The Sales Hacker Podcast
The Sales Hacker Podcast

Episode · 7 months ago

194: No More Quotas, No More Commission: Sales Without SDRs

ABOUT THIS EPISODE

In this episode of the Sales Hacker Podcast, we have Nelson Gilliat, Demand Generation Manager at Brantr Media and Author of Death of the SDR, a book whose controversial central philosophy we discuss. Join us for a visionary conversation about getting rid of the SDR role and doing away with commission and what should replace them.

What You’ll Learn

  1. The problems with the SDR to sales handoff
  2. The role of prospecting in a world without SDRs
  3. A better way to compensate instead of commission
  4. What buyer-centric revenue really means

Show Agenda and Timestamps

  1. About Nelson Gilliat & Brantr [2:11]
  2. Defining a predictable revenue model [4:07]
  3. Why prospecting sits apart from sales [6:59]
  4. The vision for buyer-centric revenue [15:38]
  5. A new perspective on commissions [19:36]
  6. Paying it forward [26:59]
  7. Sam’s Corner [29:04]

One, two, one, three, three. Hey everybody, it's Sam Jacobs. Welcome to the sales hacker podcast. We've got a great show for you today. We've got Nis Nelson Gilliat, who's talking about why he believes that the role of the SDR, the sales development representative, is dead and what we can do to replace the str with more full cycle reps. it's a great conversation. Now, before we get there, we want to thank our sponsors. We've got three sponsors today. The first is pavilion. Pavilion is the key to getting more out of your career. Our private membership connects you with a network of thousands of like minded peers and resources where you can tap into leadership opportunities, professional development, mentorship and other services made for high growth leaders just like you. Join US FOR THE PAVILION ANNUAL KICKOFF, featuring Kim Scott, author of radical candor, on February third, open to the public and will be featuring special awards from the pavilion community for our best and brightest members across sales, marketing, customer success and operations. that URL is hopincom forward slash events, forward slash pavilion annual kickoff. Two Thousand and twenty two. I will tell the team we need to shorter url, but it again is popincom for slash events for Slash pavilion annual kickoff. Two Thousand and twenty two. We're also brought to you by our reach outreaches, the first and only engagement and intelligence platform built by revenue innovators for revenue innovators. Outreach allows you to commit to accurate sales forecasting, replace manual process with real time guidance and unlock actionable customer intelligence that guides you and your team to win. More often, traditional tools don't work in a hybrid sales world. Find out why. outreaches the right solution. At Click Dot outreach that I oh forward thirty MPC. Click DOT outreached out. I Oh forwards thirty MPC. And finally, Flock Jay. With sales becoming increasingly knowledge driven and digital first, elite sales leaders are looking for ways to invest in the most important part of their tech stack, their people. Flock Jay helps sales team from five to...

...five thousand do their best work by automatically capturing, tagging and sharing best practices wherever they are. Find out how to elevate your sales team at flock jaycom forward slash salesacker. Now let's listen to my conversation with Nelson Gillette. Hey, everybody, it's Sam Jacobs. Welcome to the salesacker podcast. To they on the show, we're excited to have Nelson Gilliatt. Nelson is actually a published author. He's the author of a really important new book called the death of the str and the birth of buyer centric revenue, and it's all about a new way of thinking about how to generate demand and how to make sales and how to close business, focused on the buyer as opposed to the predictable revenue model. Nelson runs demand generation for an agency called branter and he's based out of San Diego. Nelson, welcome to the show. A Sam, hey everyone, for to be here. We're excited to have you. So, as I mentioned in the Intro, you wrote a book and we love having authors on the book. Let us understand. Tell us a little bit about the book and then we will dive in. What are the what's the premise behind the book? Yeah, sure, so the comes behind the book is that the go to market model for most beedby companies nowadays is outdated and that model is the particular revenue model, which companies operate on two different extents, and I think to the extent that they run it, it's holding them back, that their growth is worse off, for it takes longer, it's more costly, it's just more difficult, and so I think that the elements that within those companies, within their marketing and sales, that aren't particular revenue models, is what drives their better aspects of their growth. And that's where I present an alternative, which is the buyer centric revenue model. I kind of looked at the landscape, I kind of looked at what I thought to be some of the problems within bb marketing sales, and then I identify that pretty revenue models responsible for two of them, through the big ones, and then I propose an alternative. And then away for people to transition, if...

