2009 1124.3 sales compensation (from thinkpad) · 2019. 7. 3. · ted briggs, principal and...

Sales CompensationTrends, Tools, Analytics, and Solutions

November 24, 2009

Ted BriggsPrincipal

Better Sales Comp Consultants

Brian HartlenVice President Marketing

Varicent

Trends, Tools, Analytics, and Solutions

for the Emerging Environment

© 2009 The Sales Management Association

Ted Briggs, Principal and Co-Founder

• Over twenty years of experience in sales effectiveness and compensation consulting, having held leadership roles at AGI, Sibson, and Watson Wyatt

• Unique and extensive focus in the high-technology and services sectors

• We are a boutique consulting firm focused on creating better sales compensation

programs and better sales effectiveness for our clients

Founded by Ted Briggs and Clinton Gott

Better Sales Comp Consultants

programs and better sales effectiveness for our clients

• We combine the experience and connections of a large consulting firm with the

flexibility and affordability of a smaller one

• Include a network of senior and experienced practitioners able to support projects on

numerous topics, in varied industries, and across the globe

• Our model is focused on senior level delivery, collaboration, and partnership with our

clients

© 2009 The Sales Management Association, Better Sales Comp Consultants, and Varicent 2

Varicent

Brian Hartlen - Vice President, Marketing

• Thirty years of experience in leveraging information technology to improve organizational performance and decision making

Varicent

• Varicent Software Incorporated is an application software provider focusing on

incentive compensation and sales performance management.

• Varicent's customers are high-performing companies representing a variety of

industries and include Waste Management, Convoy Financial Group, Sherwin-

Williams, Manpower, Autodesk, Getty Images, Starwood Hotels, Sun Hung Kai

Financial.


• Governance

• Plan Development

• Plan Management

• Sales Compensation Analytics

• Basic

• Advanced

AgendaToday’s Webcast

• Advanced

• Leveraging Information Technology

• Today’s Environment

• Role of Technology

• Sales Performance Management


• It’s a common sense look at how sales compensation plan

decisions are made and how they are managed…

• Who performs which tasks?

• Under what timelines?

• Under what philosophy or direction?

• With which degrees of authority?

Sales Compensation GovernanceWhat Does it Mean?

• With which degrees of authority?

• Good sales compensation governance gives stakeholders peace of

mind that plan decisions are made…

• Wisely

• Strategically

• With everyone’s understanding and buy-in


Sales Compensation GovernancePlan Development and Plan Management

Strategy and Plan

Goals

Sales Jobs

Plan Imp/

Support

Plan Administration

Plan Monitoring & Assessment

Plan

Plan Management


Plan Design

Plan Cost

Plan Approval

Assessment

Interim Modifications

Dispute Resolution

Plan

Development

The Good, Bad, and UglySales Compensation Governance

• Efficient and effective processes defined and followed

• Focus moves from tactical confusion to strategic clarity

• Roles defined but people not held accountable

• Pay philosophy inconsistent or unclear

• Incumbent

• Dissatisfied sales force leads to turnover and lost results

• Long delays in final plan decisions and rollout – field stalled

Good Bad Ugly


strategic clarity

• Improved sales compensation plans that drive company results

• Cost savings and consistent admin performance year to year

• Incumbent performance history is incomplete or difficult to obtain

• Managers don’t receive thorough training on new plans

• Communication materials don’t sync

rollout – field stalled

• Major calculation errors from poor systems alignment and support

• Business units, especially internationally, fail to follow the program and stonewall

