Your Comp Plan Paid Out Clean. The Quarter Still Missed.

I have a really good friend that went to a high-flying company in New York. He had advised this company for a year and he became the CRO. Great comp package. I helped him negotiate it. He's done two exits, and one was just like a knockout home run exit for him and for everyone involved. And so he went there. He lasted two and a half months.

Just to clarify, after a year of advising.

Yeah. Wow. I'm never going full-time again. I'll put up with Dale.

AJ, I'm going to drop you in a scenario. That's where we're going to start today, and we're going to kind of see what your take is.

So AAA, Angry Alpaca's Analytics. They are a company that has 42 reps. They're $18 million in ARR. And the board deck said that 93% of quota was in motion heading into the back half of Q3. Actual bookings landed at 61%. No one in the room could explain why the comp plan still paid out like it was a record quarter. Finance is understandably furious. Sales is happy they're getting paid. RevOps built the plan in some spreadsheet that only one person understands, and that person happened to have left in June.

You've built an entire company quota path. I'm going to bet that this exact scene plays out somewhere at least once a quarter, maybe more.

So let's start with the uncomfortable one. When a comp plan pays out clean but the business result was poor, whose failure is that? When the plan pays out clean on the quarter that missed by those 32 points, is that a shift plan, a shift forecast, or a company that just doesn't want to find out?

All the above. I don't know.

Okay. Well, I got a question for you, and I want to know from you guys, from Adam and Dale. What the hell does pipeline in motion mean? What does that mean? Tell me, please.

Yeah. So in this particular example, these were all commit deals. 93% of these deals were committed deals.

Committed deals.

Well, there's a problem there.

But let's actually go to—

Don't you love pipeline, best case, and commit? Those are my three favorite terms.

It's a different conversation.

Okay. So let's actually talk about this because 61% is interesting, but like, think about it. Let's just make it easy: a 50k, 50k. Okay, if a rep hits 70% of their target in a year, what's the percentage of it just if it's just played at 1x? What's their percentage of payout? Either of you know?

If a rep hits 70% of their 50k?

Yeah. 70% of their 50k.

35.

35 plus the base.

Base, so they're at 85.

Yeah. So 85%. So you paid 85% of their OTE because for 70% of plan. So inherently, all plans are kind of broken in that way. And that's something to think about.

If you're sitting there and you're like, "Oh, wait a second. Comp plan is clearly definitely at fault," like what the hell were they paying on? Like cold calls at this point? Like what are you paying on if you're not paying on the 61%? Because even at 61%, you have a record quarter in commissions being paid, then there's some incentive that is just totally misaligned to the business objectives.

So I'm going to actually go all the way up to the CEO and the board on this one. It starts at the top because they approved the plan, I would assume. $18 million company.

How many reps?

42.

Yeah. 42 reps. 18 million. We'd hope we're getting some CEO approval on this one.

Yeah. And I'm sure you two both know this, but your GTM motion is screwed up somewhere. Like, we always—I always at Trend Kite used to talk about this thing called a CAC layer cake, which is just like okay, how much are you paying your BDR? How much are you paying your AE? How much are you paying the CS, the AM? And if your cost like that sale cost of sale or the just the cost of the deal is above 30%, that's problematic because most people are like, "Oh, well I paid 10 to 15% for my AE." But that's not the total cost. You got to add all of those up. So you're challenged in a whole bunch of areas here, but I do think a lot of this starts with the comp plan and starts with the approval process there. You're just incentivizing the wrong behaviors. You're clearly not incentivizing for committed deals closing, and 91% or 93% committed deals, and you land at 61%.

Well, and this is what will happen. This is what you guys both know. The CEO will say, "This is the CRO's fault," and you twist that screw, and then you let go of the CRO, but they last nine months. But you only get one bullet in the chamber. Or you get two, but that second one is not going somewhere where it's on you. The board's not going to get rid of you as a CEO. So disappointing to hear, but those quarters happen. It happens. And is it a trend or is it explainable? In this case, those numbers are a really tough pill to swallow, and there'll certainly be some changes in the organization there. Definitely be changes. The comp plan needs to be looked at in its entirety.

