The Pros and Cons of Tying Marketing Compensation to Metric Performance
Marketing has officially entered its Renaissance Era. Long gone are the days of talking at customers without feedback and tracking metrics that don’t move the needle. Thanks to a recent boom in marketing technology, marketing success can be quantified to show its contribution to revenue goals, helping sales and marketing align more than ever before. Most importantly, B2B organizations are beginning to track and analyze marketing metrics in terms of sales goals, such as number of marketing-sourced leads that result in revenue. Closing this visibility loop has allowed marketing executives to measure their goals objectively and quantifiably like other parts of the organization, finally earning them a seat at the leadership table.
So, if every other part of marketing’s existence can be measured and quantified, why not take it one step further and align individual marketing employee compensation to performance? I spoke with Seismic’s VP of Marketing, Daniel Rodriguez, who considered this strategy when our team really started to gain momentum in terms of qualified lead generation as a way to objectively and fairly align sales and marketing compensation. It’s not a new idea, but it’s never worked perfectly due to data gaps in the lead lifecycle. Now that marketers are able to track a lead all the way from generation to a closed/won deal, it finally became a strategy worth exploring. Daniel shared with me his list of pros and cons in terms of our team (which predominantly employs an inbound lead generation strategy), and the decision he ultimately came to regarding tying marketing employee compensation to performance.
Pro: Data shows that increased productivity and higher performance are a direct result of offering rewards for that performance, so marketing executives would yield greater results from their teams.
Con: While this strategy works well for sales and other mechanical, transactional jobs, research has found that this actually hinders performance for strategic and cognitive tasks like marketing. It’s been proven over and over again that greater, more direct rewards yield greater performance in sales. But marketing teams don’t experience the same results. As tasks become more abstract and complicated (such as creating content, nurturing leads, etc.), creativity and conceptual thinking are sacrificed in favor of perceived shortcuts—shortcuts that don’t end at the intended behavior or result.
Pro: The ability to tie compensation to a metric or metrics greatly reduces the subjectivity of marketing. This is one of the best ways to optimize new marketing data and metrics, allows marketing to better establish its seat at the decision-making table, and helps marketing make a more objective case for budget increases and more.
Con: While data-driven metrics undoubtedly give marketing a louder, more objective voice, it’s still difficult to measure marketing’s total contribution to deals throughout the sales cycle. Marketing is able to measure the number of marketing-sourced leads that turn into customers, but the quality and influence of marketing touches throughout various sales interactions (e.g. how content influences a buyer’s behavior once the lead has been passed to sales) is still difficult to quantify. This can result in over- or under-reporting of marketing’s contribution to pipeline.
Pro: Crediting individual efforts will ideally increase the landscape for healthy competition among marketing team members.
Con: Attributing lead generation metrics to individual success is not only difficult to do, but it “can lead to tension among team members who should be working together towards a common goal,” Daniel said. “For example, who gets credit for the lead that downloaded content through an email campaign, the person who wrote the content, or the person who sent the email?” Individualizing performance takes team members’ sights off of the big picture goal (which all metrics should ideally be contributing to anyways), and inhibits marketing team members from working together. Instead of increasing healthy competition, you’ll decrease collaboration and likely decrease the chances of reaching team goals.
Pro: When marketing metrics and compensation are more accurately tied to sales goals, marketing and sales are better aligned and more collaborative.
Con: Tying marketing compensation to metrics makes the sales and marketing relationship more transactional, not collaborative. More leads might get passed to sales, but marketing may lose sight of lead quality or sales’ needs. To reiterate, it’s still not easy to measure marketing’s influence on deals throughout the sales cycle, so marketing may feel underappreciated for deals that were nurtured or supported by marketing efforts throughout the sales cycle. While marketing and sales teams can track where and how a lead was sourced, it is difficult to base a marketing team’s full compensation on these leads.
There is such a direct link between sales effort and outcome that it makes complete sense for sales compensation to be tied to individual performance and revenue. For marketing, it’s a little more difficult. Mike Volpe, former CMO of HubSpot, was quoted saying that “There are many ways to keep sales and marketing aligned and to reward marketing teams in a compensatory way without jeopardizing productivity or performance. Instead of rewarding individual successes with a bonus or commission, Daniel suggests rewarding the team for reaching a collective goal—like generating a certain amount of marketing-sourced revenue each quarter or fiscal year—with a tangible reward, whether that’s monetary or in the form of a team event or outing. Individual excellence can also be rewarded in other ways, such as taking on new responsibilities or a promotion. At the end of the day, marketing is still an industry where risk can and should be rewarded and thinking outside the box is important. If we require our marketers to repeat what’s worked in the past and discourage uncovering new opportunities or strategies, the entire organization risks failure.