A. Follow a Structured Process

B. Define Clear Ownership

Key Elements RequiredSales Compensation Governance

C. Start Early and Manage to the Stage Gates

D. Involve the Right Organizational Stakeholders

E. Determine the Level of Centralization Needed


Inputs, Process Steps, and Key Topics

Role Plan Program Sales

Sales Force Input Corporate InputGeo Input Market PracticeBU Input

Stakeholder Interviews

Sales Force Survey

Market Research and Studies

Assessment & Design Meetings

Executive Confirmation

A. Follow a Structured Process

Role Definition

Plan Design

Program Support

Sales Strategy

TTC Mix

Upside Measures

Mechanics Crediting

Goal Setting

Rollout

Comm. SPM

Policies CRM

Accounts Industries

Products Teaming

Sales Process

Org Structure

Growth Planning

Account Segments

Geo FocusHeadcount

Needs

Headcount Deployment

Value Proposition


HQ Executives

• Define overall corporate strategy

BU Head

• Apply corporate strategy at BU level

BU Sales Head

• Determine sales strategy to support BU strategy

Steering Committee

• Ensure alignment with sales, BU, and corporate strategies

Sales Strategy Formulation

Where Responsible ResidesB. Define Clear Ownership

HQ HR/ Operations

• Determine pay ranges/job levels within corporate structure

BU Sales Head/ Mgrs.

• Select appropriate jobs/coverage required from approved list

Steering Committee

• Review BU job selections to ensure adherence to corporate structure

BU Sales Managers

• Assign salespeople to appropriate job roles

Job Role Definition and Application


Manage the TimelineC. Start Early and Manage to Stage Gates

• Strategy Lock (Month 8)

• Role Lock (Month 9)

• Role Assignment (Month 10)

• Plan Lock (Month 11)

• Documentation (Month 12)

• Communication (Go Live)

• System Update (Month 2)


Decision Rights, Accountabilities, and Processes

HQ

Human Resources

Finance

Steering Committee

Executives

BU

EVP

Top Sales Executive

D. Involve the Right Organizational Stakeholders

Operations

Marketing

Product Management

Legal

Functional Leaders

BU Leaders

BU Finance

BU Marketing

Sales Management

BU Human Resources


Balancing Central Control vs. Necessary Autonomy

• Strategic deficiencies

• Poor top talent retention

• Force fit solutions

• Not enough BU input

• Political in-fighting

Too Much

Corporate

Control

E. Determine the Level of Centralization Needed

• Not enough big picture

• Increased complexity

• Impaired cross-selling

• IT and admin burden

• Pay disparities

Too Much

BU Control


The Basics and Beyond

• You are most likely aware of the “usual suspects” in terms of

compensation plan analytics

• Can provide great value

• Serve as the foundation to any analytical program

• But companies now more than ever are focusing on next level

Plan Analytics

• But companies now more than ever are focusing on next level

analytics for better sales compensation and better sales

effectiveness

• Headcount planning

• Quota setting

• CCOS-based segment analysis


Focus on Pay and Performance

0.0

50.0

100.0

150.0

200.0

250.0

300.0

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Av

era

ge

Va

ria

ble

Pa

y (

$0

00

s)

FY07 Base Salary FY07 TI Earned FY07 Over Achievement

Pay Composition Pay for Performance

R2 = 0.8264

100,000

200,000

300,000

400,000

500,000

600,000

Plan Analytics – the “Usual Suspects”

FY07 Base Salary FY07 TI Earned FY07 Over Achievement

FY07 Cross Sell FY07 Spiff's

405%

63%

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Pa

y a

s %

of

Me

dia

n

Sol Consultant

Pay Differentiation

0

0% 20% 40% 60% 80% 100% 120% 140% 160% 180% 200%

$40

$80

$120

$160

$200

$240

$280

$320

$360

$400

Adherence to Pay Range


Focus on Quota Achievement

Boom/Bust Analysis

80%

100%

120%

140%

160%

180%

FY

06

Qu

ota

Att

ain

me

nt

ag

ain

s g

oa

l (%

)

5

2

4 4

3

6

3

4

5

6

7

Nu

mb

er

of

Sa

lesp

eo

ple

40%

60%

80%

100%

120%

Quota Distribution

Plan Analytics – the “Usual Suspects”

