The Changing Landscape of SDR and BDR Compensation
Is variable compensation the key to rewarding and retaining top talent? As a veteran in managing Sales Development Representative (SDR) and Business Development Representative (BDR) roles for almost two decades, I have gained profound insight into the benefits and limitations of these positions. The traditional career path and compensation plan isn’t working - companies should move towards a variable compensation strategy.
SDRs as Entry Level Work
For many years, the sales industry has utilized entry-level roles for research, appointment setting, and even assisting established salespersons. The onset of the 21st century marked a shift in the structure of sales organizations, with roles becoming more specialized, evolving into categories like SDR, Account Executive, and Account Management. This segmentation aimed to create a lean manufacturing-type process within the sales environment, a concept famously encapsulated in Aaron Ross's book “Predictable Revenue”. SDRs and BDRs remained as the entry level position, with compensation that reflected that designation.
Despite the entry-level nature, the SDR role is crucial, acting as the feeder of demand into the sales program. Many companies, when surveyed, admit that demand generation is their primary challenge. These firms often note that they excel at closing deals with ready, willing, and able buyers, but struggle with generating enough opportunities for such interactions.
The Traditional Model of a Sales Employee’s Advancement
Given the modest compensation and the often demanding and manual nature of SDR work, most SDRs aspire to transition into an Account Executive role. Here, they can begin closing deals, earning substantial commissions, and doing work that offers more gratification than the constant rejection experienced in prospecting.
A prevalent strategy in sales is to promote the top salesperson to a sales manager role. While this may initially seem logical, it often leads to a dip in sales productivity as your best producer shifts focus from generating sales to managing a team, which might not be their forte. This traditional approach, while somewhat reasonable in the older sales paradigm, requires reevaluation as we move into the next decade of sales team structuring.
Variable Compensation: The Way Forward
Considering the universal struggle with generating demand, companies should prioritize and reward individuals who excel at it. Previously, these individuals' potential was curtailed by the limitations of a manual system in a 9 to 5 work environment. However, the advent of generative AI presents the opportunity to amplify their productivity significantly. The potential for increased production is so immense that companies will need to restructure from traditional compensation to a variable compensation model for this demand generation stratum of the business.
By introducing a more enticing variable compensation program and evolving their sales teams towards a 'Sales 3.0' model, companies can tap into a period of unparalleled growth and profitability. It also presents an opportunity to duly reward top-performing prospecting professionals, eliminating the need for them to transition out of these roles to afford a decent middle-class lifestyle in the US.
The traditional model of sales team composition is not merely outdated; it's fundamentally flawed. It often coerces individuals into roles they might not be ready or best suited for, in a perpetual quest for better compensation opportunities. This could be solved with a variable compensation plan that keeps your top performers happy by rewarding what matters to your business.
At FullFunnel, we specialize in assisting organizations, from early-stage startups to publicly-traded companies, in reconstructing their sales and marketing departments into capital-efficient and highly-optimized revenue operations teams. As we move forward, the focus is on leveraging technological advancements to redefine the roles in sales, driving more significant results and fostering a more sustainable model for individual growth and compensation. If that sounds like something you need, let’s talk.