...they're ready, on the particular revenue model, away for them to compare, to test and then gradually sunset rather than just, you know, tear tear things apart from from day one. So when you I mean there are folks out there, many people know what you're talking about. Many people think they know what you're talking about. But just so for their few folks out there that don't know what you're talking about when you say the predictable revenue model, tell us what you mean. Yeah, sure. So the particular revenue model as a, you know, be tob marketing and sales playbook from the early two s that Aaron Ross popularized in his two thousand and eleven book called the Pretty Revenue Model, and essentially it was based on his time at sales force, again in the early and it was some of what sales force was doing, and I want to emphasize that this wasn't the whole kid in canboodle that sales force had run. It was some of what sales force was doing for our marketing and sales perspective and that is basically what people are copying today. So it's a model twenty years ago that people are still running today, despite changes and how buyers buying technology and marketing and sales know how and all the tools that we have and everything like that. And what's the what's the premise of the model? Yeah, so the model is basically two things. One it's a marketing thing and the second thing as a sales thing. So the marketing thing is strs, in other words people to do prospecting full time rather than sales doing it some of the time like they used to. You know, they create this new position, take prospecting off of sales is plate and have that sit with strs, which, you know, technically I think is a is a marketing thing. They are generating and qualifying leads for sales, even though it's famous leading sometimes called, you know, or considered to be...

...a sales gig. And then the second aspect of the predictor reveny model is the sales assembly line or seller specialization or sales handoffs, primarily the AE CSM split, but in practice there's a lot of other subdivisions like the sales engineer who does the Demo, or an account manager that just handles the renewals. So I think those two aspects, prospecting strs and the sales assembly line, are the two key aspects that I challenge, and we can talk about that. Aside from particular revenue model, there's two other things in my book that I have beef with and I think are also outdated practices that do more harm than good, and those are quotas as a type of sales goal and a way to measure sellers performance and commissions, which everyone knows type of sales compensation. So I think both are also harmful, and so I kind of break that down and offer alternatives to each of these kind of four things that I think you know, could put people in a better direction. So let's let's start with the first thing, since that's almost explicitly the title of your book, The death of the sale development representative. So when you first what is the problem that separating prospecting from the rest of the sales process creates in your opinion, and then how do you propose to solve that using sort of a buyercentric model? Yeah, great question, and I do see prospecting and strs is kind of the core of the pre revenue model and I think the core problem today and bb marketing and sales that not only holds companies back from growth but I think harms markers and sellers and their productivity, their fulfillment and as you know, there you know ten year and turnover and performance isn't looking too good across the board and also people's job satisfaction. And so just to define...

...what prospecting is. So prospecting is a type of marketing. That basically entails telemarketing and what I call what I consider email spam and linkedin spam, and I use email spam linked spam obviously in a negative sense because it is ninety nine percent of the time a sales pitch. It's hey, here's who we are, what we do, do you want to speak to sales? So there's this, there's a sales approach to it. There are ways to do email and to do linkedin. That's not entailed or that's not like that, but I think that that is something that falls properly within marketing and not other marketing approaches and not within prospecting specifically. And where prospecting came from was back in the day where marketing lack the ability to kind of mood buyers in the door. Sales people would kind of go out there and buyers also lack the informations. Like pre internet or early Internet, buyers kind lack the information that they needed. So kind of sales had to go out there and give it to them and there was field sales and then eventually inside sales to do telemarketing. And you know, it's a lot for sales to do to do both marketing and sales and sellers didn't want to do prospects of the was just too laborious, too fruitless, to undesirable. And that's when Pratt to revenue came along and said, you know, just doesn't make sense to have sales people do prospecting, to do this type of, you know, laborious, you know, manual marketing type of thing and they hate doing it, so let's take that off their plate. And so I consider prospecting to be kind of an old school form of marketing which over time has gone more and more misaligned with how buyers want to be marketed to and how they consume information, and so I think that's what we see. The decline of prospect is just got worse and worse, and so I think today they alternative to that is demandin. So I think sales development and demand Jin historically have kind of work together...

