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Effective Sales Compensation
Design
2016 Annual Western Plastics Association Conference
Topics
• Sales Compensation – What I have found!
• Approach to Sales Compensation Plan Design
• Success Stories
• Q&A
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Sales Compensation – What’s Happening?
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• Many sales professionals can receive 90% of their target total cash while only achieving 70% to 80% of their quota
• To many companies still give sales management 1st dollar commission overrides
• Sales commission plans usually don’t include decelerators and/or accelerators
• Account Manager’s are being paid like Sales Representatives
• Sales incentive plans are not aligned with the company’s business strategy
Approach to Sales Compensation Plan Design
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Fact Finding
Assessment & Alignment
Plan Design
Modeling & Costing
Automation
Implementation &
Communication
Administration
Approval!
Approach to Sales Compensation Plan Design
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Establish Business Strategies
Create Marketing Objectives
Define Sales Strategy &
Deployment Model
Define Sales Structure & Jobs
Design Sales
Compensation Plans
Administer & Monitor Plans
• Competitive Environment
• Short-term and Long-term Business Objectives
• Go-to-market Strategy
• New Product Strategy and Business Opportunities
• Market Share and Profit Objectives
• Pricing Strategy and Tactics
• Revenue and Profit Goals
• Customer Coverage Model and Channel Strategy
• Key Sales Measures: Revenue, Profit, Product
• Sales Organizations Structure
• Roles: Sales, Account Mgmt., Support
• Account and Territory Assignments
• Eligibility
• Target Total Compensation and Base/Variable Mix
• Plan Mechanics and Performance Levels
• Commission or Incentive
• Program Communication and Training
• Data Collection and Reporting
• Ongoing Plan Assessment and Review
Approach to Sales Compensation Plan Design
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Purpose Eligibility Target Total Cash
(TTC)
Pay Mix & Leverage
Decelerators & Accelerators
Performance Measures
Weights vs. Modifiers
Payout Formulas
Quota Achievement Performance Range
Performance Periods
Payout Timing
Success Stories
Global business process outsourcing (BPO)
• Issue: Company revenue growth strategy at
a 4-year stall (profitability eroding)
• Solution: Review sales incentive plans,
which focused on renewals, not growth;
redesign plan to reward for organic/new
growth
• Result: 25% revenue growth in 12 months;
company stock price rose from $5 to $40 in
18 months
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Success Stories
Global software technology
• Issue: Company’s revenue growth flat
for 3-years; sales executives received
high base pay and low incentives
• Solution: Redesign the sales
compensation plan by significantly
lowering base pay and increasing
incentive opportunity
• Result: revenue growth jumped by
40% in 1st year and company was sold
for multiples of its value in year 2
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Success Stories
Global luxury manufacturing
• Issue: Company revenue declined by
10%+ every year for five years; sales
reps on a 100% flat rate commission
plan
• Solution: Review and redesign the
sales incentive plans to motivate the
sales force to achieve and exceed
quotas
• Result: Increased revenue by 10% and
15% during the two years following
implementation
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Success Stories
Cooperative Purchasing Organization
• Issue: Struggling to grow the business
and build a results driven sales team;
team-based incentive plan did not
motivate sales professionals to achieve
individual target goals
• Solution: Redesign the sales incentive
plan to motivate sales directors to
achieve and exceed regional revenue
targets
• Result: Increased annual revenue from
$7.5M to $12M in 12 months and
motivated turnover of poor performing
sales directors
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Success Stories
National healthcare
• Issue: Revenue growth continued at
20% per year, but profitability was
declining dramatically year-over-year
for 3-years
• Solution: Redesign the sales incentive
to focus on profitable revenue growth
• Result: 15% increase in revenue with
profitability increasing by 20% in years
1 and 2 following implementation
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We Deliver Fortune 500 Solutions to Our Clients
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WHAT WE DO
Pay-for-Results Philosophy
Executive Compensation
Broad-based Compensation
Incentive Plan Design
Sales Compensation
Performance Optimization
Career Track Job Structures
HOW WE ENGAGE WITH CLIENTS
Outsourcing Services
Includes Everything in “What We Do”
Replaces In-house Resources
Ongoing Consulting and Administration
Monitor Competitive Environment
Technology Implementation
Project Consulting
Choose One Or More Projects from
“What We Do”
Ultimate Rewards Practice Leader
Tim is a total rewards expert with over 25 years corporate and
consulting experience in designing and implementing innovative
total rewards practices that engage employees to drive business
results and build results-driven cultures.
Expertise includes executive and broad-based compensation,
variable pay design, performance management and sales
compensation. Tim’s experience spans domestic as well as global
compensation in high-tech, life sciences, manufacturing, energy,
mining, retail, outsourcing, healthcare and many other industries.
Graduate of California State University, Hayward with a bachelor's
degree in business administration, with an emphasis in HR and
finance.
• Certified Employee Benefits Specialist
• Certified Compensation Professional
• Certified Global Professional in Human Resources
• Master Human Capital Strategist Designation
• Executive HR Programs from Stanford University
Tim Silvera
Vice President
Ultimate Rewards Practice Leader
Contact information
Office: 858.373.6955
Mobile: 760.330-6607
E-mail: [email protected]
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