Sales Quotas, Design Thinking To Solve Your Biggest Sales Challenges With Mark Donnolo
We have historically regarded sales quotas as all about numbers and justifiably so. After all, quotas do mean numbers, right? Not exactly. SalesGlobe founder and managing partner, Mark Donnolo contends that organizations can achieve better results by dealing with sales quotas with a problem-solving approach. In his book, “Quotas!” he introduces a five-step design-thinking process that totally changes the way we think about sales quotas. Joining Chad Burmeister in this episode, he explains what sales compensation design thinking is, how to leverage sales compensation to solve sales challenges and how to think differently around creative, data driven, problem solving techniques.
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Sales Quotas, Design Thinking To Solve Your Biggest Sales Challenges With Mark Donnolo
I'm here with Mark Donnolo who is the Founder of SalesGlobe. They do a weekly meeting that is fabulous that I'm sure he can tell you more about on every single Friday talking about compensation data-driven decisions and all other things. Mark's also the author of a book Quotas! Design Thinking to Solve Your Biggest Sales Challenge. Mark is probably one of the foremost thought leaders in the world of sales compensation. We're going to dig into it. We're going to talk a little bit about AI and how that can help support things like data-driven decisions and compensation. Let's get to know Mark a little bit first. Welcome to the show.
Thank you, Chad. It’s great to be here.
It's been a while since we traveled around the country and met up in Miami.
It was a different environment back then. We are in South Beach and we were meeting at Marlins Park.
Let's get to know you first. How did you get into sales and sales compensation? Take us back to the last many years. What transpired to get from then to now?
I went to art school when I was young and studied Design undergrad in Philadelphia. I then became a designer in New York for a few years. I did a corporate identity and branding design, museum exhibition design and I was working for a big branding firm in my second job in New York. Some of my roommate buddies were going off to business school and I took a look at business schools as I was helping one of them move to where he was going. I thought, “This is interesting.” I was interested in the idea of how are we solving problems for business, not just how are we doing design? I ended up going to business school myself and became a Closet Art School, MBA. Meaning, I went to business school and as I was getting out, what I realized is that no serious company wanted to hire the art guy.
They couldn't figure out what they were going to do with me except for maybe Hallmark, which is probably the best job I never got. That worked out well. I had to keep the whole design thing and the whole creative thing in the closet for a while to get a real job and I got a job in management consulting. what I realized a few years later was a lot of the things that I was doing in terms of problem-solving or drawing upon creative right-brain principles, applying those with left-brain analytical logical problem-solving techniques.
I thought, “There's something to be said here and there's a better way to help companies solve problems versus repeating the same thing they do year after year, which tends to be the pattern.” We look at, “What did we do last year or what are our competitors doing?” Some executive will say, “This is the way I did it at XYZ company,” and everybody will follow suit but it's not solving the real problems. Our whole mission at SalesGlobe is to help companies think differently and solve the real sales challenge, get to the root of that challenge and use creative data-driven problem-solving techniques.
I have to believe that marketing alignment is somehow built in there as well at times. Especially if I think about sales development, business development and SQL. What's the difference between a quota-carrying sales compensation plan and a sales development compensation plan, for example?
As you look at the broader picture of the go-to-market strategy and you look at the sales process, certainly marketing comes into play in terms of the overall strategy and also supports the integration of sales and marketing during the sales process. That said when it comes to compensation, most people in marketing don't want to have half their pay at risk. That doesn't bode well but a lot of it has to do with a level of control. We do like to see marketing roles with incentive compensation that's related to the goals that they have to achieve. We have to do that in a way that fits those roles, which might be different than a way if it's a sales role. In a sales role, you might find typically your payments might be 50/50. Meaning 50% base salary, 50% incentive or it could be 70/30.
The measures would be tied to things like revenue, bookings and profitability but in the marketing role, what you would find is going to be a little bit different in that the pay mix is probably not quite as aggressive. You might be an 80/20 or maybe a 90/10 and the measures are going to be different. We're looking at what do people have control and influence over? Marketing might be generating opportunities or positioning effectively or working in an integrated sales and marketing process. The trick is identifying the right mix and the right measures that reflect with that role should be doing.