...in a way, and typically it was where De managin would give sales development representatives and or sales contact information for them to kind of go do the telemarketing in the emails and the Linkedin and then, in addition to that, demandam would do some other things to the extent that they could or they had the freedom in the resources, other marketing tactics and channels and I think today, with the you know, with the Internet, with social media, with how buyers buying, all the communities, sort of the change in technology, the change in buyer preferences and what demansion can do, can do nowadays to who buyers in the door, to qualify them automatically on the website and then connect them directly with the seller and let them, you know, book a meeting director from a seller's calendar. That's something that demandjen is, you know, within the ten within the past ten years, and especially from the past, within the past five couple of years, you know, has that power to do, and so there's this kind of realization I think a lot of people are having. It was like, what do we do now with strs, you know, and demand Jen is, you know, kind of fighting against the particular revenue model they call it will often refer to as the legend model or the mql hands to real because an mqo refers to someone's contact information, and they're trying to fight against that and say, Hey, like we have this ability now to to be a major revenue driver and to basically, you know, own generating leads and qualifying leads for sales. We'd like that freedom, but they the kind of a straight jacket because of the of the SDR model. And I think on the str side we all know how difficult and thankless that job is. How you know for an str that? But the turnover looks like it's pretty high and the ten year it's pretty low and the performance isn't looking too good despite all the know how and tools that we have and best practices that we've accumulated for sales development of the past twenty years.

So I think people are starting to sort of realize that there's that something is got to change. So when you say the performance is not is not good, do you have do you have data to support that? Is that a fact? That was sort of I mean I would assume it's true because everybody's sort of using similar email messaging and it's very to your point seller. It's sort of seller centric. It's here's who we are and what we do. Can I have a meeting please? But do we have data to confirm that? You know, maybe response rates or declining or st our efficiency is going down. Yeah, so in terms of like strs hitting quota. I think. I think is actually you guys have pavilion. That came out recently in the STR report. That can you can correct me I'm wrong, but I think some, most like sixty sixty percent of str's miss quota. Was that right? The vast majority MIS quota? Is that figure correct? I don't know, I haven't looked at the report, but sounds right. It sounds right. So I think that's kind of the the modern or the latest figures that the majority of stars are missing quota. Are Struggling. That we all know, especially since covid that connectorrates on the phone we're down and email is being blown up, and you know email responses and the efficacy of the channels to book meetings and those meanings to actually hold and convert to revenue. It's just it's just declining and it's just again it's it's because the way that buyers buy these days and how they look at this type of outreache, it just doesn't jive with them, as anyone the receiving and will know. And so I think we all look at turnover for an Ustar it's something almost close to like forty percent and so and their turn and their tenure or the amount of time that they spend in the roles like ever decreasing something like. You know, it depends on the data source you see, but it's like it could be anywhere from like eleven twelve months. You know, they're just I mean SDRs we know don't like that role and they can't wait to get out of it and progress into marketing or, in two, sales, and so,...

...you know, he was made a required stepping stone for sales because again, historically sellers used to do prospecting. So it was kind of like the sales roll was the carrot to kind of, you know, entice SDRs with to say like, okay, get through this sort of like ruling boot camp of really ruling marketing and then eventually you'll make it into sales. And so I think one of the things we also see, this might have also been from pavilion, is that I think it's something like twenty two percent of SDRs turned a he's actually to perform. So the sort of alleged training ground for sales, which it absolutely is not, is really more like a burial ground. And so, you know, I think what we often just see, and it totally we see there's a lot of sale or st our leaders. A lot of people are trying to comfort SDRs with, you know, you know, micro promotions and more tools and more training or more coaching, but they're all kind of just superficial things to sort of numb the pain of being a str and they don't really fix the problem and I think that what I what I really recommend to people and part of the transition plan is to help strs transition to productive and fulfilling careers in marketing, with it's dimension, or product marketing or content, social you name that you know. If you you know want them to help generating leads and stuff, or help them just move into sales if they want sales, or help them go into operations if they're kind of interested in the tech SAC and the stuff behind the scenes, in the support for either marketing or sales, and I think that they'll be thrilled and that's what there anyway is trying to do as soon as possible and you're going to get more value, more productivity. I think it's there's a lot of wasted talent. So there's nothing wrong with the talent or the people who were in the role. I think it's just the role itself is is has got to go fair enough. So let's let's shift in from the negative to the positive. So, you know, introduced us to the beautiful world of buyer centric revenue. What are some of the steps if we want us are adopting...

