Your Sales Compensation Future: Why Sales Leadership Needs Your Help

Transcription

1 Your Sales Compensation Future: Why Sales Leadership Needs Your Help October 25, 2013 David Cichelli Senior Vice President The Alexander Group, Inc. Atlanta Chicago San Francisco Scottsdale Stamford SARA October 25, 2013

2 TS13 Individual Performance Plan Quick Reference Card (QRC) Certification TS13 Incentive Tax Preparation Fees Per Return Bucket TS13 Incentive Prior Related Experience (PRE) TS13 Incentive Tax Associate $0.00 Tax Specialist 1 $0.30 Tax Specialist 2 $0.50 Tax Specialist 3 $0.75 Tax Advisor 1 $1.00 Tax Advisor 2 $1.50 Tax Advisor 3 $2.00 Tax Advisor 4 $3.00 Senior Tax Advisor 1 $4.50 Senior Tax Advisor 2 $6.00 Senior Tax Advisor 3 $7.50 Senior Tax Advisor 4 $8.75 Senior Tax Advisor 5 $9.75 Master Tax Advisor $11.00 Client Retention TS13 Incentive 1 st and 2 nd Year $ Plus Years $6.00 $ $36.00 $1.50 $ $69.00 $4.50 $ $ $8.75 $ $ $13.00 $ $ $19.00 $ $ $24.00 $ $ $29.50 $ $ $35.00 $ $ $44.75 $ $ $56.75 $ $ $76.50 $ $ $90.00 $ $ $ $ $ $ Over $ % Other 15.0% AllState 20.0% Blue indicates incentives that have changed in TS13 0 Completed Years $ Completed Years $ Completed Years $ Completed Years $ Completed Years $ Completed Years $ Completed Years $ Completed Years $ Completed Years $ Completed Years $ Completed Years $5.50 Business Focus Areas TS13 Incentive Paid 2 nd Look $10.00 Paid 2 nd Look Prior Year $10.00 POM $5.25 Ask a Tax Advisor $5.00 Emerald Card $3.00 1

3 Sales Compensation Around the World 2

4 Sales Compensation Stakeholders Gee, thanks we don t need your help. And, your survey data is wrong. The costs are too high! No audit practices! Commission accounting is overwhelmed! We are not hitting our sales numbers! Who designed this mess? Where is HR/Comp? 3

5 Sales Compensation Stakeholders Gee, thanks we don t need your help. And, your survey data is wrong. The costs are too high! HR/Comp No audit practices! Commission accounting is overwhelmed! We are not hitting our sales numbers! Who designed this mess? Where is HR/Comp? 4

6 Sales Excellence Three Competencies 1 Destination 2 Execution 3 Transformation Align Sales Force with Business Objectives Operate Sales Force Functions Effectively Adopt New Practices, Discontinue Ineffective Practices 5

7 Elements Of Sales Effectiveness Sales Management System SALES LEADERSHIP STRATEGY STRUCTURE MANAGEMENT Opportunity Segments Coverage Design Customer Contact Continuum Job Design and Organization Structure Resource Deployment Sales Talent and Management Productivity Metrics Performance Management and Compensation SALES OPERATIONS & TECHNOLOGIES 6

8 Strategic Alignment Drives Excellence Business Objectives Sales Strategy Sales Management Sales Talent Sales Compensation Plan Achieving Alignment 7

9 2013 Sales Compensation Program Changes Extent of changes to the 2013 sales compensation plan: 51% 27% 9% 13% No changes will be made Minor changes to some of the plans Significant changes affecting some of the plans Major changes affecting most all incentive plans *Source: Alexander Group Survey 8

