Death of the salesmen?

Several channel players have made the news for the rights and wrongs of their sales and commission set-ups this year. Sam Trendall asks if salespeople are still coin-operated

As resellers have progressed into VARs then into services providers, their sales operations and reward structures have had to evolve quickly, with staff having to keep pace with technological change all the while - not to mention the often arcane and complex world of vendor rebate and discount programmes.

Commission plans and sales structures have been in the news frequently this year, with a number of firms at all levels of the channel revamping sales operations and incentive schemes - with mixed results, it must be said. So what are the unifying traits of the channel's most successful sales set-ups?

Most people we spoke to for this piece indicated their company had a fairly flexible sales model that encompassed staff focused either around a certain vertical market, geography, technology, new business or a list of named accounts.

Greg Harris, sales director at Cloud Distribution, explained that "our sales structure is essentially split in two".

"We have a number of account managers who each look after 25 to 30 strategic, named accounts, and then our internal sales team handles the less regular, transaction-oriented business," he added.

Dave Ellis, director of new technology and services at Computerlinks (pictured), claimed the distributor has a sales structure that "reflects the breadth of the channel and the diverse needs of vendors and resellers".

"We have different sales teams covering product vendors, services, renewals and individual reseller accounts," he said.

Kieran O'Connor, sales director at reseller Total Computer Networks, stressed the importance of keeping it simple, and claimed a salesperson's focus should solely be on building ongoing relationships with clients.

"Our whole business is about relationships. We encourage and trust our account managers to go and build relationships. It is then our job to make sure we have the relevant products and services [to fulfil those customers' needs]," he said. "If you are a niche reseller and you have a fantastic relationship with a decision maker in a business, why wouldn't you try to take as much wallet share as you could?"

Vendor Fujitsu's sales set-up incorporates teams focused on distribution; partner account management; and strategic and new business teams for both enterprise infrastructure wares and client products - with new business-geared salespeople having a particular focus on the health and education markets.

"The structure has changed over the past three years to ensure we provide consistent service and incremental business to our partners. The specialist new business teams are examples of this," said Simon Worsfold, channel and enterprise sales director.

Keep it simple

Of course, commission plans are still the fuel that drives any sales force, and Werner Knoblich, EMEA general manager at Red Hat, was one of a number of people we spoke to who agreed with the old adage that "salespeople are coin-operated."

Tinkering with the structure and focus of your commission scheme can help shape the behaviour of your sales team, he added.

"You can use the commission plan to help drive strategic objectives," said Knoblich.

"We are known as a Linux company - and it is still two thirds of our business. In new areas we do not have the same position of strength, and it is a longer sales process, so we need to give some kind of incentive [to sales staff]. We have a commission accelerator [for new products]."

Harris from Cloud Distribution is another to claim commission plans can be used to "get the desired behaviour out of your sales team".

"Our commission structure is set up to influence the behaviour we want from our salespeople and, put simply, the people who exhibit the most desirable behaviour get paid the most," he added.

But Paul Barlow, managing director of VAR Servium (pictured), is an advocate of keeping it simple. Once a salesperson passes a specified threshold, his firm's commission plan pays a completely flat rate, he explained.

"Once you start building in gates and over-riders and other things like that, it creates not only a lot of work, but also a lot of contention - people start to see them not as an incentive, but as a way of preventing having to pay them," he said. "We keep it really simple, and supplement it with specific monthly or quarterly incentives."

O'Connor from Total Computer Networks is another advocate of simplicity when it comes to commission structures.

"The more gross profit you make, the more money you will earn. If you want to sell a million quid's worth of products, it is going to take a lot longer to make the same amount you could make selling ￡100,000 of services," he said. "You need to keep it simple - you don't want salespeople with four spreadsheets open, trying to work out how much they are going to get paid."

Commission impossible?

Reseller giant Insight has insisted its staff are still happy despite a recent commission overhaul in its Specialist Software Sales (SSS) team.

Insight admitted it recently changed its reward structure across the SSS division in order to create what it described as a "transparent reward matrix".

CRN understands the rejig means that SSS staff commission is now weighted more in favour of new business wins and less towards renewals, a move which is thought to have upset some staff after it left them with less commission than they got before.

But Insight said its reward strategy overhaul was carried out with the full engagement and consultation of every member of a sales team which remains upbeat.

"Insight is constantly reviewing its sales reward strategy in line with the evolution of our solutions offerings and partner programmes," said the reseller's senior vice president for human resources Peter Richardson.

"We have revised job titles, duties and sales team alignment, with matching support structures to continue teammate development and to create a transparent reward matrix for this specialist group."

Insight is not the first big channel player to find its commission structure in the headlines. In August reports emerged of unrest at rival Misco, following a sales account management shake-up which reportedly saw the old structure, which was demarcated along vendor lines, replaced by a set-up geared around geography and vertical markets.

Sources told CRN at the time that as many as 30 disgruntled staff had upped
sticks and sought employment elsewhere.

Security vendor Check Point also came under fire this summer for allegedly running a reward programme that was failing to inspire its sales staff. The lack of an accelerator element and a policy of capping commission was reportedly causing consternation among sales heads, with sources claiming about 20 departed over the course of the first half of 2013.

A number of vendors have also used a commission rejig to encourage sales staff to be more channel-friendly. IBM, HDS and Novell are among the big vendor players who have cut or even eradicated commission payments for salespeople who bypass partners.

Supporting sales satisfaction in a services sphere

by Clive Longbottom

Let's assume you're one of those channel companies that, when a big deal is signed, someone rings a bell and there's considerable whooping and clapping all around. A salesperson has just signed a ￡100,000 deal - it's good for the company and it's good for them. For the sake of argument, let's give them a five per cent commission - they now have £5,000 in next month's pay packet. A down payment on a car, or full payment for a holiday.

Now, imagine that the same salesperson has closed the same deal - but it is subscription based over 36 months. Whoops - a happy company (it still has ￡100,000 as guaranteed income), but a less happy salesperson as they can only see the one thirty-sixth of ￡5,000 that is added to their pay packet next month - and ￡139 is hardly worth raising a whoop for, is it?

An unhappy salesperson is not good for the company. You could pay all the commission up front - but when you are only getting ￡2,778 per month yourself, paying the salesperson ￡5,000 in the first month is not healthy for your own cashflow.

You could try to front-load the agreement - maybe getting the customer to pay 50 per cent of the subscription up front and then lower amounts per month from there on, thus giving sufficient funds at the start to pay the salesperson. Or you could gamify the whole process.

Many salespeople are up for this sort of thing. What you need to do is quantify the value of a customer to you as a company, and then quantify the value to the salesperson. What is your margin as real profit on the customer for that ￡100,000 deal? Not your gross margin, but that actual amount that is cleared after all the costs of maintaining them as a customer? Maybe five per cent?

So the real value of the customer to you is the same as it is to the salesperson.

Therefore, if you "buy" the customer from the salesperson at ￡5,000, you will then make your ￡5,000 over the three-year subscription period. But the customer is now yours, not the salesperson's. When it comes to renewal, the salesperson will get a lower commission - say 2.5 per cent (subscription renewals are generally pretty easy, as long as things have gone OK). Your cut then goes up to ￡7,500 over the next three-year period.

A little thought regarding innovation in sales compensation can reap dividends by ensuring that the company maintains a happy salesforce and supports the customer base properly.

■ An extended version of this article appears in CRN Top VARs 2013.
Clive Longbottom is co-founder of analyst Quocirca.