Sales Commission Compensation: How to Incentivize and Structure Your SDR Team

Sales commission compensation is often the first lever revenue leaders look to adjust when looking to boost sales motivation.

But it can be challenging to pull off and is often a point of contention.

Sharp signal data and tight ABM targeting only convert into pipeline when your SDR team is structured and incentivized correctly, and that is the gap Siva Rajamani, co-founder and CEO of Everstage, has spent his career closing.

Siva Rajamani, Freshworks alumni, co-founder, and CEO of Everstage, knows all about this. He spent about five years helping senior executives develop and implement winning operational strategies before going on to lead the RevOps team at Freshworks.

We spoke with Siva on The First 100 Days podcast to learn how RevOps leaders can set up their sales team for success, using commission compensation to incentivize the right behaviors and goal setting for your SDRs.

Here’s the link to the full interview if you prefer to listen.

Editor’s note: The following has been edited and condensed for clarity.

Harness the power of clear incentives

Most B2B companies have broken criteria and processes for commission payouts.

This is why, according to Siva, you find many sales teams manually tracking their deals on spreadsheets. A shadow accounting tactic to avoid disputes during payout season.

“Incentives drive behaviour. If a salesperson doesn’t have visibility on their commissions and payouts, it’s hard for them to remain motivated,” says Siva.

With the process broken and the data unclear, how do you motivate and incentivize performance?

Siva co-founded Everstage in 2020 to fix exactly this — a no-code commissions automation platform built for sales teams.

“Most sales folk follow the path of least resistance. It’s always easier to close an annual contract than a multi-year contract. To push that behavior, you provide the gamification platform that helps salespeople visualize, ‘what if I were to move this deal from an annual to a multi-year contract? What additional commissions do I get?’” Siva explains.

Think of it this way; sales reps can stimulate – even before they close a deal – how much commissions could I make? It’s a powerful motivator

Siva Rajamani

This way, RevOps teams address visibility and behavioral incentives at the same time.

Set your team up for success, early

“Setting up your sales teams early for success is going to drive a big portion of your revenue growth,” says Siva.

Your ability to 'hire smart' drives growth targets. How quickly can you ramp up your sales team to their full quota within the timeframe you want?

The success or failure of a new SDR depends on training, provision of leads, and a realistic look at their sales goals.

According to Siva, start with your historical data. Quota setting begins with the typical average sales cycle and a pragmatic look at your sales goals. Factor in training time and provide qualified leads from day one. Provide qualified leads for new sales reps.

“Make sure that the lead gen. is working so that you have enough leads to keep these new folks occupied and get their feet wet. “Once you figure that stuff out, the natural next step is determining the right quota and compensation,” he explains.

Quota-setting is harder than most teams admit

Early-stage companies often have the problem of matching sales reps with realistic goals.

“They have a lot of aspirations but then they transfer a lot of the risk to the sales floor. In the search for growth, the pursuit of growth hits the sales team hard,” Siva explains.

The problem is that targets rarely reflect what's actually achievable.

“Expecting all your SDRs to hit 90% of their quota is wishful. Most teams are hitting 60-65%. If they’re not even hitting that, then, essentially, you've set the quota way too high, or something's broken in the funnel,” he continues.

In planning, you want to set a psychological safety net, where you still set your quarter goal high, but make sure that you safeguard the sales rep target earnings.  You want them to still go for the 100%, but in case they miss out on that number, they don’t get docked – just because you were too aspirational

Siva Rajamani

Full interview with Siva on The First 100 Days podcast.