0%

20%

40%

60%

80%

0% 20% 40% 60% 80% 100% 120% 140% 160%

FY07 Quota Attainment agains goal (%)

FY

06

Qu

ota

Att

ain

me

nt

ag

ain

s g

oa

l (%

)

n = 27

90th %ile = 125%

0 0 0

1

2

1

0

1

0

1

2

150%

Quota Performance

Nu

mb

er

of

Sa

lesp

eo

ple

0%

20%

40%

Frequency Cumulative %


Time-Based Coverage Planning

• Identify accounts as low, medium, or high touch

• Estimate time required for each type

• Review account assignments per rep

Next Generation I – Headcount Planning

• Review account assignments per rep

• Identify gaps or surpluses to:

• Reallocate accounts

• Shift accounts from field to inside sales


Number of Accounts

Role Country Territory

Hours

Available

Hours

Required

Surplus /

Gap Total HT MT LT

Field Sales Rep France SE 1,750 3,000 -1,250 5 2 3 0

Field Sales Rep France SE 1,750 2,700 -950 4 2 2 0

Field Sales Rep Poland SE 1,750 2,575 -825 53 0 36 17


Field Sales Rep United Kingdom NE 1,750 2,390 -640 40 1 32 7

Field Sales Rep Germany CE 1,750 2,250 -500 5 2 3 0

Field Sales Rep Germany CE 1,750 2,200 -450 2 2 0 0




Field Sales Rep United Kingdom NE 1,750 1,750 0 2 1 1 0

Time-Based Coverage PlanningNext Generation I – Headcount Planning

Field Sales Rep United Kingdom NE 1,750 1,750 0 2 1 1 0

Field Sales Rep France SE 1,750 1,740 10 17 1 15 1

Field Sales Rep Turkey ME 1,750 1,680 70 12 3 9 0

Field Sales Rep Germany CE 1,750 1,600 150 31 1 30 0

Field Sales Rep Russian Federation FSU 1,750 1,600 150 16 0 16 0




Field Sales Rep Italy SE 1,750 1,440 310 20 3 17 0



Field Sales Rep Germany CE 1,750 950 800 19 0 19 0

Field Sales Rep UNITED ARAB EMIRATES ME 1,750 825 925 9 0 8 1

Field Sales Rep France SE 1,750 550 1,200 12 0 10 2

Field Sales Rep Lebanon ME 1,750 300 1,450 3 0 3 0

Field Sales Rep Russian Federation FSU 1,750 300 1,450 3 0 3 0

Field Sales Rep UNITED KINGDOM NE 1,750 250 1,500 5 0 5 0


Market-Based Information Driving Account Level Goals

• Incorporating more inputs, more stakeholders, and greater effort

Leveraging Market-Based Information

• Understand the particular

Categorizing Accounts

• Categorizing accounts

Applying Growth Rates

• Applying the appropriate

Reconciling Bottom Up and Top Down

• Comparing account driven

Next Generation II – Quota Setting

particular growth rates by industry segments, geographies, and account types

• Better aligning sales and marketing groups

accounts

• Ability to identify growth rates by account type

appropriate market-informed rates to each account

account driven growth rates versus top down estimates

• Further analysis to close gaps


Deciphering Costs per Segment, Geography, or Channel

Approach

• Allocate appropriate costs to

each segment and related

roles

• Compare revenue to costs

• Review Compensation Cost of

Sales (CCOS) = compensation

Outcomes

• Compare growth you experience

in particular segments to market-

informed growth expectations

• Compare performance to CCOS

• Spending more when beating

growth expectations = may be

Next Generation III – CCOS-based Segment Analysis

Sales (CCOS) = compensation

costs divided by total revenue

driven

• Make informed investment or

reductions to align your cost

structure to strategic outcomes

growth expectations = may be

reasonable

• Spending more when missing

growth expectations = need

further examination and

potential shifts


Deciphering Costs per Segment, Geography, or Channel

Next Generation III – CCOS-based Segment Analysis


Growth

Market

Growth CCOS % Discussion

District

New England 5% 6% 3.3% Low CCOS and growth = may be chance to invest

Mid Atlantic 11% -3% 3.7% Low CCOS and good growth = learning potential

