Rocket Readings: Can HR Avoid a Pay War Between Sales and Marketing in 2013?

Can HR Avoid a Pay War Between Sales and Marketing in 2013?:by Steve Loftness
Teams of Lead Development Reps (LDRs) are being built in Marketing to help fill the Sales pipeline with qualified leads. This is an emerging best practice. Best-in-class Lead Management programs provide sales with more than 50% of all leads. Usually, LDRs are compensated for their efforts with a base + variable compensation mix. Join the SBI Make the Number tour to find out how to do this.
sales vs ldr compensation war HR helps A post by my colleague Vince Koehler explores ownership of the Lead Management function.
However, who should pay for this valuable service? And how can HR keep the peace when LDR pay threatens Sales compensation? LDR pay may cause Sales Reps with less commissions. This is because they now have to share some of their pie with LDRs. It’s like the waitress having to share tips with the busboy. Or the wealthy having to pay more taxes for the benefit of the 47%.
Typically, LDR compensation comes from one of these methods:

Marketing reallocates budgeted funds.

For example, Marketing may take money from ineffective trade show spending. Or, by spending less on external content producers. The LDR team can produce some of the content you used to get from an agency – with better insight, too!

Marketing’s fightin’ words: “We do this for Sales’ benefit, but they get all the credit. Their Reps go to President’s Club and get perks. Our LDRs are paid what we can afford from our budget – no perks.”

Sales pays for the service out of their general budget.

To keep the Sales Reps from rebelling, some organizations choose this method. Much like Marketing, Sales finds an area to reallocate funds from. Maybe from the annual sales kickoff or president’s club events.

Sales’ fightin’ words: “We are doing fine without paying for Marketing’s help.” Or, “This better be worth it!”

Sales Reps pay for the leads.

Leads are priced so that they cover the costs of the LDR team. Sales Reps may pay a per-lead price. Alternatively, Reps may reduce their own commissions for Marketing-sourced leads. Sales Compensation planners already do this for pre- or post-sales support compensation. Normally, there is some mandatory minimum payment to motivate sales participation.

Sales Rep fightin’ words: “I can do my own prospecting.” Or, “My potential slice of the pie just got smaller.”

Time for HR to make the peace. Before war breaks out, what is HR to do? Quell the impending Sales insurrection? Or coax Marketing into accepting that they serve Sales?
The first action is to determine which compensation method will work best. But that is easier said than done. Let’s assume some help will be needed. Where to turn?
Take a look at this diagram.
HR help sales vs ldr comp

For planning sales compensation, the HR leader has plenty of consulting firms to turn to. These firms commonly use the benchmark method to help set sales compensation. Makes sense since they’ve built their benchmarks across sales organizations. HR typically hires a firm like this to help assess and modify the current sales compensation plans. Unfortunately, these firms do not have experience with LDR compensation.
For Lead Management, there are not so many choices, but Marketing consulting firms do exist. They help companies to design Lead Management processes and assemble teams. They may even help determine what the compensation requirements for LDRs should be.
But what about the intersection of Sales and Marketing? Who can the HR leader turn to for help that straddles both camps?
Sales Benchmark Index is currently holding our Make the Number tour. We are talking to your peer HR and Sales leaders about Lead Generation and Sales Compensation. Knowing both areas, we are uniquely suited to help. Sign up now and you’ll receive many useful tools. One of these tools is an LDR compensation evaluator.

Call to Action

Is war brewing between your Sales and Marketing departments? Or are the battles already engaged?
Maybe all is calm because Lead Management has not been introduced yet. If that’s the case, it should be coming to your company soon. Before that happens, craft the treaty:

Learn best practices regarding Lead Generation and Sales Compensation by attending the SBI tour. (And receive valuable tools to use!)
Find out when an LDR team will be implemented. The HR leader will need to help source it and design compensation for it.
Be involved with the 2013 sales compensation planning. Assess it to ensure that it can potentially support LDR pay.
Contact SBI to help you determine which compensation model will work best for your situation.

What methods are you using or considering in order to pay for Lead Development Reps?