My friend, Dan McDade, President ofPointClear, has been leading an interesting discussion at Focus. He asked me the question, “would sales people be willing to share commissions with marketing if marketing was perceived to have done a better job for sales?” (it’s a good discussion, I recommend reading it.)
My immediate reaction was, “Isn’t marketing’s job to be supporting sales? Why do we need to pay them some of sales’ commissions if they do their job well?” I still maintain that position, but Dan’s question started me thinking. What would happen if we put marketing on a commission plan, what if we made them more accountable for the results they produced?
What if we came up with metrics that were closely aligned with sales–perhaps shared with sales and put every marketing person on commission? Would that drive greater cooperation? Would it elinate the silo’s? Market and sales are both accountable for generating revenue and growing the company. Aligning everyone in marketing and sales around similar goals and objectives could only be good.
What metrics would we put in place? Clearly some level of revenue metric. Probably we’d look at some sort of lead quality metric. What about the nurturing programs that marketing conducts? How would we measure those? What about the other marketing deliverables used to support sales—clearly we don’t want to incent people on quantity, but we do want to look at some sort of metric around good quality collateral that really helps sales and is meaningful to customers.
Another thing we might do is align marketing and sales teams together–for example the marketing people supporting the financial sectors, with the sales people selling in those sectors. Likewise in manufacturing, health and so forth. Perhaps we can put these team on some sort of shared goals. Many sales people have shared goals with other sales people, so we can design a system that would bring marketing into the team. It might be very powerful.
I’m certain that we can design some metrics–some individual, some team oriented that can get sales people and marketing people to work more collaboratively. I think this should be done.
Now what about commission? I’m all for paying marketing people commission. Frankly, I would put everyone in an organization around some sort of “commission” or incentive program. But, there’s no reason to take that commission away from sales people. It’s easy to design a commission program for marketing. We use the same principles we do for sales people.
First, the commission program must be cost neutral to current spending–at plan. That is, what I’m spending for marketing people today, would be the same I would spend for them under a commission plan–at plan. (That’s the way we design compensation program for sales people, let’s do the same with marketing.). Presumably, we would take the current “budget” for marketing people and reallocate it, some level of fixed base pay and some level of variable–commission based pay. If marketing achieved their goals, they would earn the full amount–base plus the commission. If they failed to achieve their goals, they would receive base plus whatever commission they earned. If they overachieved, they would earn more—perhaps with accelerators. All of this is just like sales, except it would be funded out of the marketing budget, not sales.
Now some of you might have pulled out your calculators and may be scratching your heads. “But Dave, what you are saying is we have to take a salary cut. This is just unacceptable, why should we do this? We want the upside of commission, why don’t you just put that on top of our current salaries?”
Without going into a long story about commission planning, let me just say, the job of marketing is not changing. Marketing has always been accountable to work with sales in supporting revenue generation and growth. So we aren’t changing the job — all we are doing is clarifying the goals and putting earnings at risk. If we aren’t changing the job, the value of that job to the corporation doesn’t change–stated differently, the budget for salaries, bonuses, etc. has to remain constant. What can change is how we allocate that funding–we can allocate some to a base salary and some to commission, bonuses, whatever we think will incent people to overachieve.
Commissions can be very powerful in driving behaviors (good or bad). In the sales world we are very comfortable with that, we know our total compensation is based on a base (if any) and all the variable (commission) payments we earn. We know we have some portion of our expected earnings at risk. It’s a very powerful motivator.
I think commissions for marketing are fantastic! I think virtually every marketing person should be on commission, with some portion of their earnings at risk, just like sales. It can be very powerful in accelerating the alignment of marketing and sales in driving revenue growth?
What do you think?
Interesting post and thanks for referencing the focus.com. I think that giving marketing a commission is a noble idea. I know some marketing professionals that would welcome it since they are typically driving all lead generation and nurturing that creates new business.
Koka: Thanks for the comment. Good to see you here. Regards, Dave
“Frankly, I would put everyone in an organization around some sort of “commission” or incentive program.”
David, you said a mouthful! In our early teens we took jobs that paid on piecework. We spun molds, assembled components, and the parts had to be usable. There was no free ride. Every dollar was earned. As an executive and sales professional, performance based pay was the only way for me. I like betting on myself.
