CREATING EFFECTIVE SALES COMPENSATION PLANS

Transcription

1 CREATING EFFECTIVE SALES COMPENSATION PLANS

2 JOHN ANTUNES GLOBAL COO, NRS MEDIA

3 Preamble - Bonus Payments StaBsBcs Bonus Payments Change in Bonuses across different Industries 21 % *All figures are derived from the Average Weekly Earnings (AWE) dataset, part of the Labour Market Statistics release:

4 DefiniBon Wikipedia defines sales force compensa<on as:..an incen<ve plan that needs to align the salesperson s ac<vi<es (and outcomes) with the companies objec<ves *Taken from Wikipedia website:

5 Factors to Consider 1. Level of Pay / Pay- mix 2. Measure of Performance 3. Performance Payout Rela<onships

6 Level of Pay / Pay- mix 1. Total On Target Earnings (OTE) Base salary + Bonus(es) = Total OTE 2. Pay- mix Frequency Frequently used: 50/50 60/40 70/30 90/10 (sales enablement / administra<ve roles) Depends on role / exper<se 3. Salary strategy Below, Above or Median Depends on geography Depends on economic climate

7 Measure of Performance What do we mean by performance related pay / measure of performance? Dis<nguish between what is expected as part of the role, and what is related to performance that will earn commission / bonus payments Avoid paying commission on KPIs that are difficult to monitor or can be easily manipulated, e.g. number of visits / talk- <me, etc. If you cannot get away from this, then set a minimum standard and only pay on overachievement, and cap it For non- sales, make sure the objec<ves are SMART and regular review is key Monitor the how not only the what

8 Performance Payout RelaBonships 1. Regular Monthly / Quarterly payment based on achieving specific criteria 2. Regular + Annual Monthly / Quarterly Monthly / Quarterly payment based on achieving specific criteria Plus Annual amount for achievement of further criteria, paid at year- end Op<onal: Further top up payment based on overall Annual achievement 3. Annual only Annual payment for achievement of overall annual criteria 4. Do s and Don ts Do Keep it simple Do design a plan that keeps your people switched on Do introduce a ready reckoner Do document the Commission Plans and get signature Don t design commission plans with penal<es / claw backs Don t cap commission (unless paying on KPIs)

9 Example: Regular + Annual Scenario: Salesperson is responsible for selling a solu<on to the end- customer but as a business you also want to ensure that the solu<on s<cks and you want to maximise customer reten<on Suggested Plan: General rule is that Total Cost of Salesperson to company should be 10% to 20% (maximum) of overall Revenue they bring in Therefore: 45k base + 45k Bonus = 90k OTE / Target Revenue = 600k (cost of sale 15%)

10 Example: Regular + Annual Suggested Plan: Base salary 45k + Commission 45k = Total OTE = 90k Annual Target: 600k Commission could be structured as follows: Quarterly value based on Product / Services Target achievement Annual amount based on customers having gone live or retained

11 Example: Regular + Annual Commission could be structured as follows: Total commission = 45k 60% ( 27k) based on Quarterly Target achievement, paid Quarterly 40% ( 18k) based on Annual customer go live / reten<on Q1 Q2 Q3 Q4 Full Year Quarterly Target 100, , , , ,000 Quarterly Commission 6,750 6,750 6,750 6,750 27,000 *Annual Commission ,000 *You d need to be specific (SMART) on the defini<on of go live / reten<on

12 Example: Regular + Annual Sample Target Achievement: Q1 Q2 Q3 Q4 Full Year Quarterly Target 100, , , , ,000 Quarterly Commission 6,750 6,750 6,750 6,750 27,000 Annual Commission ,000 Q1 Q2 Q3 Q4 Full Year Qtry Revenue Achieved 100, ,500 98, , ,500 % of Qtry Target Achieved 100% 95% 98% 100% 98% Qtrly Commission Paid 6, ,750 13,500 Annual Commission ,000 Total Commission paid = 13, ,000 = 31,500 out of possible 45,000

13 Example: Regular + Annual Other considera<ons on this example: Q1 Q2 Q3 Q4 Full Year Quarterly Target 100, , , , ,000 Qtry Revenue Achieved 100, ,500 98, , ,500 % of Qtry Target Achieved 100% 95% 98% 100% 98% Qtrly Commission Paid 6, ,750 13,500 Annual Commission ,000 Introduce minimum threshold instead of an absolute number Allow salesperson to make up deficit by overachieving in other Quarters You can then pay the full year commission at year end if they have made up deficit Pay overachievement / held back commission at year-end thus avoiding claw backs

14 Other Guidelines / Tips Pro- rata targets and commission for new employees joining throughout the year Employees leaving the business: Within a quarter should not qualify for Quarterly commission unless they leave at the end of the last month of the quarter Within the year should not qualify for any part of an Annual commission Recruitment The best salespeople are mo<vated by money The best salespeople are not only mo<vated by money The best salespeople close / trial close

15 QuesBons?

16 THANK YOU.