Third: Compensate Your Team To Drive The Results You Want

Figuring out how to compensate your team to drive the results you want is part art, part science, part, trial and error. There’s no “one right way” to do it and some of the variation between firms is due to the culture you are trying to build.

For example, in an earlier podcast, Ross Levin of Accredited Investors, said, “We look at all the different surveys that are out there for comp, and what we've decided to do is pay people what we think is what people would get from salary plus bonus in other organizations.”

In other words, at Accredited Investors, the team gets paid a market rate compensation package in the form of a salary with no extra incentives. The result is the team is focused on doing what needs to be done rather than focusing on what they get paid the most money to do.

By contrast, at Jon’s firm, they do offer incentives. Take the business development team as an example.  

"The way we compensate our business development group is, if their primary role is lead generation, then their primary source of compensation is going to be from getting people to the top of the funnel,” said Jon. And there are variations on this.

“If you’re in sales facilitation, you probably have a bigger base and a smaller incentive piece. And if you’re in a lead generation role, you probably have a higher incentive piece than the base, but your upside is probably a lot higher,” said Jon.

In terms of raw dollars, “We pay out 50 percent of all new business revenues on the business side. In other words, if last year, from client referrals and self gen and other parts of the business, we had roughly $4 million in new client revenues, we'll pay out around $2 million of that in compensation to the business development team. A million of that was probably in the form of a base comp, and the other million was variable.”

Whether you adopt a comp model like Ross Levin’s or one closer to Jon’s, it must be aligned to drive the results you want and the culture you are building. Knowing that your comp plan will drive the results you desire is a big step toward creating a self-managing company.

Making It Happen

Jon’s company had about $18 million in revenue when he left for a year. If your revenue is less than $5 million, then taking off for a year will be more difficult. However, taking off for a month or a few months is totally doable. One of my coaching clients with revenue in this range is spending the month of March in another country, and we’ve been systematically preparing for it.