10 2013 Plan Changes For the primary sales job, the following elements of the incentive plan will be changed in Plan Changes Performance measures Upside potential Ramps/accelerators Thresholds/caps Pay mix None Formula type Rules affecting sales quota changes Change individual/team relationship Rules affecting territory changes Sales crediting Other Payment period Performance period Eligibility *Source: Alexander Group Survey 27,20% 26,40% 24,00% 22,40% 20,00% 18,40% 16,00% 12,80% 9,60% 8,80% 4,80% 4,00% 4,00% 2,40% 43,20% 9

11 Sales Compensation: Why You?

12 Your Challenge Too Many Local Solutions Too Many Plans Too Many Exceptions No Corporate Input No Uniform Principles...The Needs Seem Endless; The Means to Contribute Not Clear....How Can You Get Engaged and Help? 11

13 World-Class Sales Compensation Plan? Connects business goals and sales strategy Aligns jobs to objectives Links pay to performance Motivates higher achievement Attracts and Retains Is simple to understand 12

14 Who Owns Sales Compensation? Sales Management? Finance? HR? Sales Operations? Who has the competency? Who needs to be involved? Don t others have a stake in Sales Comp results? Are there not competing objectives? What about cross-functional teams? And who leads the design effort? 13

15 Effectiveness Ruler How Do You Measure Up? Process Architect...Oversee Ongoing Governance Process Project Participant...Contribute to Redesign Effort Data Resource...Provide Survey Data Approver... Quick, Sign Here Still In Your Office...Doing 14

16 2014: Your Action Steps

17 6 Things To Do Now! Get Educated Set Up the Process Establish Principles Conduct An Assessment Lead the Design Effectively Communicate 16

18 Educate Stakeholders Do an In-House Briefing Send to a Training Session/Seminar Share Articles of Interest Provide Books of Interest Sponsor In-House Workshop Get Educated Set Up the Process Establish Principles Conduct An Assessment Lead the Design Communicate 17

19 Education Resources WorldatWork Courses ESC: Elements of Sales Compensation SCP: Sales Compensation Design Books Compensating the Sales Force: McGraw-Hill Sales Compensation Made Simple: WorldatWork Sales Compensation Math: WorldatWork 18

20 Develop A Work Plan Get Educated Set Up the Process Establish Principles Phase I: Assess Gather information Evaluate practices Conduct An Assessment Lead the Design Communicate Phase II: Design Establish principles Develop and cost solution Phase III: Implement Launch the new compensation program 19

21 Meetings Phases and Activities Example Work Plan Summary Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Assessment Data Collection Interviews Survey Pay & Perf Analysis Initial Plan Design and Options Design Finalize Plan Design Cost Modelling Final Approval Implementation Administration Communication Roll Out 1 Strategy and Confirmation 2 Approval Kick Off Strategy and Initial Design Final Communications Confirmation Design and Design Policies Legend: = Design Team = Steering Committee 20

22 Establish Principles Get Educated Set Up the Process Goal Overall program goal Establish Principles Conduct An Assessment Lead the Design Communicate Guiding Principles Design constructs Component Guidelines Principles for each design component Support Element Guidelines Support program practices 21

23 Confirm Philosophy! Results...Establish roles and goals, reward for getting the job done. Exit those not on the same page... Workforce...Our people are our greatest asset...be loyal to them and they will be loyal to us Individual Hire people with destiny, support them, pay them well and get out of their way... Shareholders...We are here to serve the shareholders of this company... Customers...Create a great customer experience and customers will be loyal to us... Work Team...We are team driven...there is no I in team. Work together; Execution win together...we know this business...get the details right and the big stuff will be easy... Institution...People are lucky to have a job here. We are the leaders in our industry...the company founders gave us a proud tradition... 22

24 Explain Types Of Incentive Plans Target Rate Target Pay Risk No Risk Unit Rate 3x Uncapped 2x Capped Add-On Gainsharing Target Total Cash Compensation Base Salary Base Salary Base Salary Base Salary Types of Variable Compensation Plans 23

