Tag Archives: techno

The Cost of Comp Plans

By James Kwak

Enterprise software is the industry that I know best. Both of the real companies I worked for (sorry, McKinsey is a fine institution in many ways, but it isn’t a real company) were in enterprise software: big, complicated, expensive software systems for midsize and large companies that can take years to sell.

Although the development of enterprise software is (often) highly sophisticated, sales is typically governed more by tribal custom. One trait we probably shared with other big ticket, business-focused industries is the “comp plan”: the system for calculating salespeople’s commissions on sales. The comp plan is just about the most important thing to any red-blooded salesperson. (Its only competition would be the territory assignment, which determines what companies he is allowed to sell to—or, more specifically, for sales to what companies he will earn a commission.) It is the source of months of lobbying, the subject of intense executive- and even board-level scrutiny, and the target of almost every complaint.

Continue reading