...moving away from, you know, a segmentingly generation away. We want to adopt a buyercentric process. Tell us what to do. Yeah, sure, so to focus on you all. Turn it to prospecting, testress. What does like modern marketing look like like? How do we properly generate leads and qualify them for sales? And that's where demandagen comes in. And you know, historically right dimension, which is generate the contact information of uninterested buyers through dated content or list purchases, and that's what an mql is. Nowadays, Demnagin has the ability, through you know, social media, digital marketing and a whole bunch of other plays, to woo buyers in the door. Top of funnel, you know, Middle Funnel, you know, and that could look anything from content marketing, whether that's something like this, like a podcast, and you know, inviting your audience on by the influencers in your space on, and then, you know, distributing that content on social and whatnot. That's linked in or youtube, and there's also paid ads. You can do paid ads on social media. You know where your buyers are hanging out, spending a lot of time scrolling. I think a lot of US probably scroll on linked in or on facebook and on twitter or youtube and and that's where you can put your ad out there. So what formerly was a telemarketing call or you know, is now an ad and you know where you can kind of tell you a company story and what you guys do and they've become aware of you or, you know, you could when people are searching for you. So when further down the funnel, you can kind of capture those people with SEO or Google ads, you know, or review sites or, you know, really good website. That's that's well optimized and I think that it's ultimately about to mention putting out all that information that used to be tucked away within sales kind of out there on the Internet for the buyers to consume,...

...to be made aware of, to be, you know, become interested and then come to the website and then all the information that buyers want, like pricing and the demo recording or demo environment, maybe a frough trial, you know, or an explanation of how it works. You put that all on the website. The website is essentially, if at seven seller and that's essentially kind of at a very high level. There's so many other different plays that demand Jen can do. It's like partner marketing, influencer marketing events like fireside chats, panels, conferences, this, that and the other. That again, you record and you distribute on social community thought leadership. I think we're a lot of strs nowadays are seeing success with. Is Not with telemarketing or email spam or linkedin spam. Is actually they're doing content marketing and social media, which is a function of demand jam. And so I'm saying yeah, like the stuff that is actually working is what that they should be doing in a marketing function without quotas and commissions with disincentivised them to do that type of stuff, because they just need to, you know, push people for a meeting and they've got the sort of production quota. So they're not going to go out and message someone to invite them onto a podcast or to invite them, you know, to code market and Co create content or come to an event and stuff like that or, you know, take the time to think about, you know, sort of a thought, you know, sort of a relevant, you know, thoughtful marketing campaign, because they can't this or under the gun. So Se yeah, I think it's. It's with demand Jen now, and that's where I see in the future that the strs will be or sales development will be phased out entirely for for demanding and demandion will fully own the Gen or pipeline generation or enough. I want to skip to one of the last topics that you want to challenge because it's very interesting. You mentioned that you know you don't believe in commissions, or you maybe don't or you have an issue with them. So walk us through. What's Your Perspective on commissions? Why do you think it's a bad form of compensation,...

...and what's your alternative proposal? Yeah, sure, so the way I see commissions, I going to death on this in the book and I lay out the arguments for it. There's a lot of misunderstanding about it. I think one thing to understand is a dollar of commission in a dollar of salt, a bonus. Aren't the will and what I advocate for instead of a commission is a full ote salary plus bonus, whereas on our commission model, what it is essentially is is half salary and then half commission. So it's essentially like half your salary pending your quart atainment or your revenue attainment or, in other words, the buyers decision to purchase, which is size with the outside of the sellers control. There's so many other things that determine that. Like sell like do everything right, but still up to buy the like. Could you everything wrong with the bar still could buy? What's marketing to producing for leads? You know, what's the product like? The demand head proct like? And so it's so much outside the sales control, especially nowadays when most of the buying, most of the buyers decision happens without sales. They're like typically do most of their education, research, larger things to marketing in their peers. You know, even more people often on revenue collective were now pavilion are asking appears about this, that and the other it comes to making software purchases. But yeah, so it's like half of your salaries dependent on something that sizes the outside of your control, and I think that's how you should probably think about commissions. You know, if you use a cake analogy, it's like half the cake which you have no idea if, when and how much you're going to get and it's large outside of your control. Versus a full salary and a bonus is like you get the full cake plus, plus the icing on top. So there's this kind of, I think, false carrot that's sort of presented to sellers like a you know, you can let your own paycheck and it's here's this potential money that you can get and they sell these. Don't think about all the negatives and they are all, you know, all the downsides to commission and so other things to kind of...