25 Define Competitiveness 75th 50th 25th Low Performers Median Performers High Performers 24

26 Establish Mix And Leverage Upside Mix Leverage 3x Low Job A Job B Job C Degree of Influence High 25

27 Target Total Compensation Recognition Contests/Spiffs Over Target Incentive Pay Target Incentive Pay Intrinsic Rewards Focused Efforts Outstanding Pay At-Risk Pay Special Compensation Sales Compensation Performance Based Compensation Target Total Compensation Salary Retention/ Non-Sales Pay Fixed Compensation Benefits Security Needs Sales Expenses Reimbursement 26

28 Principles Illustrations Eligibility...3x Uncapped: Customer Contact, Persuasion, Quota; 2x Capped for Field Sales Support TTC...At 25 th Pay Market; at 50 th Pay Market; at 75 th Pay 115% of Market Mix/Leverage...High Persuasion = 60/40/3x-u; Low Persuasion = 80/20/3x-u; Pre-Sales Support = 90/10/2x-c Measures...No More than Three; None Weighted Less Than 15%; One Has to Be a Production Measure Worth at Least 45% Quota Distribution...65% Reach and Exceed Quota 27

29 Conduct An Assessment Framework Get Educated Set Up the Process Establish Principles 1 Does your program align with company s strategy? Strategic Alignment Conduct An Assessment Lead the Design Communicate Program Effectiveness Principle Alignment Market Alignment 2 Does your program align to best-in-class principles? How aligned is your program to the market? 3 28

30 1 Strategic Alignment How To Do It Confirm your go-to-market model Profile your sales roles Conduct executive/corporate interviews Gather sales personnel feedback Present findings Strategic Alignment Program Effectiveness Principle Alignment Market Alignment 29

31 Sales Compensation Feedback Illustration Competitive TTC Motivates Overachievement Challenging, Achievable Quotas Clearly Communicated Easily Track Comm. Earned Overall Rating % 16% 51% 49% 4% 31% 19% 53% 9% 36% 5% 38% -13% -9% -5% -9% -28% -13% -10% -4% -23% -19% -10% -5% Strongly Agree Agree Disagree Strongly Disagree 30

32 2 Principle Alignment How To Do It Confirm sales compensation principles Analyse pay, performance and plan design data Summarize findings what s working and what s not? Present key issues for next plan period Strategic Alignment Program Effectiveness Principle Alignment Market Alignment 31

33 Assessment Framework Charter Attract, Retain, Develop and Reward a World-Class Field Organization Guiding Parameters Strategy & Job Alignment Sales Force Motivation Pay for Performance Plan Elements Eligibility Pay Levels Pay Mix Leverage Measures Mechanics & Pay Curve Perf & Payout Periods Quotas/ Targets Crediting & Policies Special Incentives Execution Investment ROI Communication Administration Governance, Assessment, Design 32

34 3 Market Alignment How To Do It Network with peers Obtain good third-party data Interpret compared to your pay strategy Strategic Alignment Program Effectiveness Principle Alignment Market Alignment 33

35 Target Total Compensation Market Data Total W-2 Compensation Percentile Our Data Survey Data Our Pay as Per Cent of Survey 10 th $145,000 $130, % 25 th $152,000 $149, % 50 th $160,000 $161, % 75 th $165,000 $172, % 90 th $175,000 $210, % Total W-2 (Thousands) $210,000 $200,000 $190,000 $180,000 $170,000 $160,000 $150,000 $140,000 $130, th 25 th 50 th 75 th 90 th Percentile Our Data Survey Data...Medians and Averages Alone are Meaningless 34

36 Lead The Design Process Get Educated Set Up the Process Establish Principles Conduct An Assessment Lead the Design 1 2 Use a Design Worksheet Cost/Model the New Plan Communicate 35

37 1 Use A Design Worksheet Eligibility Target Total Comp Pay Mix and Leverage Performance Measures Weights Mechanics Performance Period Payout Frequency Role Sales Rep National Account Manager Vertical Marketing Rep Channel Sales Manager Sales Associate 36

