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Channel Matters Blog > March 2011 > Compensation drives behaviour

Compensation drives behaviour

by Global Administrator
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Setting up an inside channel account management (ICAM) team in Ireland for a cloud vendor recently, the process got to the point of defining compensation. This exposed the fundamental contradiction in the role of the channel manager and took many Guinesses to resolve.

Problem was that ROI model on which 'sold' to regional managers was based purely on revenue. That's the up-lift they signed up and what they want to track. Period. But revenue is a trailing indicator of a channel manager's work. By the time you're counting the sales out, it's too late to affect it. Channel management is process driven, sales is event driven. We had therefore defined these ICAMs' role as identifying, recruiting and developing the right partners to become an effective sales and service engine for the company. Nothing there about shifting product.

And compensation drives behavior. Do you want CAMs to sell training courses to partners or product to customers? If you pay them pay to drive sales, they will sit on partner sales team deal by deal, partner by partner with no longer horizon than the quarter end. If you pay them to develop partners, you need to measure the number of partners signed-up and certified, the wallet share, MDF investment etc. Then they will sit on product and senior management to influence their investment decisions. The former will drive the business case for the latter and the latter, in time, make the partner better at the former; but these are two different conversations with two different sets of people. If they need to do both, then the compensation model will drive the balance.

In the end, like many others, we compromised on a mixture of hard (revenue) & soft (development) measures. But one of the biggest challenges was having an auditable process for measuring soft targets that would stand up to review by the compensation board.

So how is everyone else doing it?

We ran a quick straw poll of a few vendors and found compensation was

  • Purely on revenue (50%, 5 Votes)
  • Mostly revenue but some development objectives (20%, 2 Votes)
  • Mostly on development targets (e.g. certification) but also revenue (20%, 2 Votes)
  • Other (10%, 1 Votes)

One vendor whose Telephone Partner Account Managers we are training in Effective Partner Planning have a similar issue. They resolve it by paying 75% on revenue and 25% on Business Objectives (MBO). However they correctly felt these MBOs needed to be appropriate to the specific development goal of the partners they managed, so could not be 'hard' measure.

Another, large enterprise software vendor, has two entirely separate partner-facing teams:

  • one team are 'Partner Opportunity Managers', a field force to support the partner in front of the end-user. They are comped on revenue.
  • the other team are 'Partner Enablement Managers'. They are compensated purely on the investment the partner makes in the vendor.

We'd be very interested in how everyone else is managing this thorny issue.

 

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