Midwest -2% 10% 4.5% Moderate CCOS but missing growth = need to examine

NYMetro (A) 5% 13% 4.9% High CCOS and poor results = need to examine

NYMetro (C) 18% 10% 6.1% High CCOS may be justified = strong growth

Recovering from the Economic Crisis

• The last twelve months involved companies making many fast-

paced (hasty?) and challenging (short-sighted?) decisions

• Sales cuts and pay reductions may have compromised the role

and perceptions of the sales team’s value

Sales Compensation Trends

• Unraveling the changes made will take time, particularly as the

economy still limps forward but is poised for recovery

• We need to transition from “what the heck happened” to “what

now”?


Compensation Design ElementsWhat ‘s Under Consideration?

• Eligibility

• Ranges and Structure

• Incentive Mix *

• Upside *• Upside *

• Performance Measures *

• Performance Targets

• Crediting

• Plan Mechanics *


Poll Question 1 Incentive Mix

A. Increasing at-risk pay as a percentage of target compensation

B. Decreasing at-risk pay as a percentage of target

As it relates to base-salary/at-risk ratios (incentive mix) our company has acted or is considering:

Increasing At-Risk Pay

Decreasing

At-Risk Pay

30%

14%

As it relates to base-

salary/at-risk ratios

(incentive mix) our

company has acted or is

considering:


B. Decreasing at-risk pay as a percentage of target compensation

C. Not made or considering any changes to base/incentive mix levels

No Change

At-Risk Pay 14%

56%

A. Increasing upside opportunity

B. Decreasing upside opportunity

As it relates to upside opportunity, our company has acted or is considering:

Poll Question 2Upside Opportunity




Increasing Upside

Decreasing

Upside

54%

9%

As it relates to upside

opportunity, our company

has acted or is

considering:

C. Not making or considering any changes to upside opportunity




No Change

Upside 9%

37%

A. Adding additional plan measures/components to our sales compensation plans

B. Removing some plan measures/components from our sales compensation plans

As it relates to plan measures or components, our company has acted or is considering:

Poll Question 3Performance Measures/Plan Components



As it relates to base-salary/at-risk ratios (incentive mix) our company has acted or is considering:Adding Additional

Removing

Some

24%

7%

As it relates to plan

measurements or

components, our company

has acted or is

considering:

our sales compensation plansC. Replacing existing plan measures components with

new measures/components in our sales compensation plans

D. Not changing our plan components in our sales compensation plans




Replacing Existing

With New 44%

No Change 25%

A. Substantially changing our plan mechanics

B. Moderately changing our plan mechanics

As it relates to plan mechanics our company has acted or is considering:

Poll Question 4Plan Mechanics




Substantially

Changing

Moderately

Changing

10%

30%

As it relates to plan

mechanics, our company

has acted or is

considering:

C. Only tweaking our plan mechanics

D. Not making any changes to our plan mechanics




Just Tweaking 44%

No Change 17%

What Now – The Issues and The Messages

• Sales people have long memories, especially if they have been

treated “harshly”

• Companies that have introduced pay reducing actions will need to

address these issues as the market re-emerges or talent will flee

• Attracting talent depends on your ability to sell these “revised”


• Attracting talent depends on your ability to sell these “revised”

plans to recruits.

• The tone needs to shift from mutual cost-savings to energizing the

sales force as the driver of our top line and our market success

• Let’s bring back the sales heroes!


