This blog post was originally published on ZS's high-tech blog, Tech Bytes & Insights.
For high-tech companies, a strong inside sales function boosts efficiency and lowers costs, and for millennial-age salespeople, inside sales roles offer the chance to collaborate with a team instead of working solo in the field.
After ZS’s 2017 Comp Bytes event, where executives from leading high-tech brands met to discuss sales compensation challenges and innovations, I spoke with Robert Bieshaar, senior director of worldwide sales and services incentive compensation at Autodesk, to learn how inside sales models are evolving at his organization, what he and his colleagues are doing to motivate the next generation of salespeople, and how Autodesk is working to overcome one of the most common and cumbersome sales comp challenges: goal-setting fairness.
Q: Our research shows that 40% of large companies are following the lead of smaller companies and moving more to inside sales. Is this true for Autodesk? Why or why not?
A: Yes. Our inside sales roles are centralized in a hub, and there are a multitude of reasons for that. The most important one, for small businesses, is that the customers have adopted a different way of buying. They’re far more knowledgeable than ever before, and have 70 or 80% of the information that they actually need [to make a purchase prior to engaging with a company]. In the past, that would have been provided through an on-site or field sales rep.
Q: At Comp Bytes, you said that millennials are comfortable in inside sales roles and don’t necessarily want to become field sales reps. Why do you think that’s the case, and what are the challenges and benefits of this?
A: Millennials are far more interested in the social aspect of work rather than the lone-wolf sale. Of course they’re interested in making money, but they try more when they work within groups competitively. We put a performance dashboard in place that shows the top performer of the day or week. They’re very competitive, but at the same time, they’re very social.
The inside sales environment is supportive of the way they like to work, and the way they show and celebrate their success. They’re more willing to go to pay mixes that are more radical than we’ve seen in the past. They’re more interested in getting monthly commission checks than quarterly or annual ones. There’s a different drive and vibe than we see from older generations.
Q: In the discussion at Comp Bytes, you highlighted that a key driver for Autodesk’s increasing focus on inside sales has been the move to more of a software-as-a-service model. Why do you think inside sales is suited to companies with a SaaS model?
A: I’ll admit there’s a cost factor involved. Within a subscription world, the level of contact with the customer increases. In a SaaS world, you live from the fact that a customer stays or increases [their purchases]. If, especially in the small business space, I try to visit each individual customer, my cost of sales doesn’t scale, and it becomes exponential. Since the customer is perfectly happy getting a phone call discussing issues and getting support outside of the sales cycle, then the renewal or add-on cycle via telephone sales is much more appreciated and becomes a scalable model to drive subscriptions.
Q: How is your compensation strategy different as a result of Autodesk’s transition to selling subscriptions?
A: One of the most important changes is that we pay on annual contract value. Don’t ignore your existing customers because if you do, you won’t make your money. There’s an additional focus on the customer success management side: The customer not only buys the subscription, but actually goes into the adoption and consumption phase as well. There’s a new breed of people who are between the sales cycle and support cycle, who are driving the consumption component. They’re part of the post-sales cycle that drives the renewals. The customer has a great deal of information before they get in touch with us and, in a SaaS world, the initial sale is great, but it doesn’t ensure that the customer comes back or renews on time.
Q: Do you have separate inside sales teams focusing on customer acquisition and customer success, and different compensation strategies for those two teams?
A: Yes and yes. The renewal and the consumption component is the focus of the customer success group, and the initial sale and renewal is the focus of the standard sales team. There is an overlap: One is focused on a dollar amount. The other is focused on a percentage renewal.
Q: What compensation strategies work for motivating and retaining high-performing inside salespeople?
A: We have competitive on-target earnings: You don’t have to pay a dollar more than your competitor, but it has to be within the ballpark. People aren’t willing to sacrifice money. The second thing is millennials put a greater emphasis on their work environment. They come into interviews knowing Autodesk’s business, but also how we rank against other companies in terms of what we do from a social aspect, for the neighborhood or for the environment. They’re well informed on the soft parameters of the business. They want to be proud of the company they work for. If you have a contest that lets them donate to their favorite charity, or if you celebrate the best seller with a lunch, those things are more important to millennials than baby boomers or any other generation. If they make less at Autodesk than another company, but those components are there, they’re more likely to stay.
Creating an environment where you never have to go home—you have everything from the dry cleaner to the bank to your breakfast, lunch and dinner at the office—isn’t what I’m referring to. I’m talking about the social aspect, where you have an event that’s non-sales or non-work-related. That’s more important than ever.
Q: During the session, many attendees identified quota-setting fairness as one of their companies’ top three inside sales compensation challenges. Why is this such a common—and cumbersome—challenge, and how is Autodesk working to solve it?
A: Show me the company that says quota-setting is easy, and I’ll show you a company that’s either gone or lying. Unless you’re a renewal agent and you can do 95% renewals and your quota is pre-defined, quota-setting is extremely difficult. Two philosophies are being pursued. One is if you’re in the same role as I am, you carry the same quota as I do. I’m not a fan of that because if we don’t cover the same territory, one of us is doomed. The philosophy I believe in more is that the quota is based on your territory and the potential it can bring. It’s part science, part crystal ball magic.
For the next few years, we’ll all be struggling to get it 100% right. We have to put guardrails in place to protect the seller and the company: Avoid a runaway train while giving employees a level of security and a floor they can’t fall through.
Q: The other challenges that rose to the fore in the discussion were sales forecast accuracy, plan complexity and data availability for performance measurement. Of those, what’s the most significant hurdle for Autodesk and what are you doing to overcome it?
A: The biggest hurdle is creating a platform that allows for a single source of the truth with respect to consumption. Not many companies have paid for subscriptions; they’ll stick to billings. In a SaaS environment, more parameters become relevant, such as adoption and consumption. For a year or two, everyone was focused on subscriptions, but that doesn’t automatically equate to money. Many people gave subscriptions away for free, which reminds us of page clicks of the late ’90s. It’s coming up with the right metrics that combine the revenue with what’s growing and securing the revenue. If I have the revenue, but I don’t have the subscriptions, my annual recurring revenue is going to walk back over a period of time. If I have the subscriptions and the revenue, I also need to have the growth per customer that will drive the growth of the business overall.
Having a combination of an annual contract value target and a subscription target has been the best balance for us: Don’t give the subscription away for free, but don’t only focus on the most expensive subscriptions that never grow. In our initial pilots, this method is showing success. Try to keep it as simple as possible. The more complicated the plan, the less the seller will focus on selling.