How should you compensate your lead generation team?
Today we are going to take a look at three popular compensation structures for full-time lead generation specialists:
- Salary + Commission.
- Salary + Bonuses.
We will discuss the pros and cons of each option so that you could decide what makes the most sense for your business.
The most obvious compensation structure is a salary.
According to Salary.com data, the average annual lead generation specialist salary in the United States is $45,653 per year.
The bottom 10% of lead generation specialists earn an average of $35,192 per year.
Meanwhile, the top 10% of lead generation specialists earn an average of $59,771 per year.
Obviously, if you hire remotely, then you have access to the global talent pool, which means that you can get a better ROI by hiring people from regions such as the Baltics, Eastern and Central Europe, Asia, South America, and Central America.
However, keep in mind that geo arbitrage also has drawbacks such as language barriers, cultural differences, time zone differences, etc.
The main advantage of the salary compensation structure:
It’s clear and simple, which makes it easy to plan your company’s finances as well as avoid misunderstandings.
The main disadvantage of the salary compensation structure:
It doesn’t provide an incentive to go above and beyond the bare minimum required to keep the job since better performance will not lead to higher compensation.
Base Salary + Commission
You can also offer a compensation structure where you pay a base salary + a commission that is tied to performance.
Commission can be:
A Set Fee Per Lead
This is a more straightforward approach because the calculation is simple.
However, while it incentivizes generating more leads, it doesn’t incentivize generating better leads.
Consequently, your employees might start optimizing for quantity at the expense of quality, which means that you might end up paying for leads that will never convert.
A Set Percentage From Each Sale.
This is a more complicated approach because you need to determine who brought in that lead, then calculate the agreed percentage from the sale.
It gets even more complex if you offer a commission not only for that first purchase but also for subsequent purchases as the person progresses through your sales funnel.
This approach incentivizes generating not only more but also better leads because the lead specialist only gets the commission if the lead converts.
However, these commissions can eat into your profits, especially if you have a lead generation team and a sales team that are both compensated with a base salary + commission.
You need to do the math to see if you can implement this compensation structure profitably.
The main advantage of the base salary + commission structure:
It incentivizes better performance.
The main disadvantage of the base salary + commission structure:
It reduces your profit margins.
Base Salary + Bonuses
You can also offer a base salary + bonuses based on meeting a specific goal.
For example, you can set an annual lead generation target, then give bonuses to the lead generation experts that meet it.
However, here we run into the same quantity vs. quality problem since if you only measure lead generation experts’ performance based on the number of leads they bring in, you incentivize them to focus on quantity at the expense of quality.
Meanwhile, making the bonus dependent on the number of leads that convert might seem too abstract to be motivating, since we are talking about a timeframe of a year (as opposed to monthly commissions).
Still, the latter option probably makes more sense, since focusing on the number of leads that convert should prevent employees from trying to game the system by bringing in a bunch of low-quality leads.
The main advantage of base salary + bonus structure:
It incentivizes better performance but is more predictable than paying commissions. This makes it easier to plan your company’s finances.
The main disadvantage of base salary + bonus structure:
Employees might find it hard to stay motivated because the reward is so far in the future.
Say, when it’s January, it’s difficult to feel motivated by a potential reward that you would only get in December.
Here’s What You Should Keep In Mind When It Comes to Compensation
The compensation structure isn’t the only thing that you should consider when deciding how to compensate your lead generation team.
You need to also remember that:
You Get What You Pay For
There’s a saying that if you pay peanuts, you get monkeys. And that’s true. You get what you pay for.
Offering the bare minimum compensation will attract three types of candidates:
- People who have no clue as to what they are doing. They may lack the knowledge, skills, and experience required. Of course, you can always train them on the job, but the expense of doing that offsets the savings of offering a lower salary.
- People who know what they are doing, but have personal issues. They might have the knowledge, the skills, and the experience required, but then the question is why are they applying to a job with such a low salary? You might hire them believing that you found an underappreciated gem, only to realize that they have personal issues that prevent them from getting better jobs (always late, unreliable, miss the deadlines, poor social skills, cause drama, etc.).
- People who are top performers that are desperate for some reason. Typically, people who are top performers always have options due to their personal networks, but you might come across someone who is great at what they do but desperate to get money coming in ASAP. They might have fallen on hard times due to health problems, unexpected expenses, divorce, etc. These people will take the job because they have to, but they will likely resent you for underpaying them and feel like working at your company is beneath them.
These three types of candidates are usually more trouble than they are worth.
It makes more sense to offer a decent salary so that you could hire someone who is great at what they do, conducts themselves professionally, and is happy to work at your company.
Of course, there’s something to be said about helping new people get experience, so if you are willing to train them on the job, that might be an option worth considering.
“You Get What You Pay For” Applies to Geoarbitrage As Well!
Geo arbitrage is the practice of exploiting the difference between a high cost of living area and a low cost of living area by making money in the former and spending it in the latter.
In business, that can mean basing your company in the United States, then hiring from Central and South America, the Baltics, Eastern and Central Europe, and Asia.
This allows you to get access to talent that you wouldn’t be able to afford if you were hiring in the United States.
Say, the average lead generation expert salary of $45,653 per year is okay in the US, but it’s serious money in India, Venezuela, or Belarus.
However, you need to remember that the adage “you get what you pay for” still applies!
If all you offer is the equivalent of an American minimum wage, then don’t be surprised that top performers aren’t excited about such a “wonderful” opportunity. They can find another company that will pay them more!
You also need to keep in mind that people in these regions tend to perceive Americans as well-off, so you trying to get away with paying them as little as possible might come across as exploitative and breed resentment even if they do take the job out of desperation.
It’s much better to offer the average US salary because that will help you attract amazing candidates from all over the world who will be appreciative of the opportunity to earn a substantial amount of money and be motivated to do their best to keep such a great job.
Compensation Discrepancies Breed Resentment!
Another issue that you need to keep in mind if you want to build a remote team is that adjusting people’s compensation based on where they live breeds resentment.
Say, if one lead generation expert lives in Hanoi, Vietnam, meanwhile another lead generation expert lives in San Francisco, paying the former less and the latter more might not be the best idea. Can you imagine finding out that a colleague that has the exact same job gets paid way more than you?? Hardly a recipe for a great workplace environment!
You might want to consider following ConvertKit’s example and paying standardized salaries that are the same regardless of location.
Of course, this approach costs more, but it is an investment in your company culture. It will help people feel appreciated, included, and treated fairly. And that tends to pay off in the long run.
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A solid lead generation team can help you bring in more and better leads.
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