The Ins and Outs of Revenue Operations Compensation
Attracting and keeping the best talent is always a challenge for any organization. Leadership must argue for compensation levels that are competitive in the market. Frequently, in revenue operations, they also have to argue for staffing “non-revenue generating” personnel in the first place. Unfortunately, there’s a big disconnect between how much effort should go into running a go-to-market organization and how many people should be expected to take on this arduous task.
Fortunately, revenue operations is slowly working its way into the mainstream. Companies are seeing significant benefits in aligning their operations departments into a single department. Provided revenue operations does not report solely to sales, marketing, or customer success, they are better equipped to advocate for a balanced approach to determining priorities and executing projects.
As the benefits of revenue operations become more widely accepted, advocating for the department and staffing various roles is not quite as difficult as it used to be.
In this article, we’ll discuss various compensation options for revenue operations professionals. We’ll even arm you with logical arguments for hiring top talent, creative variable incentives, and how to attract incoming talent.
Building a Case for Headcount
If you already have a detailed hiring plan signed off on by the CFO, congratulations! You can skip to the next step.
Most of you are probably still tuned in. We'll walk you through gathering information about your department. Then you'll form a multi-year organization plan to establish the correct number of employees and support for the right level of talent.
Pick Your Ideal Org Chart
Open this article in a new tab. It provides a few variations of revenue operations staffing plans that vary by organization maturity. Pick the organizational structure that resonates the most with your vision of revenue operations. We’ll use your preferred org structure and a few exercises to help you sketch out what you want your organization hierarchy to look like in one, three, and five years.
Catalog How You Spend Your Time
If you’re a revenue operations team of one, I want you to catalog your workdays for a week. If you are one of a team, ask your coworkers to do the same. Literally mark down everything you do in your calendar by the following categories:
- Enablement (including email responses)
- Process Development
- Administrative (one-off emails that aren’t related to analytics, enablement, or systems)
A boss made me do this before arguing for more headcount, and while I was frustrated that he had no idea how I was spending my day, I soon realized I didn’t have a good feel for how my day was spent. I thought most of my time was spent on ad hoc analytics requests. It turned out that I didn’t like these ad hoc requests, which made me notice them more. In reality, the majority of my time was split between meetings and training employees (enablement).
Document Your Backlog
Once again, I want you to document all of the projects that have been requested by category:
- Process Development
Make sure you document the level of effort for each project, amount of time in backlog, and resources needed to complete the task. If you can estimate the number of hours your team will need to dedicate to completing the task, this will make some of our later calculations easier.
Hopefully, your team has been using some kind of project management software, which makes this task simple. If you don’t have project management software, now is the time to start. Whether you use Monday, Asana, Trello, Jira, or Salesforce doesn’t matter. What does matter is that you document all of your requests so you can show the business what you’ve accomplished and what is on hold. It’s also a great tool for prioritizing work with the executive leadership team.
Technical debt is a common term thrown around by systems personnel. We’re also going to try to enumerate process, analytics, and enablement debt.
Determine Your Greatest Need(s)
After you’ve collected how your team’s time is spent and analyzed the projects sitting in your backlog, you should have a solid outline of which areas are currently consuming most of your time and which areas are the most underserved.
Systems, process improvement, and analytics are typically pretty straightforward. For example, you should have some idea of how many hours of work on systems your team can tackle per week. With a well-kept backlog, you should be able to estimate the amount of time it would take to work through your backlog, provided no new requests come in (which we all know has a 0% probability).
Enablement isn’t as cut and dry to measure. You’ll want to start with how much time you’re currently dedicating to train internal employees. You’ll also want to work with your leadership team to determine how much time each department is also dedicating to training.
Assign (Almost) Everything a Dollar Value
There are a few ways to monetize outstanding projects and enablement debt.
Cost analysis on a project basis is covered in some detail in this article. We recommend you price out a random low level of effort (LOE) project, a moderate LOE project, and a large LOE project. Make sure to time people using the system as it is today and estimate time savings. These can then be assigned a dollar value (hourly rate x time wasted) to estimate the amount of waste taking place the longer each project is put off. Then multiply that by the number of tasks in that given category and LOE.
The number of hours in each backlog category minus the number of hours you can reasonably reduce the backlog by within a year given the rate of incoming requests will equal the number of people needed in these positions. The project cost analysis will add additional incentive to quickly staff these positions.
(Backlog Tasks - Number of Addressable Hours + (Rate of Incoming Monthly Tasks x 12)) / # of hours per year a person can reasonably dedicate to project work (this is less than 40 with administrative work and non-project meetings)
When it comes to enablement, measure the amount of time your department leaders are dedicating to enablement. They should be spending their time managing their teams, and you can assign the time they spend in training a dollar value to bolster your argument for an enablement headcount. You’ll also need someone fully dedicated to managing a CMS or knowledge base system if your department assumes the responsibility of enablement.
Design Your Headcount Plan
Now that you are very familiar with your team's bandwidth versus the amount of work being requested by your company, you can develop a vision of what the next five years will hold.