It's funny timing because I wore my RingCentral shirt that we worked with the SDR team on and the tagline was, “Be exceptional.” On the back, the first thing on the line said, “High integrity in the setting of our compensation plans.” These are incoming leads from the marketing department. We were tied to conversion rates. We meaning I set the plan. What we were doing at the time was instead of manually dialing these people and manually emailing, we added a lot of technology to the process and we made the conversion rate from this certain batch of leads go from 8% to 18% because there more touches on leads.
A lot of the reps felt like, “I'm doing 200% of my goal because there were new tools, technologies and processes that were rolled out. I'm making $60,000 a year. Why can't I now be making $120,000 because I'm doing well?” The psychology of talking through that and saying, “The technology has a cost to it also and we're going to get more productive over time.” How do you work in the change management piece to me seems to be extremely important in the rollout and compensation plans in general.
To the point you're making, it's not a one-for-one relationship in terms of productivity and compensation for sales. What I think a lot of salespeople don't understand is the value that the company provides to enable them to be able to do what they do. That comes in the area of marketing like you're describing, infrastructure and product distribution. If you said, “If you're going to operate as an independent agent then that's a different situation but you're not going to get all that support.” As a person's quota goes up, their compensation does not go in lockstep with the size of that quota because the company might be introducing new offers and a lot of investment to help them get there.
What a lot of salespeople don't understand is the value that the company provides to enable them to do what they do.
For companies that are growing especially, they have to understand how you delink that lockstep relationship because in order to scale up, you've got to be able to make those investments. Salespeople are going to are going to make more but it's got to be related to what they're able to contribute. On change management, that is an important point because everything that you do within sales effectiveness, marketing effectiveness, you can come up with the right answers but you have to get the organization to change. There's this whole thing that goes around all of it called people, which we've got to deal with people. We got to realize that you can't drop a textbook solution into a situation or maybe some new creative idea.
What you have to do is to bring the organization along with you. We'll usually look at change as a campaign that runs alongside and is integrated with any new initiative we may be doing. Understanding early on how people are engaged in what they're doing and conditioning them for that coming change and also getting their input and along the way giving them information. As you start to get to that point of change, making the case for them. You look at a couple of things. Whether it's compensation or changing the sales process or the whole go-to-market strategy. We'll look at what are salespeople and the organization going to see that they see as positive, neutral and as negative? We want to understand how they're going to perceive that.
What we want to do is we want to build the business case around that. In that change management campaign, we'll usually have a few pieces like who is the audience that we're dealing with? We've got several different audiences if we're making a go-to-market change, not different jobs but it could be different people at different points in their careers. What are the big messages that we want to get across to them? Positive or neutral or negative responses. What's the proof source behind that. We're going to make this change, “Why is it good and how can we prove that?” We then get into the question of, “What are the vehicles that we're going to use to get that message out there? What's the frequency of the calendar?” Change management is not touchy-feely stuff. It has to be well thought through but it can be highly coordinated as well. The organizations that do it well tend to have those components in place.
The pandemic has changed a lot of companies’ behaviors and comp plans, even where I'm seeing city governments say, “We're taking the next week off. Good luck.” Even the governor at one point said that.
COVID has given us an excuse for everything. It's like all the restaurants close at night at 8:00 and I'm always like, “Is that when the COVID is coming out?”
I've seen if you're standing versus sitting, that has a different effect. It must be frequency. The wavelengths are at a certain level. What I'm curious about, back to 2007 to 2008, when there was a market correction, I saw some companies do the right thing and adjust quotas down but not all companies did it that way. What are you generally seen across the board? Is there a reset this time? Forty percent of companies are doing better now than they were pre-pandemic. It depends on the company but are you seeing something in general with the pandemic related to complex?