...keep in mind. You know that point I made earlier that a dollar of salary and bonus as far superior to the dolve commission. So it's like, you know, a salary is predictable revenue. It's steady, consistent cashual that you know, you know what's coming in, and that's why it's such a desirable form of compensation when you go and you work for someone else. Why? HR and marketing and products and finance have that sort of model and wouldn't want commissions. And if they did have commissions, they would, they they would revolt, and so I think there's a lot of on learning with commissions that I kind of go into the book into a lot of detail. But some other things just to chew on is like, you know, your your commission is obviously tied to your revenuertainment, which again is larger outside you control. Plus often your your quotas are unrealistic or stretch goals. So most sellers miss them, and they do. Most sellers do miss quota. And then all the kind of Gotcha's with commissions. You've got your accelerators, your decelerators, your clawbacks, this, that and the other, which are often very complicated. Is the commission structures are typically very complicated, nuanced and change every year. And then you factor in your ramp time. It takes time to ramp and, you know, build pipeline and become you know and close these deals, and so that could take six months or more, depending on how long your sales cycle was. You actually start to realize and seek commissions. You know, sell as an average don't stay in a roll too long. Typically change every two three years maybe, which is I think symptomatic of the larger problem with the Sales Roll Self, of which commission contributes, and you also think about the fact that it's, you know, tax higher then than a salary and it's because it's a variable income, it makes it harder to get a loan, all these sort of things, and then you realize wow, like commission is actually really crummy and I would totally take a full salary plus a bonus like everyone else. And so I think the better the seller, you know, then the better the salary and the bonus. And I...

...think also if you think about commissions and what that does to sell, it really I think the whole purpose behind commissions and quota is really not to benefit the seller but actually to harm the seller and to pressure the seller with basically desperation and often sometimes, I guess that you know carrot, where it's like Oh, I can potentially write my paycheck, but really it's like half of your paycheck is just being withheld from you at the outset, that it's just kind of being used to pressure sellers and I think that's where, that's where you see a lot of sellers, you know, dealing with a lot of that pressure and, in turn, pressure to byers, which is the which is that, which is what really is the whole point of for his commissions? To pressure sellers, to pressure buyers, while I think, unfairly under paying sellers. So, you know, it's in a sense it's like playing the slot machines. Are playing a lot of like some people some of the time when in the Latto or when in the you know, stock market speculation. That doesn't mean that it's a good financial compensation package. I think smart financially savvy sellers, you know, good sellers would would go for the full salary, go for the full bonus and have that transparency when they're working with companies. They know what they're going to get paid and not getting over promised and under delivered. The not kind of dealing with all that, you know, Cock them any things with commissions and they can just rather than focusing or fretting about their paycheck, they can actually focus on delivering a good customer and buy our experience and relationship in the buyer does feel the effects of commissions and doesn't trust sellers often because of commissions, you know, and the worried that these sellers are going to overpromise on their deliver or they're going to pressure cell which they often do bring on bad fits just to get their just to get their paycheck. And then sellers often, you know, with team markets, like well, why should I help my other sellers on the team because I'm so focused on my own, you know, paycheck. I'm desperate for commissions. I'm not going to help to take the time to help someone else. And that or take vacations, and there's like vacations can kind of screw you...