I'm a big believer that most people build their comp plans wrong. And we'll talk about quota path and Atlas and all the experience you had. You've probably seen more comp plans than any CEO because of the access to the data you have. So I think you could speak to what works well, what doesn't. And I certainly, at some point, want to hear about the most messed up comp plan you've seen. But I agree with everything you said on that scenario. It's a hard world out there.

Do you guys know the three envelope story? It's one of my favorite stories.

Best story.

I do not. Tell us. Let's go.

There's an investor named Josh Coppelman that told me this story once, like 10 years ago, and I've like, I've taken it and I will say it's my own. It's not my own, but Josh would say it's not his own either. It's a great parable.

So a CEO walks into his brand new office, and the outgoing CEO is there, and the outgoing CEO is shuffling papers around. The incoming CEO is like, "Oh, Adam, I'm so excited to talk to you. Please, please, please tell me everything there is about this business."

Adam looks at AJ and says, "Dude, you're on your own. Good luck. You'll figure this out. But I actually got something for you. Here are three envelopes. They're labeled one, two, and three. Do not open them unless you are in absolute dire need to fix something. Okay? Like you will trust me." And he just walks out.

AJ's like, "What the hell just happened?"

Okay. He tosses the envelopes to the side, and he's like, "I got to get to work." He's figuring things out. He's trying to get everything squared away. First quarter goes okay, but not like not great. The company's in trouble. It's just kind of a mess. It's a turnaround situation.

So the second quarter comes around, and things are not going to plan. It's getting even worse than the first quarter. And he's like, "What do I do? Board meeting tomorrow. First envelope."

So he digs out his desk, opens a drawer, pulls it out, rips open number one, and it says, "Blame your predecessor."

Got it.

Walks into the board meeting. Adam, that jackass, he didn't know anything. He didn't know anything. He was just an idiot. He's like, "Yeah, the board's loving it. They're eating it up." He's like, "Yeah, that's why we fired that guy. We got him out of there right away."

And he's like, "Okay, cool. Alright, so I got this." The board's like, "We got your plan. Just keep following your plan. Okay?"

Next quarter comes along, and it's still not going well. This time he doesn't hesitate. He just rips open the second envelope, looks at it. It says, "Reorg."

It's like, "Oh, that's brilliant. I'm going to move CS under marketing. Okay, well, our BDRs were marketing. Now they're going under sales. We got a PTE team. We got our chief product officer. He's now in charge of the engineering team." He walks in with a plan and hierarchy, and the board's like, "Okay, alright. We could buy this. This makes sense. This definitely makes sense. Yeah, why would you put BDRs under marketing? That doesn't make any sense. Definitely put it under sales."

So he goes about his merry old quarter. The reorg is a disaster, by the way. Total disaster. Like a mess, because, you know, reorgs always go perfectly well.

So the next quarter it's not good. But he's holding off. He's like, "I can't open this third envelope. I can't do it." Finally, he bites the bullet, opens it up, looks at the piece of paper, and it says, "Prepare three envelopes."

Get it?

Yeah.

There you go.

There you go.

I know. As a thinker, I like it.

I love it. I love it.

It is so true, Dale.

Dale, I have an envelope for you.

Yeah. Good.

I've been looking for the envelope.

Blame your predecessor.

Co-founder. That's envelope number.

>> I've used that one a couple times. It doesn't work. Actually, you can't blame co-founders. Turns out.

>> AJ, let's dive into something that I think we hear all the time. People want comp plans off their plate. We hear this all the time because they don't really know what to do. They're not really sure how it's going to work out. They don't know what good or bad looks like. So you guys have developed and delivered Atlas this summer, which is amazing. But the comp plan is like one place that can get really sticky if it's not done well, or it gets it wrong, or people have to iterate over it. So now that you have Atlas and you have AI building this thing out, like who is accountable if the comp plan is wrong? Like before, you could grab your controller and be like, you guys did the wrong thing, but now you have AI and blaming AI doesn't always end well. So like, who takes responsibility for these comp plans now?