One thing we're seeing, in general, is that everybody's got different situations. There's no one general answer. If you look at industries, what you'll see is that, “It's different for different companies.” We did a round table where we took a look at, “Where your total addressable market is coming from and where it's moving for companies that are selling business to business.” We looked at the industries and how they're shifting. Some industries are moving up. Technology and computers are doing well. Foodservice is not doing well. Non-off-premise food, meaning grocery doing well. Off-premise alcohol doing well. On-premise alcohol down. You've got ambulatory healthcare services going up, home improvement going up. People are using power tools and then they're calling the ambulance.
Everybody's moving in different directions. From an industry standpoint, it's shifting and then from a geographic standpoint, it's shifting. We're looking at states that are up and that are down year over year. There are some dramatic differences. Point number one is whatever company you're in, you've got to understand where your market is moving. Point number two is that most companies did not adjust quotas during the pandemic. If you look at it, it's a clean break in a way because it kicked in in March 2020 so there was a lot of wait and see. That was the biggest thing that happened in the acclimation period. We think about the four phases of COVID-19 where you've got the acclimation in the beginning and then you've got a planful action.
You're then starting to build and then prepare for recovery. As we're moving through these phases, the first thing that companies did with quotas was they communicated messages to the organization about quotas and compensation. They said, “Settle down, don't worry. We're going to take care of things and things will be fine.” Their people start helping customers rather than selling. They started to help and sell beyond the curve but from a compensation and quota standpoint, there was a period where companies held off. What they have started to do is make some adjustments in terms of either pushing the quota further out into the year.
Reseasonalizing or they may have broken it into some smaller parts to have some shorter timeframes that were more manageable because they didn't know how one quarter was going to be versus the next. My sense is that what's going to happen is companies are going to start looking as we're getting to the end of 2020, they're going to start looking at, “What adjustments are we going to make now that we have better information because there's been a lot of forecasting and re-forecasting?” As we're looking at 2021, that's the tricky part with quotas because we've got a whole year ahead of us. The companies are saying, “How do I set a goal for 2021 when I can't look at history? History is history. We can't look back at that.”
We have to look at the better market opportunity, data and information to be able to set a quota. Like I mentioned, where's the market opportunity moving. We might be seeing some changes in terms of the duration of those quotas for 2021. We might be seeing more half-year quotas because we don't want to commit to an entire year. We break them into smaller parts so we get more visibility. Quotas, on the whole, have not been adjusted a lot but there's been slight tweaks, compensation. There have been some adjustments but I think companies are have been trading on trust with their sales teams and some organizations.
They have to look at their philosophy about what they want to see occur there. Some organizations have said, “We've had good years and we've had bad years.” People are going to be able to make it up. We see some clients doing that. People are going to have to catch up. Others are putting some compensation floors. A lot of treatment treatments depending on their industry and on their objective of how they want this to come out for their employee base.
I went to the TOPO Virtual event for part of it especially the opening with Craig Rosenberg. He made an interesting comment that maps exactly what you said. He said, “Companies traditionally look five years out. Not only are they not looking five years out now but they're not even looking one year out. It's 60 to 90 days a quarter is becoming the new norm to figure out what's possible for this particular quarter.” Whether it's a quarter or a half, that maps exactly the same way you're talking about. The question, one thing I've seen having attended at least 8 or 10 AI summits. Not AI For sales necessarily but just AI in general. They're showing how revenue per head in the world and the US is going up productivity per head, revenue per head while the number of people required isn't as great.
As AI entered the workforce and makes people more productive, I think of my own business, I was doing a presentation and I opened with the number 60,000. I said, “What does anybody think this means?” I broke it down. I said, “A thousand leads a month, 3,000 emails, 5,000 dials, 3,000 social connections, 50,000 paid ads to those same 1,000 leads. By the time you layer all this on, it's 60,000 touches that's now possible so that they see me anywhere they go in every single channel and then coming in with better content, better offers.” You can do more and reach many more people with the right message right place, right time. Have you seen that higher productivity per head over the course of the last many years?
