January 2011 A MAPI Council Survey

Transcription

1 Variable Compensation for Sales January 2011 A MAPI Council Survey

2 Variable Compensation for Sales Companies Offering Sales and/or Sales Engineering Teams Variable Compensation 22% Frequency of Variable Compensation Payouts 47% 7% 24% Yes, 79% Monthly Quarterly Semiannually Annually No, 21% 53% How Variable Compensation is Calculated 31% 9% 7% Revenue Gross Margin Revenue & Gross Margin Other

3 Comments on Variable Compensation for Sales Specific Plan Details Variation Across the Enterprise Direct Sales personnel are on a monthly commission program, under which they get a % of sales up to a predetermined target. If they exceed that monthly target level they receive a higher % of sales. - Sales Executive, Global Energy Products Manufacturer Outside sales have variable compensation, but not inside sales. - CEO, Global Electrical Products Manufacturer We use a method of 100% variable compensation based on the amount of gross margin obtained. It is not a linear scale. It is a % of net sales, where the % moves up and down based on the % of gross margin of the sale. - General Manager, Global Industrial Manufacturer Most North American sales people have a base, commission and growth over prior year bonus system. European and Japanese sales people mostly on a salary with little or no variable component. Our U.S. sales people are on a low base; during the worst of the recession (2009) we supplemented their pay monthly so that no one fell more than 10% vs 2008 income. - CEO, Global Automotive Products Manufacturer Our team is deployed around the world. Each region is different based on cultural and employment law differences. - CEO, Global Industrial Manufacturer Bonus potential is based on tiered scale after exceeding prior year's sales revenue. This is capped at 20%. However, it is reviewed annually based on market conditions, opportunities, growth goals etc. - General Manager, Global Industrial Manufacturer

4 Base/Variable Compensation for Sales Employees who Hit Goal Sales Employees Base vs. Variable Pay - Average Sales/Applications Engineering Employees Base vs. Variable Pay - Average Variable, 34% Base, 66% Base, 87% Variable, 13% Range of Variable Pay as a Share of Total Target Compensation Sales Employees Less than 20% of pay 14% Range of Variable Pay as a Share of Total Target Compensation Sales Engineering Employees 0% of pay 22% 20-29% of pay 32% 1-9% of pay 6% 30-39% of pay 32% 10-19% of pay 34% 40-49% of pay 7% 20-29% of pay 16% 50-99% of pay 9% 30-39% of pay 19% 100% of pay 7% 40% or more of pay 3% Percentage of Respondents Percentage of Respondents Question: For both Sales teams and Sales/Application Engineering teams who hit goal, what is the typical mix of base pay vs. variable compensation?

5 Base/Variable Compensation for Sales Employees who Hit Goal Sales Employees Sales/Applications Engineering Employees Companies that pay out variable comp more frequently reported sales employees having a higher share of variable comp. Frequency of variable comp payout has little impact on the share of variable comp for sales engineering employees. Variable Pay as a Share of Total Target Compensation Sales Employees Variable Pay as a Share of Total Target Compensation Sales Engineering Employees Annual payouts 19% Annual payouts 14% Semiannual payouts 22% Semiannual payouts 12% Quarterly payouts 30% Quarterly payouts 14% Monthly payouts 48% Monthly payouts 13% Share of Total Compensation Share of Total Compensation Question: For both Sales teams and Sales/Application Engineering teams who hit goal, what is the typical mix of base pay vs. variable compensation?

6 Sales Employees - How Variable Comp is Calculated more regular payouts tend to calculate variable comp based on Revenue. less frequent payouts tend to calculate variable comp based on other generally longer time-horizon measures (e.g. a mixture of revenue, gross margin, EBITDA, customer retention, new product sales, etc.) Greater share of variable compensation from straight revenue How Variable Comp is Calculated Greater share of variable compensation from a mixture of metrics 70% The more frequently sales people receive variable comp payouts: The greater the share of their total target income comes from at risk pay The more likely the company bases its variable comp plan only on revenues Share of Overall Target Compensation Allocated to Variable Comp 65% 20% 20% 48% 10% 15% 70% 65% 50% 67% 10% 33% 40% 30% 33% 22% 40% 19% Monthly payouts Quarterly payouts Semiannual payouts Annual payouts Monthly payouts Quarterly payouts Semiannual payouts Annual payouts Only Revenues Revenues & Gross Margin Only Gross Margin Other Share of Sales Pay that is Variable Share of Members Basing Variable Comp on Only Revenue Question: For both Sales teams and Sales/Application Engineering teams who hit goal, what is the typical mix of base pay vs. variable compensation?

7 Comments on How Variable Comp Payouts are Calculated Member Comments Member Comments 70% of the incentive is tied to individual performance against their revenue targets. 30% of the incentive is tied to the Operating Profit performance of the product divisions they represent. - Sales Executive, Global Electronics Manufacturer Metrics are based on a mix of revenue, gross margin, and cash flow and working capital targets. - COO, Global Materials Manufacturer It is based on new applications, new customers, and increased market share, not organic growth of the existing customer base. - Division President, Global Automotive Manufacturer Revenue, margin, revenues from new products and share. - Division President, Global Materials Manufacturer We do not want salesmen filtering our opportunities. A price that gives a low margin while we are on overtime can be rejected by headquarters. That same price can be great if our plants are at the time underutilized. We might also want or need to turn inventory into cash, even at low margin. More than just margin goes into deciding if a price is good for the company. - CEO, Global Automotive Products Manufacturer Revenue and Gross Margin. Gross Margin is used as an accelerator. - Sales Executive, Global Electrical Products Manufacturer For field sales, it s straight revenues. For our applications group, it s gross margin. - CEO, Global Industrial Manufacturer Several goals: operating profit of division, OP of company, ROCE of company, and personal goals. - Division President, Global Materials Manufacturer

8 Respondent Profiles

9 Respondent profiles Sales Force Size Offering Variable Compensation (n=45) 181 employees Average sales force size Sales Force Size Not Offering Variable Compensation (n=12) 166 employees Average sales force size Range of Sales Force Size Range of Sales Force Size 500 or more Sales FTEs 9% 500 or more Sales FTEs 8% Sales FTEs 13% Sales FTEs 25% Sales FTEs 16% Sales FTEs 8% Sales FTEs 22% Sales FTEs 42% Sales FTEs 22% Sales FTEs 0% 25 and fewer Sales FTEs 18% Percentage of Respondents 25 and fewer Sales FTEs 17% Percentage of Respondents 2010

10 With appreciation to our participants (57 companies)