>> It's an interesting question because it's well, and I think that you're asking the same thing for anything. If we're all happy to click buttons, critical thinking has really gone out the door in so much of this, and it sucks. It really sucks. Before I get to the question around who's accountable to the comp plan, I'll give you an example. Phishing attacks have gone up like an insane amount. I don't know what the data is, but I know for our team and for the number of emails that I get that are asking for things, and I'm not just talking about the texts that go out to my team that says, "Hey, this is AJ. Would you kindly please send me 10 Apple gift cards?" No, there's very sophisticated phishing attacks that are going out the door these days. And our team, we have our own cyber security team, and our CTO sent out a phishing test to actually catch our own employees. So we're 70 employees. What percentage of our employees do you think fell for the phishing attack that went out the door?

>> 50.

>> Oh jeez. If it's 50, I'm going to have to fire half the company. Thankfully, it wasn't 50, Adam. But that would be problematic. Let me give you the context of the baseline. The baseline last year, two years ago was 2 to 3%. We are up to 15%.

>> That's a big jump.

>> And I get it. They're really sophisticated looking. And so the challenge that we've come across is that we just mindlessly click on things, copy and paste, use Granola, use Whisper Flow, use whatever, and just dump it in. And then garbage in, garbage out. And it's so frustrating to see that.

So accountability is like taking a backseat. It feels like in this world, and we don't have enough proof points or cycles on some of these things. Comp plan or go-to-market sales methodology, the strategy behind it, what you guys are doing and how you're employing that with your clients. There's going to need to be some cycles, but what I'm finding is that the companies and the organizations that are actually taking the time to still do some things manually are the ones that are going to win.

And as it relates to comp plan, the AI is just like benchmarking data or anything. It's just another data point to be used in a way. We even when we talk to our clients on the services side, customers on the product SaaS side, our clients about this, we're working through it. We're solving a problem and we're having a chat conversation to really understand, okay, well, would this work or would this work? And they don't have to take any of it if they don't want to. We just make it easy to automate it and push it and say, okay, this is actually the plan forward. Now that we've done all the scenario modeling and that we've looked at this and we've done the Monte Carlo simulations, the capacity planning, whatever, we're now going to push this into our Quotapath instance.

So at the end of the day, the accountability still falls with the accountability that was previously. In our case, I'm trying to elevate comp to the CEO level of the signoff so that the data because the data is right there. So that's the person that ultimately should be accountable. That's why in your example, like you said, who's ultimately accountable? The CEO is accountable. The CEO used their two envelopes. They're on that third envelope that they're going to hand to the incoming CEO. AJ's done.

And so that's why I think that you have this CFO, RevOps leader, CRO Venn diagram. And it's you all deal with this. And that Venn diagram is a really important one, but it's a very difficult one to crack because of the translation layer and operational cadence that exists in every organization. Everyone's a snowflake. So you have to really figure out what that looks like.

The answer is yes. Like at the end of the day, the human always has to be responsible for the output of what's happening. And what I am envisioning as this progresses is back to that third envelope opening up. There's going to be blaming from the CRO, the RevOps, the CFO like, "I don't know. Atlas told me that I should be doing XYZ," and it's like, okay, but you still need to think through that.

>> Everyone wants a throat to choke.

>> Yeah. Your analysis of like people are using AI more as the thought leader versus the thought partner, and that is a big problem. Because if you're not interacting with it like a partner and you're just taking the data, game over. I would fully, fully, fully agree with that.

I would also say that we see this in our own tool today where our admin NPS hovers around 60. It's actually quite good. I mean, it wasn't always like that. We had plenty of product challenges. This year it's been really strong. Our rep NPS hovers around zero. And it's not because of the tool. It's because of the plan. They're frustrated with their plan. And so it's a really interesting thing to see. But people want something to blame. So they're like, "Well, it must be Quotapath's problem." But no, you didn't take our advice.

There's definitely that. And when you're looking at comp plans, you're looking at advice. I often talk about OTE versus FOT, right? You could say, oh, your OTE is $500,000. Great. 250, 250. Your comp plan's unattainable. Your OTE is $250,000. No matter how you slice it and dice it. Dale promised me when we started this company we'd make a certain amount of money. I'm still waiting.