38 Make Shared Decisions Eligibility Target Total Comp Pay Mix and Leverage Performance Measures Weights Mechanics Performance Period Payout Frequency Role Sales Rep Yes $120k National Account Manager Vertical Marketing Rep Channel Sales Manager Yes $140k Yes $150k Yes $120k 50/50 3x 70/30 3x 75/25 3x 80/20 2.5x Sales Associate No $70k 100/0 Sales 70% Commission Annual Monthly Price 30% Modifier Annual Monthly Sales 70% Bonus Formula Annual Monthly Retention 30% Modifier Annual Monthly Sales 70% Bonus Formula Annual Monthly Rep Perf 30% Modifier Annual Monthly Sales 70% Bonus Formula Annual Monthly Partner Perf 30% Modifier Annual Monthly Sales 85% Merit Annual Annual MBO 15% Merit Annual Annual 37

39 2 Cost/Model The New Plan 38

40 Communicate Communicate a Theme, Not Just Mechanics Use Leadership Messages Train Field Managers Get Educated Set Up the Process Establish Principles Conduct An Assessment Lead the Design Communicate Develop Presentations Provide Web-Based Documentation and Calculation Models Give Ongoing Access to Pay and Performance Results Connect Personal and Company Performance Alignment Notify Promptly of Any Program Changes or Plan Interruption 39

41 Why Is Effective Communication So Critical? Perception is Reality Comp Plan Confirms Company s Strategy Feedback is Crucial for Management The compensation plan is only as good as the sales representative s understanding and acceptance Unique opportunity for leadership to reiterate the vision and strategy of the business Incumbent and management feedback helps ensure the success of the sales compensation plan 40

42 Leadership Message Key Elements State Compelling Business Condition Disconnect from Past Present the Future Thank for Past Efforts Call for Volunteers 41

43 Implementation Strategy Best Practices Effective CHANGE MANAGEMENT principles are required to successfully implement and communicate even the bestdesigned sales compensation programs. Absolute buy-in from the executive team A compelling business reason Support from key stakeholders Cascading communication approach Appropriate level of training Communication collateral for all employees A smooth transition strategy for all individuals to the new plan Administrative systems and reporting updated for program launch 42

44 Closing Remarks Don t miss your opportunity to leverage one of the most powerful management tools the sales organization has to drive results! 43

45 Sales Compensation Plans Produce Results If You Invest the Time to Design Them Correctly. 44

46 David J. Cichelli, Senior Vice President Business Experience Prior to joining the Alexander Group in 1985, David served for five years as a national practice manager in sales compensation for a leading compensation consulting firm. Previously, he had spent seven years providing support to the field sales organization of a multinational Fortune 200 chemical company. Academic Credentials David Cichelli, a Senior Vice President with The Alexander Group, Inc., a sales effectiveness consulting firm, contributes his knowledge and experience to a wide array of sales organizations. His clients include leading companies in technology, telecommunications, wholesale/distribution, financial services and healthcare. David helps clients redefine and deploy sales coverage to ensure optimal sales performance. By applying the Alexander Group s Sales Management System, he helps companies achieve their sales objectives through a variety of techniques, including improved channel design, sales ROI, sales metrics, sales forecasting, quota allocation, sales force automation solutions and sales compensation. Widely recognized by national professional associations and trade publications for his work in linking sales compensation to management's objectives, David is a frequent speaker on sales compensation topics. He is author of McGraw Hill s Compensating the Sales Force (2 nd edition). He is also the author of The Sales Growth Imperative, published by McGraw Hill. He serves a leadership role in the design of the firm's sales effectiveness conceptual models. David is an officer of the company. M.S., Michigan State University B.S., Pennsylvania State University Faculty Experience: Merage Foundation University California, Irvine; WorldatWork; Columbia University 45

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