What does a good sales engineer compensation plan look like?
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One of the toughest moments when going through your first job interview for the SE role is discussing the compensation plan. I remember when I reviewed my first comp plan and agreed to all the terms without really understanding the details. There were acronyms such as ICR, as well as various weights on how you will get paid out. Although I signed the comp plan without fully understanding the terms, I was lucky that the plan was favorable. However, this may not be the case for you. Therefore, let me try and break down some of the terms that you should look for and/or ask for.
Target Incentive Payout - This will describe how often will you be paid out against the quota. I have worked with companies that have made the either payout monthly or quarterly. These are the most common types. There isn’t really a right choice here and this is never negotiable (at least in my experience).
Individual Commission Rate (ICR) - is defined as the percentage payout vs. your monthly or quarterly target. Basically, this determines the commission percentage that you will be paid if you hit your revenue target. When asking about the ICR during the interview, I normally ask the following questions:
What was the quota attainment for the sales team that I was covering last year?
Can you share with me what is the quota for this year or how it is determined?
Accelerators - If applicable, these will be paid if the target incentive is exceeded. In other words, if the sales team exceeds their quota these describe what you will get paid above the normal ICR. If this isn’t defined in your contract, then this would be great question to ask. Also, definitely ask if the payout will be based off of quarterly achievements or annual achievements.
Spiffs - are optional per discretion of the CRO and CFO. There is no guarantee of award. They will be communicated by leadership throughout the year. Basically this is free money that can be given out based off of some special rule that is created in more real time and not part of a compensation contract.
Below is an example on how this all ties together:
| Commission Plan Inputs | ICR | 0.0125% |
|---|---|---|
| Quarterly Target | $ 10,000,000 | |
| Quarterly Achievement | $ 12,500,000 | |
| % of Target | 125% | |
| Achievement per accelerator bucket | 0% to 100% | $ 10,000,000 |
| 101% to 110% | $ 1,000,000 | |
| 111% to 120% | $ 1,000,000 | |
| 120% | $ 500,000 | |
| ICR Multiplier | 1x ($10mm * 0.0125% * 1) | $1,250 |
| 1.25x ($1mm * 0.0125% * 1.25) | $156 | |
| 1.5x ($1mm * 0.0125% * 1.5) | $188 | |
| 2x ($500k * 0.0125% * 2) | $125 | |
| Total Payout | $1,719 | |
If you have any questions, feel free to post your questions in the discussion board.