FTE. I remember when we were first hiring. This is 2013, 2014. And I was trying to get the best of the best, people that weren't looking. And I was hiring friends of people that had worked there. A guy, Justin Papermaster, became my VP of Sales. And Max Bergen, who now works with me at Quotapath again—third company, by the way—as our VP of Strategic Services. And I, $90,000, $91,000, I think, was our OTE. And I was going up against all these Austin, sexy companies that were offering enterprise at 250, 300k OTE. And I was like, you're not actually going to make that. I will promise you, if you do the things you need to do, you'll do 150% of the 91k. No problem. And we got a lot of people that joined. We had some people that didn't and went to the flashy thing. And the flashy thing, you know, died out in six to 12 months.

Adam, you and I met at a flashy thing.

[laughter]

So I know we know how that works. You get the glitz and glamour. You have these investors—Sequoia, Andressen, Iconic—and, not that I wasn't just naming all the investors in one of my competitors, but you get that. And then you know what does that amount to? It's not. So I always talk about the sales-to-earnings ratio. It's not the quota-to-OTE ratio, 4:1, 5:1, whatever. But it's like, okay, how much do they actually sell, legitimately sell, versus how much they earned? What does that ratio look like?

>> Well, and that goes all the way to the top. So let's talk about CRO tenure right now, right? So CRO tenure is brutal. 19 months is the median right now, give or take. A CRO who leaves before 15 tends to be net negative once you add in the replacement cost, the hiring, the downtime, the sales performance, everything that happens when someone leaves. Yet at the same time, companies are still writing 5 to 10x OTE return expectations on these comp packages as if the person's guaranteed to stick around long enough to deliver it. But they're gone 15 months later. And Dale and I talk about this a lot, right? You hire a CRO. They have a million priorities they need to go handle. Go build all this, fix all this, solve all these problems, build the foundation. But at the same time, you got to hit these numbers. So is it the comp structure that's broken? Is it the expectation that someone can truly turn around revenue in 12 to 15 months that's broken? Like, where's the issue here?

>> Well, AI is going to fix all of

This, so we should be fine. We're just, we're good. I have a really good friend that went to a high-flying company in New York. He had advised this company for a year and he became the CRO. Great comp package. I helped him negotiate it and he's done two exits and like one was just like a knockout home run exit for him and for everyone involved. And so he went there, he lasted two and a half months.

>> Just crazy to me. After a year of advising.

>> After a year of advising. Yeah. Wow. I'm never going full-time again. I'll put up with Dale.

>> I mean, there's definitely the horror stories. And actually, you hear about like OpenAI or just anything like where you have all of these AI frontier models, infrastructure harness companies that are hiring CRO right now and it's like sales are back. And a lot of the RevOps folks that we know are helping these companies build the infrastructure to build these teams. And what I've realized is that they don't know anything about anything. They're going back to the MongoDB Oracle ways of selling and we are seeing that come full circle once again. But these entrepreneurs and founders are totally lost in space when it comes to go-to-market and they don't care. They literally couldn't give a damn less. And I've met a handful of CROs that have worked at companies like GitHub. GitHub's a great example. Paul St. John, I think that was the CRO. They were at 20 million when he joined the company and the CEO wasn't even going to meet with him joining as CRO and he was like, "No, I'm not going to go be the CRO of the company and not meet with the CEO of GitHub." Which he eventually did and it turned out, I mean, they turned into a rocket ship. He crushed it there. So it works out sometimes. Figma, another company, were early CROs. But it's just the CRO gig is just such a hard, hard gig. There's so many variables you don't know. Like you don't know what the expectations are of each individual board member and they won't tell you the truth. And the CEO tends to, especially if they're in one of these companies, they're going to be a first-time founder most likely. They're just going to be like, "Okay, well, I don't know anything about this, but my board is saying that we're not doing the things that we need to do, and I need to make a change. I don't like this. You are here for three months. We're paying you what? A million dollars is the most important thing." And I've seen it, you've seen it. I'm sure Dale's seen it if he's ever interviewed for a CRO position. The board doesn't tell you the truth. I can tell you having dealt with enough boards, eight out of ten times, there is such dishonesty coming from the board as to what the expectations are, what they want, who wants what, who gets along with who, what it takes to get something. Like we were just talking about this yesterday with a client like the level of dishonesty on the board and the PE and VC side blows my mind. And I think that if we, and we're not going to solve that, but that would fix half of these problems. Just start telling the damn truth.