If marketing were on commission, the feedback from sales would become invaluable. The relationship could change from an arch rivalry to one of codependence, as it should be. Great post.
Thanks for the note Gary. It’s funny how things like this might become the “ultimate” alignment tool.
Hi Dave,
I was contemplating a similar concept. The on-going battle that most companies struggle with is aligning Marketing and Sales. The most difficult challenge as a Marketer is justifying the value at the top of funnel because frankly, not many sales teams will care about the source of the lead/sale.
By implementing quotas with a shared set of common metrics, I think you enable your marketing team to do a couple of things:
1. Hold them accountable to key metrics, goals and qutoas.
2. Motivate your marketing team to become better at managing each channel responsible for generating leads (SEM,SEO,Internet advertising, Campaigns, Nurturing, portals, mobile SEM).
3. It forces your marketing team to own each channel and consistently test new ways of generating leads to hit their quotas.
4. It provides sales teams with clear visibility into how marketing is impacting the top of the funnel.
5. It incents the marketing team to understand the overall value they are providing to the sales organization that can be quantified.
6. It helps sales directors understand the source of their sales, so they further align with Marketing to capitalize on the channels responsible for bringing in those leads.
Without a shared set of goals and quotas that are agreed upon, you run into the challenge of blindly hitting sales without understand how to capitalize on them at the source level. If we can’t manage the source of our sales, we can’t work with marketing to manage them.
Another common Marketing/Sales alignment problem is the definition of an SRL. Without agreement and alignment on the definition, you run into the situation where your leads are not dialed, there isn’t fundamental alignment and you’re essentially throwing money out the door.
The fundamental root cause in all of these examples is a shared set of metrics. Implementing a commission based model would resolve many of these challenges because in my mind, it would force the organization to look at the business holistically and create further alignment with marketing given the shared metrics.
Great observations Imraan. Whether marketing is on commission or not, it’s critical that marketing and sales are aligned both in what they do and in key metrics.
Hey Dave,
I am sad I missed that discussion on Focus. Gonna go read it after this!
I agree with you that you shouldn’t take commission away from sales people, but a marketing department that isn’t on commission will not have the same motivation as the sales force to produce results.
For some marketing executives this might mean a pay cut, but for those who are really doing well it would mean an increase in income.
The only problem is how to measure marketing success. Since marketing is in many ways a long term investment only measuring short term gains isn’t enough.
Marketing is about building a brand, a feeling, a community around your products, building loyalty and smoothing the path for the sales force.
The problem is that a marketing departments advances today may generate income over the next 5-10 years making it hard to just measure todays sales as a metric.
It is an interesting to explore but difficult to put in place I believe.
//Daniel
Great comment Daniel. There are some challenges with the long term focus of marketing, but I wouldn’t lose site of some of their short term goals, as well as interim metrics on the long term goals.
While it’s a side issue, whenever an organization has goals that are very long term, it’s critical to have interim metrics to make sure you are on target to achieving the goals. The worst thing is waiting–then finding you’ve missed.
As always, Daniel, thanks for your contributions.
Hi Dave,
Interesting article. First up I have heard it said before in B2B that marketing is to support sales which I disagree with. Perhaps this is because my backgound in marketing was in consumer companies.
In those companies I was held responsible for the financial result from sales to net profit. If we didn’t make those targets you can lose your job. We had no authority over sales, finance, production but had to work closely to ensure all targets were met.
If you wanted to do a commission for short term programs it wouldn’t be difficult as most tactical progrms have objectives set in B2B. However I think the consumer model is better as it does ensure marketing is business focused.
Susan, thanks for the comment, particularly helping clarify some confusing misimpressions I may have created in the post. I did say, and do mean (at least for B2B) that marketing is repsonisble to support sales–meaning both the sales function and revenue generation in general, but I didn’t mean that was it’s only responsibility of marketing. There are many other function that marketing is responsible for, that could include product marketing and other functions. Having made that disclaimer, you raise several other interesting points, I’ll kind of react randomly.
1. I presented a one sided view of things, saying marketing is responsible to support sales. At the same time, had I been more balanced, I would have said sales is responsible for supporting marketing. As the sales and marketing processes are becoming increasing intertwined and complex, neither function can achieve its goals or contribute to the organization’s growth without supporting each other, and, as a consequence sharing some metrics.
