is your sales comp plan working?

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Is Your Sales Compensation Plan Working? How to Assess Your Compensation Plan and Prepare for 2013 September 12, 2012

Rachel Parrinello Principal, Sales Compensation Practice 415-276-5664 [email protected]

Paul Vinogradov Vice President 415-276-5670 [email protected]

© 2012 The Alexander Group, Inc.® 2

Welcome!

Introductions – Us and You!

Is Your Plan Working?

AGI Framework and Guidance

AGI Offerings and Concluding Remarks

Questions and Answers


About Us

Rachel Parrinello Principal, Sales Compensation Practice

Paul Vinogradov Vice President

15+ years of sales effectiveness consulting Runs AGI’s western region office Runs AGI’s benchmarking practice Sales compensation speaker

12+ years of sales compensation consulting Manages AGI’s Sales Incentive Benchmarking Sales compensation speaker

http://www.alexandergroup.com/about/leadership-team/sanfrancisco


About You

How many employees total in your company?

13%

6%

28%

14%

39%

1 to 500 501-1,000 1,001-5,000 5,001-10,000 10,001+


About You

How many unique compensation plans do you manage?

36%

26% 21%

17%

1 to 10 11 to 30 31 to 50 More than 50


About You

Do you have less, equal or more plans than you have selling roles?

46% 40%

15%

Less Plansthan Roles

Equal Number of Rolesand Plans

More Plansthan Roles


About You

What degree of pain are you experiencing with your current sales compensation program?

12%

75%

10% 3%

0-2 LOW:plans work well,few complaints

3-5 MEDIUM:some adjustments

needed

6-8 HIGH:signs of failure,

changes needed

9-10 VERY HIGH:complete overhaul

required!


Most Companies Update Their Plans Each Year

*Source: The Alexander Group (AGI) 2012 Sales Compensation Trends Survey (n= 118)

3%

53%

31%

13%

No changes will be made

Minor changes to some ofthe plans

Significant changesaffecting some of the plans

Major changes affectingmost all incentive plans

97% plan to make

program changes for 2012


Laggard

World Class

Where does your company’s compensation plan fit along this continuum?


Assessment Framework

Program Effectiveness

Strategic Alignment

Market Alignment

Principle Alignment

Does your program drive your company’s strategy and align with its job roles? 1

Does your program align to best in class principles?

2 How aligned is your

program to the market?

3


Strategic Alignment – Why?

SALES LEADERSHIP

STRATEGY STRUCTURE

Opportunity Segments

1

Coverage Design

2

Sales Process

3

Job Design & Organizational

Structure

4

Resource Deployment

5

Sales Talent

6

Productivity Metrics

7

Performance Management & Compensation

8

MANAGEMENT

SALES OPERATIONS & TECHNOLOGIES

THE EIGHT PILLARS MODEL

1


Strategic Alignment – How to Do It

Review and confirm your go-to-market model

Conduct interviews

Conduct ride-along’s with sales employees

Inventory your sales roles – create profiles for each

Summarize findings/issues and confirm with sales leadership

1


Illustrative Segmentation and Coverage Map 1

Strategic

Enterprise

Small and Medium Business

Sales Engineer

Account Manager

Inside Sales

Sales Support

Product Specialist

Channel Manager


Primary Input – Job Design

Customer: Target Segments Target Accounts Buyer Needs Sales Potential

Sales Process: Lead Generation Account Development Propose/Close After Sales Service Conversion, Penetration, Retention

Products and Services: Product Type and Complexity Knowledge Required New Versus Current Product Job

Bandwidth

1


Job Profile Example – Strategic AM

Job Summary Responsible for end user sales of Company

products and services to new and existing strategic (5,000+ employees) accounts Executes complex sales and effectively

manage the sales process and activities Effectively engages other sales resources as

