(Repost of 5/7/18 post that got deleted and it's easier to repost than restore)
As CEO of a company, I can't tell you the number of times, I get emails like this:
Dave,
I know our policy is that we don't pay both the salesreps their high-rate commissions on low-profit, one-of items, but we ended up doing a $50K/year pass-along storage fee for Acme, because they are managing a huge amount of data. Because it recurs we're considering it ARR at the corporate level. The rep is OK because they are being paid well on the rest of the $500K deal, but I worry that the sales managers and sales consultants who also get paid on new ARR bookings won't get 100% of their payout if we don't pay them on this – can we please do that?
Thanks/Kelly
I find this email a non-actionable, incomplete proposal better suited for a philosophy class than a business discussion. The message does eventually ask for approval, so you might think it's actionable – but is it really? What's missing? Three things.
- A complete, concrete proposal: taking everything into account – all groups, any existing relevant policies, and any relevant precedent — what do you want to do? Suppose the SDRs are also paid on total bookings, have you simply overlooked them and will be back asking again once you've figured that out, or are you saying you don't want to pay them like the sales managers and SCs?
- Numbers: what's it going to cost the company? First principles are fine, but you must translate them into recommended actions and identified costs. I don't mind back-of-the-envelope calculations, but I do need to be sure you've included everything in your analysis. If the issue is complex or expensive, then I'd want a well thought out and clearly documented spreadsheet cost analysis. I get the qualitative arguments, but if you are just giving me passion and philosophy with no idea of what it's going to cost, then I have no way of answering.
- One or more alternatives: if I don't want to approve your primary proposal, do you have a preferred backup? What is your plan B and what would it cost the company and why do you prefer plan A to it?
- Bonus: a proposal to change existing polices so this situation won't be ambiguous in the future and require another escalation.
So, let's re-craft this email into something I'd rather receive:
Dave,
Per our policy we didn't payout the salesrep on the $50K of ARR we took as a pass-along storage fee on the Acme account. That's OK with the rep because such one-of items are clearly excluded in our compensation plan terms and conditions [link], but I've discovered that the SC and manager compensation plans lack the same exclusionary language. Ergo, this time, I recommend that we pay out the SCs and the managers on this $50K of ARR (total cost $2.5K as it pushes some folks into accelerators). Additionally, I intend to immediately update and re-issue the T&C document for sales management and SC comp plans. Can I get your approval on this proposal?
By the way, if you're opposed to this, can we please just go and payout the SCs (total cost $1.0K) because I believe it's more important to them than the managers. Either way, these are small numbers so let's get this behind us quickly and move onto more important items.
Thanks/Kelly
Ah. I feel better already.
The proposer is referring to our existing policies – even providing me with links to them – applying them, noticing problems with them, and making a concrete proposal for what to do about it, along with a backup. Kelly's telling me correct costs – e.g., not forgetting the impact of accelerators – for approving the proposal. And even correcting our policies so this situation won't ever again require an escalation.
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