Your plan needs to account for major initiatives that will likely come into play as your organization matures. Talk to your network to get an idea of what is probably on the horizon, such as automating quote processes, data management, onboarding efficiency, net promoter score, and more.
Suppose your incoming requests are split as follows:
- Analytics (40%)
- Systems (60%)
- Process Development (most falls under systems)
You also know that your executive team wants to move the enablement function to revenue operations within a year. Also, assume consistent company growth.
Your hiring plan may look like this:
Immediate Hire: 1 systems administrator
1 Year: 1 systems administrator, 1 analyst, 1 enablement manager
2 Years: 2 enablement direct reports (content writer & design)
3 Years: 1 system developer, 1 project manager
4 Years: 1 enablement content admin, 1 enablement manager, 1 compensation analyst
Negotiating the Right Level of Compensation
Don’t let upper management or recruiters tell you how much a position is worth.
I’ve seen too many hiring managers get blindsided once an offer is extended and the person being recruited is genuinely insulted by the proposed salary. Ideally, salary expectations should be communicated during the first or second recruiting call. It’s better to understand whether you need to negotiate for a higher salary for your new hire or change your job requirements to suit a more junior position.
Salary.com, Glassdoor, and Payscale are all great starting places, but they aren’t infallible. Talk to your network. Ask colleagues in your area how much they make to verify your numbers, and don’t forget to take your industry into account. In the Seattle area, people in technology generally enjoy a much higher salary than most of the other industries.
You’ll need to make a decision whether or not to hire a remote employee, and you’ll need to weigh whether to offer them a competitive salary in your market or a fair salary in their market.
Sometimes, particularly in startups, hiring managers have to get creative with compensation to stay competitive. In addition to your base salary, the caliber of your benefits plan, stock options, and bonuses should all be considered. Opportunities for career growth are generally taken with a hefty dose of skepticism, so unless your company has a tuition reimbursement plan, know that your recruit won’t be basing their decision on the off chance they’ll become your next manager.
Free snacks, a kegerator, and swag don’t go as far as they used to.
I’m in Kevin Cohn’s camp when it comes to incentivizing upper management. Anything less than 30% variable compensation for an executive leader isn’t motivating enough to make an impact. Variable compensation should be based on company objectives. At an executive rate (70/30), the compensation should be paid out on a quarterly basis, while bonuses may be annual.
For example, a VP of Rev Ops or CRO can be structured as:
- 70% (minimum) base salary
- 30% variable based on objective-driven bonuses
- An additional 10-20% bonus based on annual company performance
To keep operations aligned, goals should be aligned with the main company objectives. For example, if your company is interested in improving margins in a market that’s well saturated, your goals are going to be centered around efficiency. If your company is focused on growth, your goals should be based on revenue growth.
In my humble opinion, variable compensation based on early indicator performance (lead volume, meeting volume, opportunity volume) is a mistake. As a prime example, let’s look at the behavior encouraged by compensating marketing operations on lead volume. Inevitably, lead scoring goes out the window, everything MQLs, and they find syndicated content channels to boost lead volume without regard to the negative impact on conversion rates.
Keep your revenue operations team focused on the same objectives to maintain alignment. Remember that compensation is used for behavioral motivation, so think about the unintended consequences of motivating someone on a very specific goal. What gets ignored while your employee is focused on a specific objective?
Examples of objectives tied to variable compensation:
- Company quota attainment
- Specific product sales goals
- Regional attainment
- A reduction in representative time to productivity
- Reduction in churn
Who Should Have Variable Compensation?
Any person with variable compensation should be directly or at least significantly influential in meeting these variable compensation goals.
As you get lower in the organizational hierarchy, the variable compensation piece should decrease or not exist as anything other than a bonus. The reasoning here is that if my salary is partly variable, I have less clout as an individual contributor and have a harder time influencing behavior. Unless the variable portion is a bonus, an individual contributor will be very frustrated by a lack of autonomy in their compensation outlook.
More specific goals for senior managers may be appropriate if influence is limited:
- % Reduction of technical debt
- Automated all OKR dashboards
- Improved sales/marketing/customer success department productivity by %
The only variable piece in an individual contributor’s compensation (excluding salespeople, some marketers, and customer success managers with a quota) should be a bonus in addition to their fair market salary.
If the amount you negotiate still has you nervous, honestly assess your benefits. Unlimited PTO, flexible hours, childcare reimbursement, and even pet insurance can make a difference when your potential hire is weighing their options.
Did You Know You’re a Recruiter?
Once you have your headcount, a salary you’re comfortable with, and a list of potential candidates, it’s time to put on your recruiting hat.
A wise mentor clued me in to the fact that by being on an interview loop, I was accepting the job of selling the position and the company. People probably aren’t knocking down your door for the honor of working for you or your company. They’ll want reassurances that they’ll have a pleasant work environment and be appreciated for their work.
Tell them why you love working in revenue operations, what you enjoy about your company, and some of the favorite things about your coworkers. Get to know them as a person, ask what they love about their work, and try to figure out if they’re a fit for your team.
Remember, it’s called an interview, not an interrogation.