Compensation reflects value.
We have seen companies start to use AI more and become a little less scared of AI because we have this perception that it's going to take over and they're going to start to displace us. What we've seen more of is in the COVID period, things have been accelerating. I understand the power of AI, have worked with you on that as well and it's amazing what you can do. I think we're going to see puts and takes on productivity. When you look at where we're seeing them apply AI, it's tasks that don't need to be done by a person that can be done a lot more efficiently.
The idea of if I'm a salesperson and I'm prospecting being able to get multiple touchpoints on LinkedIn with customized messaging but yet I'm not doing all that messaging that can greatly decontaminate the job, helping to figure out where I should be targeting. Machine learning by looking at the market and knowing where the hotspots are. Machine learning in the pipeline knowing when deals are starting to taper out and where we need to get in and take action or we need to disengage from those opportunities. A lot of that stuff required judgment before can be automated. That's tremendously powerful. Those are going to be productivity improvers. If you look at some of the puts and takes on productivity that we're seeing ahead and we do see greater efficiency of contact, we're having more calls and more meetings virtually.
Greater efficiency of contact of buyers for a lot of companies are not sitting on planes and trains anymore. They're easier to get in contact with. That's a productivity increase but then offers are changing as well for a lot of B2B companies. They're bringing out a lower profile, maybe a lower price point offers that are easier for their customers to buy that can be a take on productivity. That could take away because we have to sell more of those. As people are continuing to work virtually, we're going to start to see some bunny slipper fatigue, which means salespeople are going to get tired and fatigued working out of their living rooms for an extended period of time. That's going to take a toll on productivity probably will contribute to some turnover as well because people are going to start to not be as sharp on the value proposition like, “This is not what I wanted to do. I'm going to start looking at some other places where I can get out and I can work with people again.”
We have a lack of collaboration. As a salesperson, as a marketing person, it's tempting for companies to have them working remotely. Microsoft announced that they're going to be doing a lot more remote working indefinitely. I believe that we're going to see a tap on productivity there though because the collaboration starts to decrease and we can get together virtually but the idea of working together in the office is much more productive. We're going to see various puts and takes on this. In the near term, distraction. kids are back in “school” but they're being homeschooled.
Homeschooling is hard. We did it for our daughter for four years. You can't put an entire country through homeschooling in one shot, that's a learned skill but you've got the mom and the dad at home with the kids, massive distraction. Some company leaders have said to me, “I know my salespeople aren't getting as much done as they normally do. We're losing productivity.” They're at home, they're helping out with the kids, distracted and, “I don't know what's going on.” We got to put the puts and takes together and sum it up by looking at sales capacity. Take your AI and take all those other changes that I mentioned.
You're going to have to put it together and say, “What's our revised sales capacity model look like? How's that going to change for the new world? Because we have new types of roles and a bunch of new factors that played in.” That's going to flow into quotas and what's attainable. It's also going to flow into compensation. We've seen some indicators from major companies that they're starting to look at adjusting compensation because if they're not going to get the same productivity out of people, that reflects on compensation. Compensation is going to reflect the value that the salesperson provides to the organization. We're going to see some changes in those areas.
I did a talk with someone and they termed the term “Zoom first strategy.” He said, “I believe that in the future, you'll ask the question that says, ‘I get it. We all want to get back on planes, trains and automobiles but if I'm the CFO, help me understand what's the impact to the organization of doing that.’” To your point about value, one person in my organization might do $1,000 a day using technology. He's well more equipped to do that. I'd rather have one person at $1,000 than have ten at $100 because 8 of the 10 are going to kick and scream and say, “That isn't working. Why are you making me do something?”
Let's go find the person who you can align their value of what they do with that specific skillset. Same thing for email. Someone with higher EQ, which is generally a certain sex in the world. There's an advantage to my wife and in the world we live in. Men we need to learn how to better communicate but you can read that in an email. If you're sending something with empathy versus a typical, “When can we get on a demo? I'd like to take you out for coffee or sell you something.” The world is changing. We're running up on the top here. What would you like to leave our audience with? We've talked a lot about sales compensation and the changing world we live in. Take us out with the home run here.
