So I was on a group Zoom with a number of CROs and VPs of Sales the other day and a consistent theme came up: everyone was surprised how high OTEs (On Target Earnings) had held up in the current environment.
Well, one would think OTEs would have to come down as every SaaS leader has gotten much more efficient over the past 12+ months, as growth venture capital has dried up, and in some cases, as times have gotten a bit tougher.
But OTEs really haven’t come down much. In fact, in some cases, base salaries have gone up as a reaction to market conditions.
What has come way down is attainment.
You can see this in third party data, in RepVue and other places, but some of the root cause is less well understood. Some of the root cause is in fact … the need to still market “High OTEs” to attract talent.
Many of the CROs and VPs of Sales said they were seeing was nominally hitting 50%-80% of plan overall, but that was in large part due to the Top 10% of reps still crushing plan. They said most reps weren’t coming close to 60% attainment, and the high performers were flattering overall numbers.
Let’s look at a basic example. An enterprise rep might be looking for a $200k OTE, with say a $100k base and a $100k bonus. In 2021, they might have gotten their bonus for closing say $500k in bookings. Today, they might get the same $200k OTE with even a higher base, say $120k. But they might have to close $1m to earn their full bonus — in a much more challenging macro environment.
I heard the same story from a Salesforce sales exec the other day who had recently left. Base salaries went up, OTEs stayed the same, but it’s much, much harder now to hit OTE.
Look, it just makes sense. Everyone has to be more efficient now. Sales reps really do have to close 4x-5x what they take home — for real. Not just “sort of”, kind of, which is what really happened in 2021. Folks weren’t remotely efficient. And no one cared as long as growth was strong.
Today they care.
So beware the High OTE on its own. SaaS companies are under pressure to continue to contain costs and stay efficient. But recruiting remains a challenge, at least for the best. So no one is really lowering OTEs. Instead, they are implicitly making it harder to achieve them. It has to come from somewhere.
(base and bonus image from here)