required

Primary Secondary

Teaming

Independent Small Team Large Team

Product Type

Point Product Solution Architecture

Job Category

Technical

Account

Partner

Product

Sales Motion

Market Coverage Mature Emerging

Segment

Generalist Specialist

Selling Type

Inside

Field Hybrid

Sales Strategy

Identify / Qualify Lead

Qualify & Develop Oppty

Validate & Approve Solution

Fulfill

Renew Sell-Thru / Enablement

Sales Cycle

0 Months 18 Months 24+ Months 6 Months

Sales Process Complexity

Low Medium High

Sales Process

Management

People Manager

None

Global

No / Minimal Focus

Strategic Enterprise Commercial SMB

Specialization

Quota $4M - $10M

Account Load 3 – 5 Accounts

New Opportunities in Existing Accounts

Renewal / Recurring in Existing Accounts

New Business in New Accounts

Sales Process Sales Focus

Type of Sale

Channel-led Strategic Transactional

Key Metrics

Renewal Bookings

New Bookings

E/B

1


Overall Strategic Goal

Plan Elements

Execution

Guiding Parameters

Charter

Rules To Govern Design Solutions

Guidelines for Specific Program Components

Supporting Programs: Required for Any Sales Compensation Plan

Principle Alignment – Why? 2


Plan Elements

Execution

Guiding Parameters

Charter

Rules To Govern Design Solutions



Sales Compensation Principle Framework

Attract, Retain and Reward Sales Resources To Drive Sales Results

2


Plan Elements

Execution

Guiding Parameters

Charter




Strategy & Job Alignment

Sales Force Motivation

Pay for Performance

1 2 3


2


Plan Elements

Execution

Guiding Parameters

Charter





Pay for Performance

1 2 3


Eligibility Pay Levels

Pay Mix Leverage Measures

Mechanics & Pay Curve

Perf & Payout Periods

Quotas/ Targets

Special Incentives

Crediting & Policies

1 2 3 4 5 6 7 8 9 10

2


Plan Elements

Execution

Guiding Parameters

Charter




Pay for Performance

1 2 3






Quotas/ Targets

Special Incentives


1 2 3 4 5 6 7 8 9 10

Investment ROI Communication Administration Governance, Assessment,

Design

1 2 3 4

2


Principle Alignment – How?

Confirm or create principles based on pay philosophy

Gather seller feedback via survey and interviews

Analyze pay, performance, and plan design data

Summarize findings - what’s working and what’s not?

Summarize topics and issues that require addressing for next plan period

2


What Is a World Class Sales Compensation Plan?

The Sales Compensation Plan is a Valuable Management Tool to Drive Sales Results if Done Correctly

Drives business goals and sales strategy

Aligns with each sales job’s role and objectives

Closely links pay to performance

Motivates and rewards higher levels of achievement

Provides market-competitive pay to attract and retain appropriate level of talent

Is simple to understand

2


What is a World Class Sales Compensation Program?

Linked with fair, equitable and stretch goals

Effectively communicated and documented

Sale force understands the plan

Sales leadership messages how the plan supports strategy

Is fiscally responsible and aligns with budget

Efficiently administrated to provide consistent, accurate, and timely pay

Provides the right level of alignment / equity across the organization

Includes ongoing governance to ensure program integrity

Designed by a collaborative process with key stakeholders from sales, finance, human resources, and sales operations

The Plan’s Effectiveness Depends on the Support of People, Processes, and Systems

2


Low Performers Median Performers High Performers

75th

50th

25th

What is Your Pay For Performance Philosophy?

2


Complete a Survey to Capture Sellers Sentiments

Competitive TTC

Motivates Overachievement

Challenging, Achievable

Quotas

Clearly Communicated

Easily Track Comm. Earned

Overall Rating

3.4 3.6 2.8 3.7 3.1 3.2

Strongly Agree Agree Disagree Strongly Disagree

-5% -9% -13% -4% -10% -5%

-13% -9%

-28%

-10%

-23% -19%

51% 49% 31%

53% 36% 38%

7% 16%

4%

19%

9% 5%

2


Analyze Your Program’s Data

Pay Mix Analysis What: Pay mix averages and variance for each role.

Purpose: Assess appropriateness and consistency of pay mixes.

Pay vs. Performance Scatter Plots What: Correlation of incentive pay and sales performance.

Purpose: Identify inconsistencies between pay and performance.

Incentive Payout Percentile Distributions What: Range of incentive payouts across incumbents by percentile.

Purpose: Examine pay discrimination and assess upside opportunity.

2


Analyze Your Program’s Data (Continued)

Quota Performance Distributions What: Performance distribution across incumbents.

Purpose: Assess the effectiveness of the goal setting process and compare performance range and shape with best practice distribution.

Quota Size Correlation Scatter Plots What: Effect of quota size on target achievability.

Purpose: Assess the effectiveness of the goal allocation process and need varied accelerator structures based on quota size.

Quota Performance Percentile Distributions What: Range of quota performance across incumbents by percentile.

Purpose: Assess current threshold and excellence levels; determine percent of incumbents above and below target performance levels.

2


Investment ROI Communication Administration Governance, Assessment,

Design








Pay for Performance

Plan Elements

Execution

Guiding Parameters

Charter

1 2 3

1 2 3 4

Quotas/ Targets

Special Incentives


1 2 3 4 5 6 7 8 9 10

Illustrative Assessment Using the Framework

= Working Well = Minor Area for Improvement = Major Area for Improvement

2


x x

x

Market Alignment – Why?

Know how you compare to market practice

Know how you compare to the competition for top sales talent

Make fact-based and data-driven decisions on how you will compete and differentiate

3

Laggard Market Practice

World Class


Market Alignment – How?