2. The case you describe for the accountabilities of marketing in a B2 Retailer/Consumer market (sales/net profit/share/etc) actually lend themselves pretty nicely to a commission plan design. In fact I know of many marketing people in large consumer product companies that are on a commission plan–except it’s called a bonus/incentive plan. (All commission plans are is a variable payment programs based on performance. The commission payout can be based on any number of paymenet methodologies and goals).
3. I believe a commssion or variable comp plan is not inconsistent with a balanced perspective between long and short term programs. In the sales world, we have lots of sales that have very long sales cycles and very long fulfillment cycles. From an incentive program design point of view, there are a number of methods that can handle these scenarios. This way a balance between long and short term activities can be achieved as well as a balance on payment for results over time.
4. Perhaps I didn’t state my case well, or in a balanced fashion, but I beleive everyone in the organizaton should be held accountable for results. I believe reward systems should be put in place that recognize those results and overattainment of those results.
Don’t know if I have clarified anything, may have dug a deeper hole. What do you think? Thanks so much for taking the time to force me to clarify some of my thinking.
Hi Dave,
I liked what you said and I took it from a B2C perspective. Just thought I
You did explain your position. I guess I reacted because it seems that in B2B the functions are seen separately and where I come from all departments must work together.
Also and I would like your opinion and others do you see sales and marketing getting to the stage of seeing each other as partners in B2B firms?
I agree about the commission and part of my package was as you described which meant that working successfully with sales as well as other departments was essential to get the results and the bonus.
It makes a huge difference when you know that you must hit financial targets and from experience it brings all of you closer together.
Just one more thought and again would like your opinion. I see in a number of B2B firms that even the marketing function is split out. For example some do product marketing, others communication etc. Never understood why and perhaps that makes it even harder for marketing and sales to work together. Thoughts?
By the way congratulations to you and Anthony on the launch of Future Selling Institute. Sure it will be very successful.
Sorry for the slow reply Susan. You raise some great questions! I’m seeing a huge amount of pressure for sales and marketing to align better as partners—but progress is spotty. As far as the split out, there are lots of different trends. In many of the high tech sectors, we are seeing product marketing and management separated from tactical marketing programs and other variations—all this make alignment more challenging.
Thanks for the comment on FSI. We’re launching the program I spoke to you about. I’ll be emailing you details!
Remind me to send you a new copy of Dale Carnegie’s How to Win Friends and Influence People.
That said, I agree with everything you said and I will be right behind you as the slings and arrows of 5,000 angry marketing departments are hurled violently in your direction.
Anthony
Dave, if NY Times had not already used it in yesterday’s magazine you could be called “The Man Who Kicked Over the Hornet’s Nest”. I think we may have talked about this once before, but the only consideration that I believe should be given equal billing here is that I believe that people should be paid for what they can control. A disconnect for me, tying marketing comp to revenue is that they (marketers) can lead a horse to water but they can’t make them (sales) drink. If there is agreement on the market, the offer, the definition of the leads and tight management over metrics along the demand waterfall (MQL, SAL, SQL, Closed) – then I am all for commissions for everyone! Thanks for the call out, for supporting the great work being done by Focus and for your thoughts!
Dan, I’ve got my “bee-keeper’s hat on!” I’ll actually be a little argumentative here–not for the sake of being argumnetative, but to explore the issue more deeply than the quick post I wrote.
I struggle with the concept of being paid for what we can control. As a sales person, there were a number of years when I missed my quota, and missed major commission payments, not becasue I didn’t “get the order,” but because the company couldn’t ship, there was a product problem or something else outside my control. As a sales person, you swallow real hard, do everything you can to work around those issues and still achieve your goal. Sometimes you can’t, just because “it’s out of your control.” I remember one year, when I managed a very large sales force, most of my people missed numbers and major commission/incentive payments just because of a major issue the company faced with the manufacturability of some product lines. In the past year I’ve had many of the sales people in some of my clients in the electronic components business face the same thing. The people didn’t make their numbers, they didn’t get paid, they didn’t achieve their goals–and it wasn’t their fault. From a performance management point of view, we didn’t fire a single person because they didn’t make their numbers. But they missed out on $10’s of thousands of commissions.
