work at my last company and that’s what we’re going to do here.”

A lot is lost trying to plug a plan that worked elsewhere into a different organization. It comes off as being half-baked, and ultimately they’re not sure what to do, or not sure how their pay was calculated. When salespeople don’t understand the basis of their pay, that’s when a comp plan is dead on arrival.

How salespeople are empowered to shape how they’re recognized & rewarded [13:00]

Scott Barton: We’ve been in a tight labor market for years, and it’s particularly acute in sales. There’s uncertainty in some industries and markets, and the labor shortage is going to be with us for a while, combined with changing attitudes around the workplace.

I encourage those who are interested in new jobs and new opportunities to be assertive. Understand how salespeople are successful. Understand how their incentive plan works. How many people achieve quota? How many people achieved quota last year, and the year before that? Talk with people from that company and understand the culture around success. What does high performance mean, what do high performers earn? Salespeople should better understand if it’s going to be a good fit.

Increasing productivity by lowering the bar for success [14:42]

Sam Jacobs: You said you can increase a person’s productivity by lowering the bar for success. That’s something that there’s a lot of debate on. Where do you set the goals and quotas?

Scott Barton: It’s a controversial notion. I encourage sales leaders to think differently about how they set and manage quotas. For salespeople who are trending between 80 and 99% of goal, leadership views these people as doing pretty well. But for a lot of them, that’s not a good predicament. They haven’t hit their goal, they’re not earning their target income.

You can use data to logically reduce goals in a way that gets more performance. A salesperson in the first year probably has a guarantee, they’re not expected to make quota. But at month 15, 16, or so, if they don’t have a clear path to success, hitting quota, earning their target incentive, then they’re starting to disengage a little. They’re getting pinged by recruiters. They’re taking their focus away from selling. Keep them engaged, and manage the quotas so that they have a better chance of success.

Sam Jacobs: There’s a confluence of factors with sales compensation. One is the labor market, the second is there are a lot of companies with money and explicit growth expectations, so there’s pressure to increase compensation.

If you’re trying to find the right economics for the business, you might say, I’d love to lower the quota, but I still need to make the right amount of money. So I’m going to have to lower OTE relative to competitors and now my perceived compensation is less than my competitor who isn’t as worried about running a sustainable, profitable business. Are there pressures that drive compensation in different directions, some of which are good for the salesperson, but bad for the company?

Scott Barton: Companies believe that the competitive differentiation when it comes to recruiting is to pay more. You can make an impact with some jobs and markets by doing that, but ultimately it’s not sustainable. Somebody can always outbid you on your OTE.

It’s the actual pay that matters and not just within a particular year. You have to demonstrate that they can grow their careers and their income over a period of time. Companies are more successful by offering a competitive but not outrageous OTE amount and managing quotas so that they’re delivering pay that’s meaningful.

We all accept the importance of articulating a career path and growth plan, and income plays a role in that. Sometimes salespeople are left out of that discussion because we’re looking at their quota performance, but salespeople are no different from other people, they need to have a long-term view for success that includes both income and career growth.

Advice to management teams navigating the current economic uncertainty [20:43]

Sam Jacobs: A jobs report came out today that still shows strong job growth. Different data points can tell different stories. What advice would you give to management teams right now for navigating this economic uncertainty?

Scott Barton: Focus on what works and use that as the basis to operate. It’s important to have a model for contingencies. What are five possibilities that can happen in this business? What are we prepared to do about it? Management gets locked into a particular strategy and doesn’t have flexibility when things change. Having an action plan is the way to manage times like this.

Paying it forward [22:29]

Sam Jacobs: Let’s dive into your influences. Books, people, investors, coaches, famous people, relatives, people that have had a big impact on you that we should know about.

Scott Barton: I’m a USC alum and a fan of Pete Carroll, he’s a controversial football coach. But he’s demonstrated that he can turn around a morbid football program. His approach to leadership and coaching is all about accentuating the positive. The power of positive thinking is a mantra that I believe in.

Sam Jacobs: One of your guiding principles is, “first get the pig out of the ditch, then figure out how it got there.” Walk us through what that means.

Scott Barton: That comes from Warren Buffet, and it means you’ve got to take action often in terms of how to correct a situation. Let’s fix the problem first and avoid finger-pointing. Address the problem, and go back to understand how it materialized in the first place. It’s critical to keep the issue from repeating itself.

The world goes around for me when I meet new people, understand what they’re working on, and try to help them. I encourage people to use LinkedIn, I’m very responsive.

Sam’s Corner [25:10]

Love that conversation! Scott is a methodical, disciplined, systems-oriented thinker with a lot of experience and insights.

There’s tension between trying to create an exciting opportunity for salespeople and building a compensation structure that works for the company. If the company goes bankrupt, paying the sales team does no good to anybody. Scott’s seen success with companies that don’t pay top of market, they pay near the top, and it’s competitive.

Think about compensation holistically, think about benefits, and not just base salary and commission structure, but all of the pieces that go into somebody feeling good about where they work. Professional development opportunities, a clear career path, the right set of benefits, and the right opportunities for advancement. Part of the compensation is working at a company you believe in.

Be intentional about creating a path that works for where you want to be. The future needs to know where to find you. You have to have a plan. That’s how you’ll build the future that you want to have.

Thank you for listening. Reach out at linkedin.com/theword/samjacobs, and buy my book, Kind Folks Finish First: The Considerate Path to Success in Business and Life.

 


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