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Why Chief Revenue Officers Should Make Sales Compensation Their #1 Priority in 2024

Sameer Sinha
CEO & Co-Founder At Visdum
Published On:
January 8, 2024
June 12, 2024

In the SaaS world, an efficient sales compensation plan is important for everyone but for a Chief Revenue Officer, it is a priority. As the driving force behind revenue generation, CROs play a critical role in the success of their organizations. Among the myriad responsibilities on their plates, one area that deserves heightened attention is sales compensation. 

In this blog post, we will explore the key responsibilities of a CRO and compelling reasons as to why CROs in SaaS companies should care more about sales compensation and recognize its direct impact on sales performance and growth.

The Chief Revenue Officer's SaaS Sales Compensation Playbook

What is the role of a Chief Revenue Officer in Sales Compensation?

In SaaS, the Chief Revenue Officers responsibilities revolve around ensuring that their SaaS sales compensation plan aligns with the company's overall revenue goals and effectively motivates the sales team to drive results.

  1. Plan Design and Implementation: The CRO oversees the creation of fair and transparent sales compensation plans that motivate the sales team, working with sales operations and HR.
  2. Performance Measurement and Analysis: The CRO establishes metrics to measure sales performance and analyzes data to optimize the compensation plans and make data-driven decisions.
  3. Sales Team Communication and Alignment: The CRO effectively communicates the compensation plans to the sales team, ensuring clarity on goals, evaluation, and addressing concerns.
  4. Continuous Evaluation and Adaptation: The CRO regularly evaluates plan effectiveness, stays updated on industry trends, and makes adjustments as needed to keep plans aligned with business objectives.
  5. Incentive Program Management: The CRO oversees incentive programs and contests to motivate and reward high-performing salespeople, establishing guidelines and rules for fairness and transparency.

CRO's Sales Comp Planning Guide

Why Chief Revenue Officers should make Sales Compensation their top priority

1. Fuel Revenue Generation

The Chief Revenue Officer (CRO) designs and implements effective sales compensation plans that align incentives with desired sales behaviors and outcomes. This, in turn, motivates the sales team to perform at their best and drive revenue growth.

what does a chief revenue officer do

CRO oversees sales behavior and ensures that it aligns with the company's values and customer-centric approach, creating a positive impact on revenue generation and long-term business success.

2. Supercharge Sales Performance (Productivity Power-Up)

It is the job of a CRO (Chief Revenue Officer) to enhance sales productivity and drive revenue in an organization by aligning sales strategies with business objectives, establishing performance metrics, and optimizing sales processes.

This can be done by using sales enablement tools, training, and effective communication channels for the sales team to perform at their best. It is necessary to streamline workflows, foster collaboration, and offer coaching to enhance individual and team performance.

sales compensation plan for chief revenue officer

This results in only 35% of their time being dedicated to revenue-generating activities. 

This inefficiency not only hampers productivity but also leads to missed opportunities, as sales reps may lack crucial information during critical moments with potential customers. To address this issue it is vital for companies to prioritize sales knowledge management and foster collaboration within their sales teams.

3. Attract and Retain Top Talent

CROs will create lucrative sales comp plans that will ensure reps are happy and stay with the company and also ensure that good candidates continue to join the company.

what is a chief revenue officer responsible for

Retention: A well-designed sales comp plan that offers attractive incentives and rewards motivates sales representatives and increases their job satisfaction. When reps are happy and feel adequately compensated for their efforts, they are more likely to stay with the company for the long term.

what is the role of chief revenue officer

Hiring: A competitive sales compensation plan serves as a powerful recruitment tool. When candidates see that a company offers an enticing and rewarding sales comp plan, it becomes an attractive proposition for them to join.

4. Elevate the Experience with Compensation

A study says that even when people love a company or product, 59% will walk away after several bad experiences, and 17% after just one bad experience.

what is the role of chief revenue officers in sales compensation planning

Research shows that 59% of all consumers feel companies have lost touch with the human element of customer experience.

CROs can incentivize cross-functional collaboration and alignment between sales and customer success teams. When both departments have joint compensation metrics, such as revenue growth from existing customers or upsell/cross-sell performance, they are encouraged to collaborate and coordinate with each other.

5. Unlock Sales Team Superpowers

Sales comp data helps CROs gain better insights about individual and team performances – this again is tied to the revenue + retention factor.

A commonly cited guideline for a fully ramped sales rep's compensation is the 50/30/20 rule. According to this rule, a fully ramped sales rep's compensation plan should include:

  1. Approximately 50% of the total compensation is allocated to the base salary. This reflects their experience, expertise, and contribution to the company.
  2. Around 30% of the total compensation is allocated to variable pay. This portion of the compensation is directly tied to the sales rep's ability to drive revenue and meet or exceed their goals.
  3. The remaining 20% of the total compensation is allocated to benefits and perks. These are non-monetary benefits that add value to the sales rep's overall compensation package.

6. Align Sales with Shared Goals

Business goals and sales goals alignment can be controlled via sales compensation. If comp plans are designed in a way that encourages reps to focus on shared business goals, that's something the CRO cares about because his/her job is alignment.

Sales Compensation Planning Guide for Chief Revenue Officer

In case CROs notice that the sales reps are not being paid fairly for their work, they need to analyze the whole situation by tracking their KPIs. If the unfair compensation is the company's lack of attention, then they need to redesign the plan to pay out adequately to top performers.

Sales Compensation Planning for Chief Revenue Officer

7. Maximize Profitability through Compensation

CROs have their priorities set, i.e., customer happiness and the total value of the organization. Therefore, companies need to compensate for maintaining a high level of client satisfaction and producing long-term revenue for the organization.

Chief Revenue Officer sales commission plan

The CRO's major job is to focus on optimizing tech and cost-cutting. Sales comp needs to be designed in a way that focuses on cost control but keeps reps motivated. Hiring and training a new sales rep while current employees depart owing to low compensation could be a costly job. Ensure competitive and equitable sales compensation to maximize financial success and prevent employee turnover.

In conclusion, it is crucial for Chief Revenue Officers (CROs) in SaaS companies to prioritize sales compensation. The success of a SaaS company heavily relies on its sales team's performance, and the right compensation plan plays a pivotal role in motivating and incentivizing sales representatives. By caring more about sales compensation, CROs can ensure that their sales team remains motivated, engaged, and focused on driving revenue growth.

FAQs

What should a Chief Revenue Officer focus on for sales compensation planning? 

A Chief Revenue Officer should focus on aligning sales compensation with business objectives, setting clear performance metrics, ensuring fairness and transparency, and regularly reviewing and adjusting plans to drive desired sales behaviors and outcomes.

What is the difference between a VP of sales and a Chief Revenue Officer?

The key difference lies in their scope. A VP of Sales typically focuses on sales strategies and teams, while a Chief Revenue Officer (CRO) oversees the entire revenue generation process, integrating sales, marketing, and customer success to maximize overall revenue and customer value.


Does sales report to Chief Revenue Officer at a SaaS company?

This depends on the company structure but yes, in many SaaS companies, the sales department often reports to the Chief Revenue Officer (CRO). The CRO oversees not only sales but also other revenue-related functions, including marketing and customer success, to ensure a holistic approach to revenue generation.


Do CROs get commission?

While Chief Revenue Officers (CROs) typically do not receive individual sales commissions, they often have performance-based bonuses tied to overall revenue growth and company success. Their compensation structure emphasizes strategic leadership, aligning the organization's efforts for sustainable revenue generation.

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