How To Pay Your Sales Development Reps
Learn the importance of providing the right sales development representative salary and compensation, and how this can help you achieve your business objectives.
In this article:
- About Alex Hudzik: Nasuni Global Director of Inside Sales
5 Things To Avoid When Creating A Sales Development Representative Salary Compensation Plan
- Preferring Simplicity Over KPIs That Matter
- Creating A Compensation Plan That Does Not Promote A Fair Playing Field
- Coaching on Best Practices But Not Motivating SDRs to Apply Them
- Paying SDRs In A Way Where They Don’t Have Control Over Their Compensation
- Providing Incentives To Achieve Goals That Don’t Align With Your Business Objectives
Sales Development Representative Salary: What You Should Avoid
Sales Development Representative (SDR) Definition: An inside sales representative whose primary objective is qualifying which leads should be prioritized. While they don’t really do the selling, SDRs contribute to the sales process by helping leads move down the pipeline.
About Alex Hudzik: Nasuni Global Director of Inside Sales
Compensation matters across sales, but it is especially important when it comes to sales development representative salary. In this podcast, Alex Hudzik from Nasuni talks about the lessons he learned on building an optimal SDR compensation plan.
He shares the most effective way to pay a sales development representative that will also allow sales leaders to achieve business objectives.
Alex Hudzik is the Global Director of Inside Sales in Nasuni, a cloud-based file storage company for enterprises. He has been in Inside Sales his whole career, selling to customers online or via phone.
Alex has been in the industry for more than a decade so he’s got a lot of passion, thoughts, and opinions on Inside Sales.
He has been with the technology industry during his tenure, and now runs a global inside sales team at Nasuni.
Alex is very passionate about the topic of compensation. He believes that it might be the “most important thing to get right” when it comes to inside sales.
One major reason why people get into sales is for the opportunity to make money relative to their skills and effort. With other jobs, you’ll end up with the same annual pay no matter how well you do your work.
That’s why it is critical to have a compensation plan that allows SDRs to have this kind of earning opportunity. It’s the dream for sales.
Unfortunately, over the last decade, Alex has also seen that not all companies provide this kind of compensation.
5 Things To Avoid When Creating A Sales Development Representative Salary Compensation Plan
Managers interact with their team only about 5% of the SDRs’ day. This is why Alex feels that whenever he’s not directly working with his team, their compensation plan will help them.
How, you may ask? The SDRs’ understanding of the company and their role’s objectives are going to act as their guidepost.
SDRs make a lot of tiny decisions every single day around what they want to do. This is why the compensation plan needs to be really tied to the company objectives.
Alex says that there are at least five ways where typical inside sales compensation plan can go wrong.
1. Preferring Simplicity Over KPIs That Matter
Your compensation plan can go wrong if you choose to simplify it instead of including KPIs that matter to your business.
Alex has seen this happen a lot, especially when people who are not familiar with inside sales are in charge of compensation plans. They are prone to adopt “the simpler, the easier” mindset.
Some sales leaders want to pay SDRs only on bookings. That’s a perfect example of oversimplifying the comp plan in a way that ultimately doesn’t drive the behavior you want.
As much as Alex agrees with the principle of not making simple ideas complex, he couldn’t disagree more in the case of SDR compensation.
You need to determine which KPIs really matter to the business. You have to figure out what’s going to drive the right behavior.
For Alex, it’s okay to have two to three KPIs in the compensation plan that each have different weights. If that’s what’s going to drive the result you want, even if it’s more complex, go for it.
Remember, though, that you should not complicate the sales development representative salary compensation just for the sake of it —there should be a purpose.
It’s acceptable to have two to three different KPIs in the compensation plan. It’s also good to determine their weight based on what you deem to be other important factors.
You should not avoid having a slightly more complex compensation plan if it will help improve your SDRs.
2. Creating A Compensation Plan That Does Not Promote A Fair Playing Field
How will you now integrate differently-weighted KPIs into your compensation plan?
Alex implemented a weighting structure on his own SDRs’ comp plan that helps strike the right balance. The point of weighting certain KPI components is to do as much as you can.
It’s never going to be perfect, but the goal is to be as close to perfect as possible. Keep in mind that there is no such thing as a perfect compensation plan.
