The Channel Sales Commission Conundrum
Here's a trick question: What do salespeople do? What is their role in a solution provider's organization?
Ah, you're right. They sell. They sell your products. They sell your services. They sell your expertise. They sell your brand. They sell your reputation.
Now, what's the role of a sales engineer?
If you say to consult and design systems that fit the customer's needs, you're half right.
Increasingly, the role of the sales engineer is more about selling the engagement than simply answering technical questions and providing design specifications. Whenever the customer waffles, the sales engineer is the ace that swoops in, impresses with knowledge and, in effect, helps close the deal for the salesperson.
Sounds like the perfect arrangement for the solution provider, since the synergies of skill lead to more and bigger deals. It's perfect until it's time for someone to get paid.
Over the past few weeks, solution providers have come to me talking about compensation conflicts with their sales engineers or sales support teams. The conversation sort of goes like this: "I worked on the deal; I put in a lot of time and effort to help get the deal. So why is it that I'm not getting any of the commission or credit for closing the deal? Why is it that the salesperson is the only one who gets paid?"
It's a fair question. The line between sales representative/manager and sales engineer is increasingly blurred as salespeople lean on their geeky counterparts to make deals happen. Sales engineers have the technical expertise to not only impart the specifications and benefits of a particular implementation, but also to cite in detail the comparative differences to competitive products. They are the "aces" in the sales equation.
But there's a big difference between sales engineers and sales representatives: risk.
As the CEO of one Midwestern solution provider recently relayed to me, one of his sales engineers recently asked for the same compensation as the sales reps that he supports. His argument is that he works just as hard on the sale and has near equal exposure to the client, and therefore deserves a piece of the action. The CEO offered to put the sales engineer on a commission plan that would have resulted in a substantial increase in his potential gross pay, but would require a 50 percent reduction in his base pay. This is pretty much the standard compensation arrangement for sales reps.
The sales engineer declined the offer. He opted to keep his comparable higher base pay rather than risk the variable pay that comes with commissions.
The idea behind commissions is to give sales reps an incentive to always be closing business. And commission plans are often lucrative to compensate for all the work that goes into proposals and deals that never come to fruition. Those fat paychecks--as well as contests and special promotions for sales staff--often cause dissention among non-commissioned staff for all the obvious reasons. What non-commissioned staff members don't often understand is that bonuses and commissions come with risks; sales reps don't get paid if they don't sell, and they only collect commission if they hit or surpass assigned revenue thresholds (or quotas).
But here's the conundrum: Sales engineers don't get the entire risk-rewards equation. As this CEO relayed to me, the sales engineer who wanted commissions but didn't want the risk understood the pay dynamics until the next two seven-figure deals came in. That's when he returned to the CEO's office looking for a piece of the deal.
This is not an uncommon issue, but it's one that solution providers will likely see with increasing frequency because of the changing nature of channels sales. Many vendors are looking to push the sales engineering burden (or presales support) onto their channel partners to save costs and increase the reach of indirect sales. Further, the introduction of cloud computing, professional services and holistic IT systems will mean greater dependency on sales engineers to complete sales.
So how should sales engineers be compensated? Do they deserve a piece of the deal? Or do we need a whole new system for compensating sales reps and engineers?