...over, because then that affects your commission. And you know, there's examples of companies who've gone rid of commission and they're paying a proper, you know, compensation, full, full salary bonus, and those look like mondaycom bamboo, HR microchip technology, culture, amp plural site. Lead to the GISTICS and I'm sure there's many more I'd not get aware of and I hope to become more aware of them. And companies and B Toc like Charl Schwab or TDA mere trade or tes La. It's just like or human to some extent Uber and those companies they realize that, like hey, this whole you know, couple like the thing of tipping and forcing the virus tip as a push. Just having menu prices is not a good experience and you know, either for our drivers or, you know, for customers, and so I think it's the same thing with sales. You know, treat treat your seller like show them the hey, we value we're going to pay you a full proper salary and bonus and and you know, if you don't meet our expectations, it's like any other role. It's like we either going to try to coach you or we're going to and remediate the solution or we're going to try to find you a fit elsewhere, but we're not going to kind of play games with your with with your compensation. Fair enough, Nelson, we're just about at the end of our time together. Before we go, what's a book or an idea or person that you've personally found inspirational that you think we should be aware of? Yeah, I think that's Chris Walker from her fine labs and fine labs is of BB demansion agency, and I was heavily influenced by him and I think he is helping people to also understand what's going on and be the be and that things are changing and to kind of be ahead of the curve and to and to make the change, not only so companies grow better, but that people have more productive and fulfilling careers in sort of like an operational strait jacket and aren't suffering, you know, high turnover and low tenure, low performance and low job satisfaction and have sort of like the freedom and resources to do their job. He focuses more, I on markters,...

...you know, but there's ramifications for sales people as well and he does touch upon that as well. So I think he's a great resources. PODCAST is the state of demand en and he has a weekly event, demand Gen live. You can ask questions. So I highly recommend you go and you check out his content. Sounds awesome. On Nelson IW folks are listening and they want to check out your content. What's the best way to get in touch with you? How would you like people to follow up with you? You can follow me on Linkedin. Nelson Gilliatta put up a lot of content. Try to break this stuff down with it's on prospecting, SDRs and the sales assembly line or sell a specialization, commissions, quota and you know what the bias such a Retney mill is and how to get there. And then the book is obviously on Amazon. The death of the str on the birth of biers and ship revenue, and I'm always available if someone wants to chat about it. You know, if you just are chewing on these things and you know you just have questions, I'm always happy to just chat off the record. Wonderful, Nelson. Thanks so much for being on the show. We'll talk to on Friday for Friday fundamentals. Thank said. Thanks everyone. Thank you, everybody. Sam, Jacob, SAM's corner. Great Conversation with Nelson Gilliatt. Got Some pretty controversial ideas there and I think I think we're going to have to we're going to need a bit more data before we before we take any of these actions right. So is his theory is strs. Get rid of them, jettis in them now, gradually over time, but you know, remove that function and stop the sales assembly line, specifically the handoff between SDR to sales and sales to account management, our customers success, get rid of quotas and get rid of commissions. I've seen some research recently from my friend David s bits that runs a company called bench sites that indicates that people, the higher the variable calm, the greater the performance. So unfortunately, the issue there is. My lawyer is calling you right now. He...

...said two hundred forty five. It's not to forty five yet. It's to forty three, Matthew. At any rate, here's the point. The point is there is some data to indicate the variable compensation does actually drive better performance and I think we're going to have to figure out. You know, not every role is the same and the reason that inside of comp tends to work for SDRs and for sales people is because the jobs themselves are highly repetitive and the more that you use your brain and the more that your actions and your activities are not directly correlated to immediate transactional feedback, the more likely it is that inst of cop is not going to be the right solution. But there are situations where inst of conversation does seem to drive better performance, so I think we'll have to figure that out. I think we'll also have to figure out whether it's an either or. Do we want to do demand generation and marketing programs and also use sales development and people to prospect? Agreed that it's not the best job, but I also think there's some people that get some enjoyment from it and it's also true that not every entry level job is the best job, and that's okay. It's called work for a reason and you know, maybe fulfilling your life's passion happens over the course of two to three decades, as opposed to instant gratification. You just entered the workforce in Gosh, this job sucks. Isn't that unfair? Well, there are many, many worse jobs in the world, so maybe take a longer term perspective. I appreciate that it's they can be repetitive. I can appreciate that people say no a lot, but also you have some really interesting conversations with people. So I guess I come out slightly on a different side than Nelson, but I think it's a really interesting perspective and check out his book the death of the SDR and the birth of biercentric revenue. So that's all for now. We're looking forward to hearing from our sponsors. If you need to reach me, you Ken Sam at joined Pavalioncom. Otherwise I've talked to you. Next time, my friends.

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