KAMCon 2023: Best Practices for Key Account Management Compensation

Is your account management comp plan effective?

Does it drive desired outcomes, and attract and retain top talent?

Account management comp plans are often an afterthought with limited incentives to go above and beyond. This is a problem, during a time when your ability to sustain and grow your business relies on key account retention.

Isn’t it time you revamp your key account manager (KAM) compensation plan to attract top talent, provide enough upside to retain current reps, and incentivize the right behaviors so you achieve your business’s overarching goals?

Mary Grothe, CRO at PNI-HCM gave a presentation on this very topic at KAMCon 2023 titled, "Best Practices for KAM Compensation.". She walked us through the elements of a key account management (KAM) compensation program and how to build your own effective plan.

“If we want to attract and retain great KAMs, we need to compensate them appropriately,” Mary reminded us, “And if we want great outcomes, how are we going to pay them to incentivize that performance?”

Common Components of Key Account Managers’ Compensation

Let’s start by looking at the different elements you can include in your KAM comp plans.

Base Salary

It’s important to have a competitive base salary for these positions. “We must take into consideration that you’re going to get what you pay for,” according to Mary.
With the current economic conditions, the number one thing we need to do is retain our customers. Since KAMs are doing this work, what are we doing if we’re not attracting and retaining the best people in the KAM position?

Your people should not have to go somewhere else to get a pay raise. So, you need to first look at what you’re compensating them. Make sure that the people who’ve been with you for a while are being paid fairly. It behooves you to level out your comp and make sure that you have equal pay for equal work. Ensure that it’s fair and equitable so somebody who’s new doesn’t make more than the person who’s been on that team for a year or more.

You don’t want to have to replace this person since it has a huge impact on the business. It is not fair that the person who has dedicated the last however many years to doing a great job for your corporation and it’s very expensive.

If our number one focus right now is on retaining our customers, you must retain the people who retain your customers.

Earned Commission

In a salesperson’s compensation plan, the more they sell the greater the multiplier. But in a KAM comp plan, there’s often a flat percentage paid. If you want your KAMs to sell more, you must incentivize them to do that. A flat percentage doesn’t incentivize them because they end up getting paid significantly less than the salesperson who sold less than they did. Incentivize your KAMs to do the work that you’re asking them to do. An earned commission is a great way to do that.

Quarterly Bonus

If you have monthly quotas, you can sometimes get lumpy performance, making forecasting more difficult. A quarterly bonus helps you drive consistent quarterly performance. That way, if somebody knocks it out of the park early in the year, they may take their foot off the gas after that. A quarterly bonus incentivizes continual performance, giving reps something to work for so you can close out quarters strong.

Annual Bonus

There are various ways to approach annual bonuses. Mary discussed two options: an annual bonus offered if the rep hits their annual number and a percentage of goal attainment. For example, if a KAM does 126% of plan, they receive 126% of the annual bonus amount. This incentivizes reps to potentially go above and beyond and prevents them from taking their foot off the gas once they hit their annual goal.

Milestone Bonuses

Mary likes milestone bonuses because they’re typically off-cycle payments. They can help you retain KAMs when they are most likely to leave their role. Your reps know when they collect their bonus money and often plan their transition out of your organization around that.

After year-end, the commission multiplier drops down and climbs throughout the year as an individual’s sales increase. Implementing something like a fast start bonus gives KAMs a chance to earn a substantial sum of money if they meet or exceed 120% of their quota during the first quarter, for example.

Incentivizing KAMs to be ahead of plan is an incentive that drives performance at a critical time of year. Individuals who over-perform during this time get their big fat annual bonus and then their fast-start bonus. This retains them for another 30 days.

And, by then, they have done all the hard work to race through the first scale of multipliers and are earning quite a bit at that point. Sprinkling in these sorts of bonuses helps with KAM retention.

Other Incentives

According to Mary, 87% of top performers like to compete against their fellow KAMs. Some ways to leverage this is by adding in rewards like:

A Top KAM Bonus: Reward and recognize your top KAMs with a bonus.

President’s Club: Shouldn’t we be celebrating the people who are retaining and growing our customers, who don’t always get the joy of a happy phone call or email?

These KAMs are figuring it out when the economy gets rough and are tasked with retention when people are cutting spend like we haven’t seen in a long time.

Other Performance-type Clubs: People like to belong to a club! And it’s a great way to recognize performance.

Lifetime Achievement Incentives: This is something you should seriously consider because you have loyal KAMs on your team who perform consistently year after year.

These KAMs could leave, and it would hurt the relationship that they have with your very important customers. Plus, it would be costly to replace this essential team member.

Why not celebrate somebody with a lifetime achievement incentive based on how long they’ve been at your company and all they’ve accomplished? Compensating them by looking back at their entire career, and celebrating that, is meaningful.

What are we doing to create that longevity and celebrate those people?

How do you build your KAM Comp Plan?

Creating a KAM compensation plan is a process that typically starts with a budget assigned by the finance department. Mary likes using salary benchmarking tools to get an understanding of what the market is. This helps ensure that base salary and OTE are competitive and fair, so you’ll attract and retain the right people.

Then you must understand the KAM job description and ask yourself:

  • Do we know what we’re asking them to do?
  • What does good look like?
  • Do the KAMs know what good looks like?
  • Do we have metrics to hold KAMs accountable?
  • Are we compensating our KAMs to celebrate wins?

Next, assign a quota or goal that is driven by actual data, not an arbitrary goal, which unfortunately you are sometimes tasked with figuring out how to accomplish it.

Determining a quota or goal based on actual data is what Mary calls a “bottoms-up forecast.” She explains this forecasting method as answering the following questions for each client:

  • Do we expect that business to stay the same, increase, or decrease?
  • Do we have adoption?
  • Do we have a risk for retention?
  • What are we doing to secure that renewal and upon what timeframe?
  • What are the threats to this business?
  • Where do we need to go from here?

If we can task our KAMs with doing this work, it’s a wonderful exercise. It enables KAMs to report what they believe they are capable of doing inside of their book and that is where the goal can come from.

By doing this exercise, it becomes a lot clearer how you divvy up the big number because now you can confidently and fairly allocate the percentage of what needs to happen by where it can actually come from. Then we know how to hold people accountable.

To carve up the big number you need to determine what you are doing for net new business, client retention, and client expansion. Then decide how you are going to reward for client advocacy to fill the top of the funnel, creating affiliate and partner programs.

After you develop your version one, it’s imperative to get buy-in from your CFO and the executive team. Some may want to contribute to the process of building it. Others may want to be hands-off.

Test and Improve Over Time

“The only perfect plan is still sitting on the shelf. Every plan needs to be tested and improved over time,” Mary reminded us, “You need to create benchmarks that help you determine that plan’s success and have that agreement and alignment across the rest of the leadership team.”

Measure them monthly, quarterly, or annually against performance so you can determine the success. You will find holes and errors inside your plan. Then make improvements as needed.

As you roll this out, it’s not perfect, but it sure is a heck of a lot better than what it was.

Let your KAM team know that their voice and opinion are valued and that you need to hear the feedback loop. This is important because if you hear silence, you’ll think that it’s great and you don’t want to be proven wrong when you have attrition on the client side or on the team member side.

Create that trust so you can have feedback and communication coming through. This is something that you’re working on and building together so you can set yourselves up for success.

Looking for a way to set your KAM team up for success? Register for KAMGenius PLUS. The next cohort starts on October 12th.

CEO at Kapta
Alex Raymond is the CEO of Kapta.