For Alex, a balanced comp plan eliminates luck and levels the playing field for everybody. There is a variety of things that can generate meetings and pipeline that don’t necessarily correlate with the SDR’s hard work or skill.
Ways You Can Weight Different KPI Components
Here are some examples of how you can structure your weighting:
- Demo request = 1 point
- Downloading a top-funnel asset that generates topic interest = 2 points
- Cold prospecting = 3 points
In this way, you can evaluate and promote a sales development representative based on their work ethic and skills. Also, the points system can give you a clearer picture of your team’s performance.
Another example is that not all meeting schedules are equal. One SDR can have a meeting scheduled with Dell’s CEO, while the other SDR has someone from a lawnmower company.
This is a good example where weighting may make more sense for your evaluation. Your points system for meetings can depend on what type of market you’re going after.
You can also consider the size of the enterprise your SDR has scheduled a meeting with. A larger enterprise can bring a larger deal, so that could be a 5-point meeting.
3. Coaching on Best Practices But Not Motivating SDRs to Apply Them
Another problem is that sales leaders coach their team on best practices, but the SDRs’ comp plan doesn’t provide incentives for applying these.
Sales leaders will tell sales development reps to target large accounts where the larger deals are. The SDRs don’t always do it because their comp plan isn’t structured with incentives for them to go after large accounts.
If their compensation plan says, “get meetings,” they are more likely to target smaller accounts. That’s why it doesn’t matter how many times you emphasize the value of meeting with enterprises.
SDRs will still end up taking advantage of their compensation plan.
Another example is, sales leaders coach their team to target C-level or VP-level decision-makers. The problem is, those are also the hardest to get to answer emails or pick up the phone.
If, on a monthly basis, sales development representatives are being evaluated and paid on meetings, why would they spend their time there? The company has not made it in their best interest to, financially speaking.
The management team has to provide more incentives for the results they want to produce. They need to weight C-level or VP-level meetings with more points than lower-level meetings.
4. Paying SDRs In A Way Where They Don’t Have Control Over Their Compensation
Alex also observed that having comp plans where SDRs don’t have control over their compensation is not effective.
Sales development reps work within a sales process where members have specialized roles. A hand-off takes place within the process because of this.
The SDRs’ job is to generate interest. Once the hand-off process happens, they have either lost a majority of control or all of it.
Management, on the other hand, cares about quality. They want to see deals progress through the pipeline, which is why in a perfect world, they want to pay SDRs on closed business.
Alex shared that in his experience, what kills an SDR’s morale or motivation is knowing they did their best, but someone else dropped the ball and that hurt their compensation.
What’s motivating SDRs to do the right thing is the feeling that they have no control over their compensation. That’s all the more reason why sales leaders need to create a weighted comp plan that SDRs can actually contribute to.
They’ll have more ownership over the comp plan if it measures their own work ethic and skill set. This way, they’ll know that if they do well, they’ll earn more, and vice versa.
5. Providing Incentives To Achieve Goals That Don’t Align With Your Business Objectives
When you place weight on specific KPIs, make sure that they align with your business objectives. The weighting system can still be ineffective if not done with a purpose.
We established earlier that not all meetings are the same, which is why you need to weight them differently. You can add another factor into that by considering if the meeting scheduled is with the right person or company.
Can your team really help them solve their pain points? Are they within your target market?
You can add this extra layer of evaluation when it comes to creating a tailored comp plan for your SDRs. In this way, you’ll know that your team is working towards achieving your business objectives.
Alex encourages sales leaders to spend time creating a balanced and effective compensation plan. As he mentioned, giving everybody the same goal doesn’t level the playing field.
Having a slightly more complex comp plan is okay, as long as it drives the right behavior and motivation in your SDRs. This is important not only for the role but also for employee retention.
You can reach out to Alex Hudzik via LinkedIn, and he will be happy to assist you in structuring your compensation plan.
Creating an optimal sales development representative salary compensation plan is one way to show your team that you care. Not only can this motivate them to own their job more, but it will also help your company achieve its business objectives.
Follow Alex Hudzik’s advice and start creating a balanced and effective comp plan for your Sales Development Reps!
How does your current SDR comp plan affect your team and your business objectives? We’d love to hear from you in the comments section below.
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