“Stacking” is a dirty word in sales comp. It generally refers to the number of people getting paid for a single deal. The sales credit “stacks up” such that three, five or even eight people are credited and paid on a single deal.
But the complaint usually comes from finance, not sales. Cost and incentives are an objective, quantifiable, knowable number. The amount of revenue generated by this stacking is not as precise and, therefore, often discarded. The result? A mandate to reduce stacking without thinking at all about the underlying sales model.
Let’s first start with the assumption that sales compensation works. Our sales force effectiveness study of more than 100 companies shows that improvements or changes to sales incentive plans results in a 5% increase in revenue, on average. Many academic studies (including those done by former ZS Principal and current University of Houston Professor Michael Ahearne) show unequivocally the effect of certain incentive tactics on behavior and results. We know sales compensation works, but the exact impact on revenue from a specific incentive for a specific role in a specific company is hard (impossible?) to quantify. However, we do know the hard costs of the sales organization, and when someone deems that to be too high, the “hard data” can win the day.
Let’s make the case that a certain amount of sales credit stacking is not only OK but also desirable. Sales compensation should always start with the sales strategy and the sales force structure required to implement the strategy. Sales teams are increasingly team-based. Accounts are bigger, requiring more specialized resources as companies provide more and more diverse products and services. As a result, the role of a strategic account manager (SAM) to “own” the account is increasingly common.
Underneath the SAM tends to be product or category specialists who “own” specific categories of products or services. They have specialized expertise and are responsible for ensuring that the SAM sells and maintains the products that the specialists “own.” We’ve seen account teams as small as two or three to as big as 30 or more. In large high-tech accounts, it’s not uncommon to have product owners (of a specific software product, for example) who report to category managers (someone responsible for all software sales for an account), who then report to the SAMs. A similar structure exists on the hardware and service side as well.
Within these accounts, individuals (in this example, let’s assume the individual software salespeople) are, and should be, accountable for the sale of their assigned products. That’s easy, but what about the software category manager responsible for that person (and presumably several others)? She should be held accountable for the total software number in the account, including the specific software sold by her direct reports. And, of course, the SAM is responsible for the entire account performance, and therefore would get credit for sales to the entire account. Also, presumably there’s a manager structure above the SAM. That means that four people are getting credit for a single sale in some shape or form, but is this good or bad?
Here are four simple steps that you can take to determine the appropriate amount of stacking that exists in your organization:
- Establish clear selling roles, hand-offs and accountabilities.
- Only include those roles that interact with the customer and that can make a sale or otherwise impact the business financially on a sales incentive plan. This will limit the stacking problem to only those on a sales incentive plan.
- Pay only those roles that touch or influence a product or category. Don’t pay on a team sale if a certain rep only touches 5% of team revenue; make it more in the rep’s control.
- The higher the metric level (such as account team total sales), the higher the threshold before payment is made. This helps eliminate “free sales” and payouts to team members who aren’t contributing to the overall team performance.
Stacking has developed a negative connotation. Perhaps in some cases it deserves it if there’s freeloading going on and people are able to “hide” within a large, broad metric. But for most team-based selling organizations, stacking is a good thing if it accurately represents the account team responsibilities and who actually influences sales.