>> Well, they can't. That would, it's a they're like the façade has to always be up. Ask any fund how their 2021 returns and vintage funds from 2021 are doing and you'll hear great, everyone's crushing it. But no one, you can't. But like, oh, Mur and Airtable that won't happen to me. Meanwhile, Bending Spoons is just collecting all these corpses. It feels like I don't understand. And I just look at it and I'm like, and even for a quote, I'm like we just continue to create customer value. Create customer value. Create customer value. And I can't do anything else if I don't. That's it. That's all I can be. That's all I literally can do. I can't help what the market's trading the multiples at—1x or less than 1x for some of these companies like, just is what it is. So yeah, I mean I think we're in a challenging, challenging spot for not just CROs but for SaaS companies more broadly. And you know I talked to my co-hosts of my own podcast and the general consensus is well, a lot of these companies their employees are getting secondary. I'm like, are they? I mean like, are they at that level? Like what percentage of overall employees that have equity at some of these companies are seeing secondaries? I don't know the answer to that, but we shall find out. Yeah. And it's I think it's very tricky overall to develop comp plans. And I want to double click on something that I've been thinking about for a long time. And we don't like to put clawbacks in comp plans because I think it disincentivizes things and like goes through process, but there's been a couple of cases now in California that have been litigating for like decades, right, that basically once a commission is earned and paid, a company can't legally take it back. But that "earned" is the word in every clawback clause that we're trying to refine in our favor. So where's the fine line between the windfall clause as protecting the business and one that's just writing a legal escape hatch?

>> Well windfall and clawback are very, very different. I will say I am in favor—is a strong word "favor"—of a clawback under certain situations. I'll explain that in a second. Windfall, I like, I've never seen that really work out in a great way. It just feels punitive. I've seen it go south more times, especially with companies where the sales team is scaled and that's just going to get out. Like you're owing a million dollars to a rep for closing a deal plus like $100,000 to the solutions engineer who might not have even been involved or whatever. You're like, "Okay, the CFO comes in, is like, we're going to cap that at 10% of everything that you're each owed and like that just, you know that term exists in these comp plans, it just is a very ugly term to deal with. Now on the clawback, here's the thing. I mean we have this idea and concept called "payout eligibility inside quotas" which is where you pay when the invoice is received. So you're connecting your ERP system, QuickBooks or whatever. And so you can basically, were an Epsilon quota pass a RevOps ETL at that point, but allows you to be able to track these and then pay them out. Obviously best-in-class companies are not doing that. Like that just is like, no pay on a quarterly basis, pay 30 days at the end of the quarter, whatever, and set it out. But I do think there is something to be said about this: the reps selling to ICP and selling good deals and you know the micro bear science of scaling sales acceleration formula will tell you that you really need to make sure there's a part of that incentive that is attached to the retention of the customer. And I believe in that fully. And so you can probably get away with putting a retention component inside your comp plan in place of a clawback, kind of operates in the same way and that solves that, right? So that would be my advice there. But I'm not fully opposed to clawbacks and maybe because in my own company I'm like, are you kidding me? We have to write off this contract for this reason. That feels like we should have known this situation. Only time I'm a fan of clawbacks is if it's like rep dishonesty or something along those lines. If the rep told—

>> Never dishonest though. Never dishonest.

>> If the rep told the customer—AJ, let me finish. If the rep told the customer that AJ promises we're going to build this for you and we don't and that's why the customer turns, hell yeah take that money back. Other than that, I disagree with clawbacks.

>> But AJ, so the scenario you just put through where it was a bad deal that was sold. Like who's really responsible for it? It could be your sales leader. It could be like, I recommend you do deal desks.