What Now - Specifics

• The basics:

• Restoring sales compensation

• Removing/lowering hurdles and thresholds

• Straighten out the inverted pay curves

• Address acceleration as you normalize quotas/targets


• The advanced:

• Target pay evaluation – look for “hi-pot laggers”

• Quotas based on opportunity and market

• Aligning headcount and workload for better penetration

• Putting incentive dollars into specific growth segments


• Governance

• Plan Development

• Plan Management

• Sales Compensation Analytics

• Basic

• Advanced

AgendaToday’s Webcast

• Advanced

• Leveraging Information Technology

• Today’s Environment

• Role of Technology

• Sales Performance Management


• Inability to look at the impact of recent, or planned changes

• Inability to implement new plans quickly

• Managing overpayments and errors

• Sales creates its own ‘shadow accounting systems’

• Challenged to meet audit and compliance requirements

• Inability to model/analyze effectiveness of incentive spend

• Inability to look at the impact of recent, or planned changes

• Inability to implement new plans quickly

• Managing overpayments and errors

• Sales creates its own ‘shadow accounting systems’

• Challenged to meet audit and compliance requirements


Today’s Challenges


• Too much time and effort to administer and maintain incentive compensation processes

• Payment disputes consume significant time & effort

• Limited ad-hoc reporting & analysis capabilities

• No ‘tight’ links between incentive pay, sales territories, quotas and business metrics


• Too much time and effort to administer and maintain incentive compensation processes

• Payment disputes consume significant time & effort

• Limited ad-hoc reporting & analysis capabilities

• No ‘tight’ links between incentive pay, sales territories, quotas and business metrics


400

600

800

1000

1200

1400

Revenue vs Sales Spend

Focusing on Good Business

0

200

400

Revenue Sales Spend


Workforce Management Survey

65% respondents use spreadsheets for ICM

• ~60% of large enterprises are dissatisfied with this method

Workforce Management Survey, 2009


Pros

Business ownership

Flexible

Reporting

Business Impact of Spreadsheets

Comfort with Calculations


Pros Cons

Business ownership Difficult to administer

Flexible Error-prone

Reporting Scalability

Comfort with Calculations No Workflow

Business Impact of Spreadsheets

Comfort with Calculations No Workflow

Audit and Compliance

Integration with back-end Systems


Sales Performance Management

Monthly Commission Statement


Sales Capacity Summary

Quota Analysis Report

Sales Summary At a Glance

Territory Analysis

Sales Performance Management Dashboard

Sales• More Selling Time• Reduced errors and disputes• More visibility and into pay and performance• Identify top/bottom performers to drive effectiveness

Finance• Reduce commission overpayments

Accurately forecast sales and spend

Sales• More Selling Time• Reduced errors and disputes• More visibility and into pay and performance• Identify top/bottom performers to drive effectiveness

Finance• Reduce commission overpayments

Accurately forecast sales and spend

Benefits of an SPM Application

Reduce commission overpayments

• Accurately forecast sales and spend• Significantly reduced administration costs• Exceeds all audit and compliance requirements

Human Resources• Increased employee satisfaction• Alignment between strategy and actions• Drives consistent, repeatable processes

Reduce commission overpayments

• Accurately forecast sales and spend• Significantly reduced administration costs• Exceeds all audit and compliance requirements

Human Resources• Increased employee satisfaction• Alignment between strategy and actions• Drives consistent, repeatable processes


Questions and Wrap Up

Submit Your Question(s):• Please enter your questions in the “Questions” box to

the right of your screen.

• Our presenters will circulate responses by email to all submitted questions, including those not addressed

today because of time constraints.

The “Questions” box looks like

this and is located in the right-

hand toolbar of the webcast

application.

Contact Today’s Webcast Leaders

Ted BriggsPrincipal and Co-Founder

[email protected]

+1 310 245-4686

Brian HartlenVice President, Marketing

[email protected]

+1 416 987-1241


2009 1124.3 sales compensation (from thinkpad) · 2019. 7. 3. · ted briggs, principal and...

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