When it comes to managing sales people, the traditional rule of thumb is to “keep them hungry.” Low base salaries topped off with personal commissions keep a sales team focused on bringing in as many new deals as possible. The challenge with this traditional approach is that salespeople incentivized by this type of sales commissions will often do whatever it takes to close the deal. In an effort to meet quota, salespeople will quickly pass closed deals off to the account manager so they can focus on the next deal. After the deal is closed, account managers and developers are left with the customer’s issues and problems. Customers are passed off to someone they don’t know, and there is no investment in the relationship.
We don’t think that’s fair for either the internal team or our customers, so we have instituted a different system of rewards. We split a monthly bonus between everyone on the team, since everyone on the team is part of the customer lifecycle. Sales people close deals, account managers help upsell, technical support helps answer questions, and developers help resolve bugs and build features they need.
How do we determine the bonus amount to increase motivation? Revenue.
The Tint Happiness Bonus Formula
Here at Tint we don’t offer personal sales commissions on new deals. Instead, we split a team-wide bonus equally between every member of the team, including developers. We calculate the bonus based on revenue growth – our most important growth metric. Since we didn’t raise a Series A funding, we are disciplined as a company and have managed to reach profitability and are on the process of scaling
How it works: We set a benchmark based on our revenue goal for the month- this month it was $200k. A 20% commision on any revenue above that amount is divided equally between the whole team.
(Revenue – Benchmark) *.20 / # of employees = individual monthly bonus
Current Benchmark = $200K/month
Example Revenue = $260K
Differential = $60K * 20% = $12,000
10 Full Time Employees = $1,200/employee bonus for that month
Unorthodox? You bet. But the benefits of this distributed system are great.
These are four of the benefits we have seen:
1) Get Technical Developers Focused on Revenue and Customer Growth
Shared bonuses help ensure that everyone on the team is rewarded for our growth, and has their eye on the prize. When a developer knows that fixing this bug or finishing this feature in time means closing a deal or keeping a large account, they now have an added incentive to keep that revenue coming in the door. You will start seeing developers work with the business side of the team to learn how they can develop efficiently and where to focus. That’s powerful.
2) Enhance Team Morale
When working at a startup, it’s more important than ever to keep the entire team motivated and working towards a common goal. There are so many issues that can arise in a growing company – there is little time for employee disputes and distractions unrelated to growing the business.
A team working towards a mutual goal strides in unison. No one person gets a huge bonus, and everyone gets to celebrate each big deal and revenue milestone in the company equally. Many sales organizations have reps wasting time competing over leads and this can spill over into potential negative interoffice competition. Our business team does not need to compete for leads anymore with this structure. Now they work together to share leads together based on who has more time, who knows more about the industry the customer operates in, and who can respond to the customer the quickest while they are still excited about the product. Working together boosts that morale and helps each other grow.
3) Improve Customer Experience
When a sales person’s incentive to give a customer the best experience possible ends with the customer’s payment in the bank, there is little incentive to spend time with them after the deal. This leads to poor customer relationships and the customer is left with someone completely new after the deal closes. What a poor feeling.
With shared commission, each rep can spend time keeping their current customers happy and up-selling them at a later stage because they already understand how the customer has been using the product, and what their needs are likely to be. And the plus side is they can do so knowing comfortably that if new leads are coming in, they are being taken care of by their teammates and all will share the deals won.
4) Weed Out Selfish Employees
One thing we have noticed is that the candidates who really care about our company are excited to hear the joint commissions structure. On the other hand, when we mentioned this to a few candidates, they seemed very concerned about their own personal salary and exposed their selfish nature early in the interview process. These types of people focus on their own benefit instead of the greater good of the company and they are the type of people that we cannot have at this stage of our company. As a small, profitable startup, we have a lot to fight for and grow towards. We need the smartest and most collaborative people to have a standing chance at breaking into big market opportunities.
How did it even start?
When I joined Tint, we had one sales person on a personal commission basis. I was brought on to help with marketing, sales, and business development. It was tricky to figure out how to structure the contract – we didn’t want to have competition for deals in a two person sales team, nor did it make sense to give the CEO a sales commission, since he wanted to reinvest as much cash as possible back into the business. The company-wide bonus sharing was a byproduct of troubleshooting this early stage problem.
Now with this monthly bonus structure in place as a team, we all ring the gong every time we close a deal because we know that it was a team effort.
Doubts, Concerns, or Consequences?
Nothing is ever perfect, and our equal monthly bonus structure is by no means the perfect solution. We don’t know how long can this structure last as the number of employees grow. Also, if we decide to bring on Senior VP of Sales/Marketing/Business Development/etc. to help grow our company, will ego clash with an equal bonus sharing structure? Will the bonus structure excitement eventually wear off?
Though those are all valid challenges, but our high team morale and dedication from each employee makes it worth it. When we mention this during recruiting, it’s what makes us stand out from other companies – it shows how much we care about every employee and how hard we strive to make a fun, exciting, and fair workplace. Reinvesting a % profit back to the employees says a lot.
Will the formula change and adapt as time moves forward with more employees? Absolutely. But for now, it’s been a great asset for our team, and I hope you can learn something from this. If you decide to implement it for yourself, let us know in the comments below. I’m sure we can learn from your efforts. Also let us know in the comments what you think about this structure, flaws, things we may have missed or should consider, and whether you think this will work in the long run!
-Brandon, Director of Happiness