Capture internal employee’s sentiments and knowledge – use caution

Network with peers in your industry

Formulate your hypotheses

Use 3rd party data – survey houses, research associations, and consultants; research your options

Invest time/resources/budget to get good data

Interpret the results carefully – in light of your phase of growth and strategy

3


Analyze all plan design components

Plan Design Components

Pay Mix

Performance Measures/Weights

Plan Mechanics (Bonus, ICR, etc.)

Payout Curves & Rates

Thresholds

Excellence Points

Upside/Leverage

Caps

Linkages, Hurdles

Performance Period

Payout Frequency

Add-on Bonuses

Sales Quota Crediting

Sample Plan Component Analysis

3


Illustrative Market Comparison Data

Plan Type Sales Incentive

Plan Mgmt. Incentive

Plan Profit Sharing

Pay Levels Pay Mix New Hire Practices Excessive Payout

Practices

3

Measures At-Risk Add-On Linked

Pay Curve Thresholds Excellence Caps

Formula / Calculation Methodology

Performance Period Payout Frequency Crediting Rules

Policies HR Changes Quota Changes

Cost Metrics Plan Administration

Administration Tool FTE Ticket Accuracy Rate Processing

Communication

Plan Data at Job Measure Level Data Program Data


Illustrative Market Alignment Comparison

Aligned w/ Market Minor Misalignment w/ Market Major Misalignment w/ Market To Be Determined Legend:

Plan Component Market Comparison Comparison Details

Pay Mix • Pay mix is on par with benchmark companies

Measures • Benchmark companies use between 2-3 measures, including linked metrics

Mechanics • All benchmark companies use a quota based mechanic

# of Pay Curves • More pay curves than benchmark companies

Thresholds • Most benchmark companies pay from the first dollar

Payout Limits • Most benchmark companies do not use a deceleration rate and/or cap

Leverage • Equal upside opportunity than the benchmark companies

Excellence • Calculated excellence points appear aligned to market

Pay Curve • Rates >100% are below average relative to benchmark companies

Performance Period • Most benchmark companies use annual performance period

Payout Frequency • Most benchmark companies provide monthly payouts

Calc. Methodology • Most companies use cumulative methodology; some use cumulative-period-to-date

Crediting • Sales crediting at bookings aligns; however shipment/invoice payment credit does not

Key areas of misalignment include # of accelerator rates, the rates and crediting.

Summary Benchmark Findings

AM

Overall Comparison

3


AGI’s Sales Compensation Services

Sales Compensation Process Design and Optimization 2

Sales Compensation Design Principles 3

Sales Compensation Scorecard 4

Sales Incentive Benchmarking 5

Surveys 6 On-Going Advisory

Services 7

Plan Design 1


AGI’s Sales Incentive Benchmarking (SIB)

Pay Mix Leverage Measures Measurement Level # of Pay Curves Thresholds Caps Pay Curve Linkages Performance Period Payout Frequency Crediting Events New Hire Practices And 15 More Topics


Closing Remarks

Convene a design team with the right stakeholders

Develop a work plan of activities and events – typical process takes 8-20 weeks depending on # of jobs & payees and degree of change

Develop a scorecard to assess your overall program and drive continual improvements

The difference between an average program and a best-in-class program can drive .5% - 5% difference in sales results.

Don’t miss your opportunity to leverage one of the most

powerful levers the sales organization has to drive results!


2012 Chief Sales Executive Forum October 24 – 26 | The Breakers | Palm Beach, FL

37

Top sales leaders across industries and Fortune organizations are convening to discuss the bold solutions they’re using to drive sales growth in 2012 and beyond . . . ones that are redefining sales excellence! Join these leaders and Alexander Group’s sales growth experts this October. You will bring back actionable sales growth strategies and tactics to your company for 2013!

www.alexandergroup.com/events/2012-cse-annual-forum

Speakers & Topics:

Kerry Grimes, VP, Global Solution Partner Sales - Siemens PLM Channel Partners - Optimize Sales Coverage to Drive Value & Margin

Neil Isford, VP, Smarter Analytics – IBM Customer Analytics: Dig Deeper for Competitive Advantage

Glenn Mason, President, Sales Strategy & Sales Operations – UPS Healthy Paranoia; Bold Leadership Means Never Being Comfortable

Mark Ouellette, SVP Business Operations - CA Technologies Transformation Journey: Building Value Into the Sales Ecosystem

Andrew Sage, VP, Worldwide Partner Led – Cisco Scaling Into the Mid-Market With Partner Led Selling

Mark Toland, SVP, Cardiology Sales & Corporate Accounts – Boston Scientific Sales Transformation; From Talking Product to Delivering Solutions


Questions?


Rachel Parrinello Principal, Sales Compensation Practice

415-276-5664 [email protected]

Please contact either of us for any additional information or questions.

Paul Vinogradov Vice President 415-276-5670

[email protected]

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