In all our jobs, whether sales, marketing, or whatever, there are lots of things that are outside our control. That doesn’t take away from our accountability to achieve results, and sometimes we just have to suck it up. I really do think marketing should be accountable for sales/revenue. Maybe the specific metrics might be different. Where a sales person might be accountable for revenue from a territory, a marketing person might be accountable for a product line, for overall revenue, for a market segment, or something else.
Again, not wanting to be argumentative, but being argumentative, as a sales professional, I’d really like to hold marketing accountable for “making me drink.” I say this, because I think that by not doing this, we reinforce the silo’s that both you and I are trying desparately to break down. Just as I hold marketing accountable for great marketing programs, leads, etc. and will be in marketing’s “face” for those things that I, as a sales person need, I think marketing needs to be in sales “face” to sell. If we are both measured on sales, then we have a vested interest in each person doing their job and contributing to the attainment of our separate and shared objectives.
While I may be stating thing in a slightly negative and argumentative way. I really feel that we — sales, marketing, and for that matter, everyone else in the organization, each have our own jobs, but we have shared goals for our mutual success. It’s too easy to be accountable just for our jobs, I think we need to do everything to help others in the organization succeed at doing their jobs (not doing them for them), and fulfill their accountabilities. After all, isn’t that what collaboration is all about?
Dan, thanks for taking the time to comment and to help flesh this discussion out. It’s an important discussion, I’m not certain that I have great clarity about my own ideas, but your (and others) help me clarify them, and the discussion we are having will create a result better than each of us could imagine separately. Also, as so happens in this blog, the quality of the comments far surpasses the original post! Thanks very much!!!!!
likely to agree with you, Sales & marketing work hand it hand. You need marketing to make sales so this should already be team work.
Often the demise is thinking the two are separate.
Thanks for the comment Anthony
Incentive/Commission is a good thing. I would go further with this concept and propose compensation for the senior executives of the company also to be on some sort of incentive/commission. This will justify the compensation rather than just pay exorbitant salaries to these executives while the organization keeps bleeding shedding jobs to keep afloat and causing hardship on the lower and mid level employees of the organization. Even in the event of termination a clause must exist that mandates a certain economic state of the organization (Before taking office and after taking office metrics) to be eligible for any sort of golden parachute.
Nice point Suresh—actually, in many of the businesses that I work with, top executives are on some sort of performance bonus plan. What might be interesting is to extend some sort of performance incentive lower into the organization.
Excellent post David. The key phrase you mentioned in my opinion is “cost neutral”. Many times marketing is performed in organizations without discernible or measurable metrics in the name of ‘creating or influencing brand awareness’. So to your points I believe that marketing (and any other position in the organization) can be held accountable to outcomes if a discipline is applied to how what they do influences what is produced in profitability. If you can’t measure what you are managing, and how that contributes to the bottom line, whether it be marketing or anything else you’ve got a cost – pure and simple.
Dan, ultimately, it’s all about accountabilty–whether it’s in sales, marketing, or meeting commitments in any part of one’s life. I’m all for putting anyone on commission, as long as we can directly measure their contribution. At the same time, it’s sad if the commission is the primary thing that drives accountability.
Hear, Hear.
Maybe its because I’m an ex-member of the British Institute of Marketing but I have a completely different understanding of the most beneficial way to organise a marketing orientated company. (Is there any other type?).
It seems only logical that the sales department should be an integral part of the marketing department, which has the job of preparing a marketing plan and carrying it out.
If marketing projects sales of x000, then marketing becomes responsible for making sales of x000 and recruiting/managing the sales force that achieves it.
The whole company would be aware of the marketing plan and be striving to ensure that it becomes reality.
I suppose another way of looking at it is that the whole company becomes responsible for manifesting the marketing plan.
I can’t see the point in doing it any other way.
Kind regards
David
David, thanks for the comment. Without meaning to be nasty, the logic might be applied equally well to manufacturing. Since the jobs of marketing and sales are to sell the products we make, one might then say marketing and sales should report to manufacturing. Every organization and every person has to execute the company strategies and priorities. We need to recognize, we don’t exist alone, but are dependent on working with people in other functions. We are most effective when we coordinate and collaborate across functions.