>> Call back the sales leader. I mean, call back.

>> You call opportunist over here.

>> It could go all the way up to like your CFO. Like let's say you do a deal desk and everyone agrees to it but it still becomes a bad deal. Like do you want to claw back? Like my recommendation on all deals that either you have a feasibility study on a deal that you can do super quickly on like a red, yellow, green. If they're yellow, they need to be brought up to the top and someone has to make a decision. So like, yes, if you leave a rep on an island and they sell a bad deal, like who's responsible for that? My thought process, like that's the company's responsibility that no one's managing that rep properly.

>> Yeah, I hear you on that, Dale. I would also say that there's every comp plan has exception handling. That's what kind of the windfall clause really is on the other side of it. And I think that there's just you just, I mean we—

Don't claw back on everything. Of course we don't—that that meets that criteria of what you just said, where it's like, "No, the solutions engineer was involved. We looked at the data. The plans fit. All of the things fit." But the point of contact left a month later, and like this got orphaned, and they're just saying they're not going to pay it. Like, what are you going to do? Are you going to take them to court? You send it to collections? You can do those things, of course, and I do think this is a problem with the world. And tell me, correct me if I'm wrong on this. It felt like 10 years ago people took bookings and signing contracts, contracted revenue more seriously to pay than it does today. It feels like, "Oh, I don't have to do that. I don't have to deal with that." I'm like, "Well, what do you think contracts mean anymore?" They just don't have the weight that they had 10 years ago. Unfortunately.

>> Yep. And we have clients that have contracts that are really just licenses to hunt.

>> Which is—

>> That's a whole separate conversation. I don't think anyone puts faith in bookings anymore.

>> That's a whole separate conversation.

>> AJ, I want to switch to what we call the Monday Morning Move. So this is a practical takeaway that our listeners can test this week. You have two jobs. Job number one is you're going to score my Monday Morning Move from 1 to 10. One being the worst—what Dale wants you to score me. 10 being the best—what I want you to score me. My average is pretty damn high. Number two, you're going to tell me what you would—

>> Pretty damn high as in like a seven? Because people could say seven, above an eight, closer to a nine.

>> We actually, Dale, we should put a tracker on the website of the Monday Morning Move rolling score.

>> I agree.

>> Just have Claude do that.

>> Then you're going to tell me what you would add, change, or push back on, or tell me that it's total bullshit.

>> Okay.

>> All right. Here we go. Pull up your last comp plan and run this before you touch a single raider accelerator. Pick your five most tenure reps and ask each one, without looking at the document, to tell you in one sentence how they get paid on a multi-year renewal versus a brand new logo. Then write down those five answers and how those five answers disagree. Next, you're going to take whichever deal type generated the most commission disputes last quarter, and you're going to trace that from the close date to the payout date, noting every place a human made a judgment call instead of the system. Finally, you're going to go ask your RevOps lead the blunt version of this question: If I got hit by a bus tomorrow, could someone else explain to a rep this comp plan in under two minutes? If the answer is no, that tells you that the plan is running on one person's memory instead of the business's structure. And that, my friend, is an ownership conversation to have before you even touch the formula again.

>> These are three different things. So I have to score them and then probably do a weighted scoring.

>> Oh, I love this situation.

>> This is so AJ.

>> Shut up, Dale.

>> This is me writing this down. Look, start with one. I really like the concept. I'll give it that. That's the thing that I will say. The challenge with it is you picked a very specific way—you picked multi-year, and you were very specific on how multi-year versus single. I think like I understand why you're asking that specificity, but where reps actually get confused is not in one component. It's actually in the mechanics of it. Like, where does it? What field in Salesforce is this reading off of, for example? And so comp plans in general can be really simple on the surface, but the field mapping, the data hygiene, most importantly, is where the devil's in the details. And so I would like that question to be a little bit more specific around that. So I'm going to give you a seven on that one.