I'd leave everybody with one thing, which is the future of sales is uncertain and the spoils are going to go to the data-driven creative problem solvers. if we're selling in the old ways and replicating what we had done in the past, we're in a changing environment where we may not be able to give you the answers about what you should be doing but what you need to be doing is what we're doing. We're mind-mapping out all the factors, the drivers of change and you need to equip yourself to be able to be an effective problem solver, a creative problem solver. That's what we do at SalesGlobe is we help people think differently about that. You've got to understand given all these factors and we're going to be starting to see hybrid sales roles and the sales process is changing, offer is changing and, “How do I solve for that problem? How do I not just solve for the surface problem but redefine the problem and start to do some divergent thinking about the possibility?” The most important thing is to become an effective creative problem-solving. That will make you successful in an uncertain future.
I met with the CRO and we went through that exact exercise for 1.5-hours. We looked at the funding status of all our customers. We looked at which reps were closing, which deals and quick drag and drop in the back end of the CRM. Our biggest discovery is that the non-funded companies are growing like crazy with us because we have an offer that's a $500 a month offer. The funded startups are a little more conservative. The non-funded companies, which I personally enjoy helping because they're people who are like, “They don't have $10 million in the bank from a series A round.”
There are people who are like, “I used to be on the road and I used to sell on stage and I charged $20,000 for my time. Now, I can't do that anymore.” We're seeing this huge jump in people that are saying, “I don't want to go back to Corporate America. I don't want to quit my job. Most of all, I don't want my family to look at me as a failure.” It's interesting when you start to dig into the mindsets of your buyer, understand where the market's going. If you don't come up and look down at the map, it's easy to continue doing what you've done and find yourself in a world of hurt.
It's like the frog and the gradually boiling water. It's comfortable until it's boiling and you realize, “We haven't been solving the real problem.”
I've enjoyed the conversation. Every Friday, you're doing an amazing meetup with a bunch of people. You look across a lot of different data from a lot of different organizations. I highly encourage you to check out the websites, www.SalesGlobe.com. You can find Mark there. If you look up Quotas on Amazon and Mark Donnolo, I'm sure you'll find it there as well. Mark, thank you for your time. We appreciate it. If you're looking at making sure to do make data-driven decisions for your organization and especially as it relates to compensation, Mark is your guy.
Thanks, Chad. It’s great being with you.
See you next time.
- Quotas! Design Thinking to Solve Your Biggest Sales Challenge
- Amazon - Quotas! Design Thinking to Solve Your Biggest Sales Challenge
About Mark Donnolo
Mark Donnolo is focused on helping companies rethink their sales challenges with a focus on data-driven creative problem solving. Mark has concentrations in design thinking around sales strategy, sales organization design, sales process, deployment, strategic account planning, incentive compensation, and quota setting. Mark’s work spans several industries including technology, telecommunications, business services, manufacturing, financial services, and healthcare.
Mark is founder and Managing Partner of SalesGlobe, a management consulting firm focused on sales strategy, sales process innovation, sales team development, and sales compensation. He also directs the SalesGlobe Forum, a membership organization of senior sales executives that operates in partnership with leading business schools.
Mark is the author of the books The Innovative Sale, What Your CEO Needs to Know About Sales Compensation, and Essential Account Planning available in stores and online.
Mark holds an MBA from the University of North Carolina at Chapel Hill and a BFA from The University of the Arts in Philadelphia.
Mark speaks on sales and marketing topics and has been published in publications that include Fortune, Sales & Marketing Management, Selling Power, Telephony, Investment Property, Telecommunications, Velocity, Workspan, American Way, and Marketing News.
Mark serves on the Board of Trustees of The University of the Arts, founded in 1876 as the Philadelphia Museum and School of Industrial Art, now the country’s first visual and performing arts university.