With a view from the front lines, Mike Allers a channel veteran agreed to talk about compensation plans and the channel. Mike has been a force in the channel at SurfControl, Websense, Nokia, he has seen the good, the bad and the ugly in this business, without further delay here is Mike:
One of the biggest issues I’ve seen in today’s Channel Organizations appears to be setting up a compensation plan that creates a win/win for both the organization and the Channel Team. Many executives tend to focus on the direct relationship between the cost of the sales personnel and the cost of the sale. While I agree that this remains to be one of the most effective methods, I don’t believe that most executives truly understand what the cost of the sale is for a Channel Team. Not only does the cost of the sale have different metrics, it has vastly different timeframes to contend with as well. As an example, Channel Professionals spend their time developing business relationships and creating business plans then executing on those plans. These can take anywhere from 6 to 18 months to begin to produce. It’s not a matter of stepping into a partners office and demanding purchase orders. It’s about creating a positive business relationship, and those don’t happen overnight.
Depending on how your sales team is structured, in most Channel Sales models the reality is that the Channel Account Manager (CAM) doesn’t have the ability to directly affect their own income. They count on internal sales staff as well as Partner sales staff who are often compensated on their own set of goals.
The CAM will need a little more stability and less upside potential. As a general guideline, a CAM’s compensation should be about at a 60% base and 40% variable that includes revenue and Management by Objectives (MBO). It’s imperative that a good portion of the CAM’s variable pay is MBO’s that involve activities like marketing and lead development. MBO’s should include things like: number of marketing events/activities, number of leads, number of opportunities, weekly reports, regional team meetings, Partner business plans, number of Partner acquisitions, percentage of Partner growth, etc. All of these are ways to increase visibility, increase Partner awareness and indirectly increase revenue while allowing the CAM have a bit of control of their destiny.
On the other end of this, is how do you create a compensation plan that is “Channel neutral” (assuming you have both direct and indirect sales staff)? This can be a long and drawn out debate, but some key factors to consider are: direct vs. indirect true cost of a sale, percentage of business that is direct vs. indirect and the potential conflict of a compensation plan weighted too heavily in either direction. If your direct staff is paid on the gross value of the sale (which they probably are), do a little research to compare how the deviation from list price fares against an indirect sale thru a Channel Partner...you may be surprised to see that you actually do better thru the Channel.
And think about some of the other benefits of having a unified field-sales team. Channel Partners absolutely despise Channel conflict and just as you would want them, they would rather be working to find opportunities and closing them. Every time there is conflict, not only does your CAM have to manage it, but someone from the Channel Partner has to take time away from selling to manage that conflict as well.