>> Okay. The second one I really like. I'm a big fan. I love the train of thought and the journey of a deal, and getting someone to actually talk through it and then also saying, "Well, here's a failure point. Here's a failure point. Here's a failure point." That has probably served you guys really well in meeting with your clients. And I'm going to give you a 10 on that, because I don't want this to fall to a 4.2. So we're getting a count on that one.

>> Okay. The last one was RevOps getting hit by a bus? So the last part is that the revenue leader—um, says if I got hit by a bus tomorrow. You're asking the RevOps lead, "If I, as the CRO, got hit by a bus tomorrow, is there someone else who could explain this plan to a rep in under two minutes?"

>> I'm going to have to score you a seven on that one here because like I just can't get behind that being a realistic possibility. And I could—if that is actually—that's an eight average. I'll—coming from you, I will take that. That is a high score.

>> Yeah, but I didn't give you the weighting of each point of it. The first one—

>> They're weighted. They're weighted equally.

>> Ten percent?

>> You get the eight. Eight is eight. I'll give you an 8.5, Adam. I'm going to give you an 8.5 on that one. How about that?

>> It makes me very happy.

>> Dale not so happy.

>> Yeah. Dale, I think I was fair with his critiques of his questions. And wasn't I?

>> Felt like I was. I think you're fair. I just think the score is a little high, but that's okay.

>> The hit by a bus is wrong. But in reality, if I as an actor though—this is NPS scoring. Seven's a detractor. So you keep that in mind.

>> If I leave tomorrow, can someone explain this comp plan? And having been in the roles we're in, where we listen, no one calls us to come into their business because things are going great, right? Like people call us because there's a problem. So CRO gets fired, we come in, and one of the first things we look at is the comp plan.

>> And there was a recent company where I looked at the comp plan, and like AJ, I shit you not, the thing was 11 pages of like—

>> That's how what—like I—

>> One of our customers had a 150-page PDF. Like who's reading that?

>> I'm not kidding.

>> Why do you think we're being hired? You guys are being hired for the same reason we are being hired for.

>> Like 150 pages. But I guarantee you no one knows how they get paid.

>> Maybe they know when they get all—

>> Well, the funny thing is the 150 pages that no one knows how they get paid—it was all definitions, exceptions. And so it's like, "Well, that's the problem. It's like you're trying to explain how they get paid, not in the simplest terms. It's ridiculous."

>> So I have a question for you before we go into our uncensored questions, because when you talk about exceptions and definitions—

>> Oh, these were censored. All your questions were asked. I thought these were all unanswered.

>> Touché. Um, in a lot of comp plans, what I see is a line that says, you know, something to the effect of basically everything is up to management discretion. We could change the comp plan at any time that we want for any reason. What are your thoughts on that? Because a lot of companies do like midcycle, "We're going to change the comp plan." Like, fair? Unfair? Should that be allowed? Like, what are the rules as the comp expert? CFOs love this one simple trick. I mean, that sounds like a contract you're signing that at the end of it says, "Oh, by the way, we reserve the right to change this at any time." Like, "Oh, we're going to invest $40 million into your business, but at the end of this contract, we could change that." It doesn't—like, who does that? So I would not be in favor of that at all. I don't think anyone should be in favor of that. Were you guys in favor of that?

>> No, not at all. But like I literally was sitting across from a CRO a couple days ago who's like, "Yeah, we need to change this before the quarter's over." I'm like, "Um, we can certainly talk about changing 2027 moving forward, but we're not changing midquarter when the reps have been like, 'This is what you get paid on.' This comp plan incentivizes behavior, and now we don't like this, so we're going to change it because we might be paying you too much or we think we need to change the goalpost?" Yeah, I don't think so.

>> Yeah, that should never happen. Cool. AJ, let's wrap this up a little bit with some rapid-fire uncensored questions. So they're all uncensored, but we'll do a little more rapid fire. So, Exactly's whole 2026 pitch is built around pay compression being the top threat to sales teams this year. Does this reflect something real, or is this just a compensation vendor manufacturing urgency to sell their software?

>> I don't think that's real. What we have seen is—

# Transcript

That pay compression. I actually think it's maybe the opposite. So you have a bell curve on earnings, which you've typically seen with our benchmarking data. What we've seen is a barbell, which means the lower performers—maybe this is what pay compression means, I don't know, maybe I'm not understanding it correctly. We've seen the lower earners be further from the median and the higher earners much higher than the median. Is that pay compression? Or am I—what is pay compression in that instance? Is that—that's not barbell. It's not pay compression. It's actually going the other way.

>> Yeah, yeah. It's pushing it out. When I read through somebody's report, they're basically saying that people don't want to be paying a lot for the sales reps or the commission themselves. So they're compressing what the OT—

>> Here's my uncensored take: Pay your high performers well. Pay them super well, and don't pay your low performers well at all.

>> Or just build your comp plan in a way that you want them to act and execute.

>> Incentivize their behaviors.

>> Oh, shocking.

>> Go figure.

>> God, exactly. Get your stuff together, man. AJ, I'm a huge Atlas fan. I use it. I've promoted it. I think it's great. But you guys launched Atlas saying that it's been trained on tens of thousands of comp plans. Whose bias is backed into that training set? The plans that worked, or just the plans you happen to see the most of? How was it trained?

>> If you had asked me that question previously, I would have rated that question a ten, Adam. That's a great question. So when we first launched Atlas, it was trained on those comp plan consoles that we had, which I would fully agree has a bias. Today, we've actually anonymized all of our data, and our CTO Eric and our VP of Partnerships Graham spent four months getting all of our customer data—like 50,000 reps' data—in a usable, structured way, and that's what Atlas is actually trained on today. That is not biased. But it's both of those things together because you have to have the mechanics of how you build a comp plan with the actual data to build the best plan possible, and that's how those things get tied together.

>> Great question.

>> Awesome. We give him at least one good question every session, so that was his one good question. We'll give you—I remember my questions. Can you please read your question for AJ? I can't wait for Dale's question. It's going to be a good one. Dale, what do you got?

>> Oh, yeah, this one's amazing. This is such a good question. It's so unique. You've never heard it before.

>> What's your dream vacation destination? Where you going?

>> Well, my wife and I went to Japan last year for two weeks.

>> Jealous.

>> And I freaking loved it so much that I would say my dream vacation would still be Japan because there's so much to see and do, and we didn't see it all and do it all. And I loved it. Japan seems to be the vacation destination for a lot of folks.

>> We're planning it now, too.

>> There you go. It's awesome. It was a really, really great trip last year. I would go back. But, you know, if maybe somewhere I haven't been—I haven't been to Australia yet. I really need to get there. So I'll say Australia with the family because it's a family-friendly country.

>> The irony of Dale asking your favorite vacation destination is Dale travels to his boat and back to his house. I always laugh every week when Dale ends with—

>> Dale's got a boat. I've got an airplane. What do you have, Adam?

>> I have AirPods.

>> I have a sports car.

>> What kind of car do you have, Adam?

>> Not for long. I have a Porsche.

>> Oh, look at that—Porsche.

>> I love the airplane. I would love to come fly with you. One of my dreams, true story, is to actually fly in the cockpit. I'm a little bit of an airplane geek.

>> Well, there you go. I used to run a podcast called Value Props where I flew business leaders in the cockpit of the airplane. I did this right before COVID hit. Super cool. We did this thing where we do an elevator pitch. So I'd pitch the airplane back for 30 seconds to 1,000 feet, basically going 2,000 feet per minute straight up. And if they didn't finish their pitch, I'd push on the yolk and go weightless for like 5 seconds.

>> That's amazing.

>> Listen, I'm down. I love it. AJ Bruno, thank you for joining the show. Y'all go check out Quotapath. This is not a paid endorsement. This is not a sponsorship. I'm telling you, we use it. We love it. Quotapath Atlas. I have tried the other platforms. I will not mention them by name. They don't deserve the air time. Go check out Quotapath. Quotapath.com.

>> Adam, I just bumped your score up to a nine.

>> There you go.

>> You don't even have to pay me later. True story, y'all. Check it out. AJ, thanks for joining the show, man.

>> Thanks, AJ. Thanks, guys.

>> Appreciate it.