10 Sales Compensation Mandates For HR

Transcription

1 10 Sales Compensation Mandates For HR David J. Cichelli Sr. Vice President Atlanta Chicago San Francisco Scottsdale Stamford

2 Sales Compensation Plan Challenges Issues Ineffective Plans Do any of these sound familiar? Plans not aligned with strategy, job role and/or desired behaviors Talent acquisition and retention issues Inconsistent adherence to best practices, differing philosophies Cost and Inefficiency Increased Cycle Time Non-scalable process for managing compensation Sales reps shadow account their paychecks Role and/or plan proliferation Late communication, miscommunication Comp plans delivered late Inefficient use of resources to manage end-to-end comp process 2015 The Alexander Group, Inc. 2

3 Some Bad HR Sales Compensation Mistakes Being Unprepared Not knowing the topic, your plans and company objectives Complaining About Pay Levels Not having credible pay data Complaining About the Number of Plans Being concerned about the wrong thing Hijacking the Design Process Careful what you ask for Being Tactical, Not Strategic Focusing on insignificant issues Doing Nothing Waiting for someone to contact you 2015 The Alexander Group, Inc. 3

4 10 Sales Compensation Mandates For HR Get Educated Establish Your Charter Manage the Process Establish Principles 5 Add Value 6 Bench Test the Design 7 Fortify the SC Ecosystem 8 Ensure Legality 9 Sell the Plan 10 Monitor and Assess 2015 The Alexander Group, Inc. 4

5 1 Get Educated Source WorldatWork Courses Resources Elements of Sales Compensation Sales Compensation Design Developing Incentive Plans that Work Books WorldatWork Publications Compensating the Sales Force The Complete Guide to Sales Force Incentive Compensation Sales Compensation Essentials Sales Compensation Math Sales Compensation: A Collection of Articles from WorldatWork Automating Sales Compensation Designing Sales Compensation Plans Sales Compensation Made Simple Get Certified Certified Sales Compensation Professional 2015 The Alexander Group, Inc. 5

6 Construct Illustration 5 Variable Compensation Types Target Rate Target Pay Risk No Risk Unit Rate 3x Uncapped 2x Capped Add-On Gainsharing Types of Incentives Target Total Cash Compensation Base Salary Base Salary Base Salary Base Salary Types of Variable Compensation Plans 2015 The Alexander Group, Inc. 6

7 2 Establish Your Charter Who Owns Sales Compensation? Sales Management? HR/Compensation? General Manager? Choices Sales Operations? Finance? Marketing? Others? 2015 The Alexander Group, Inc. 7

8 Your Charter; Their Charter Parties Accountabilities Sales Management Establish Objectives Define Deployment Identify Measures Represent Field Perspectives and Own the Sales Comp Plan Marketing Finance Sales Operations HR/Comp Confirm Product Strategies Establish Price Management Value Products Establish Expense-to-Revenue Ratio Cost of the Plan Provide Administration Provide Pay/Performance Data Ensure Tracking Evaluate Plan Performance Gather External Pay Data Establish Sales Compensation Principles Facilitate the Design Process 2015 The Alexander Group, Inc. 8

9 3 Manage The Process Define and sequence key activities Design Administer 2015 The Alexander Group, Inc. 9

10 Design Process Phases Phases Actions Phase I: Assess Phase II: Align Gather and assess current sales compensation practices, including: sales objective, job definitions, time allocation, market data and pay and performance data. Meet with senior executives to ensure sales effort alignment with strategic objectives. Document the company s sales compensation principles for use in the development of the revised sales compensation plans. Phase III: Develop Work with a task force of key sales compensation stakeholders to develop and cost new sales compensation plans for each job. Phase IV: Implement Guide sales compensation staff to create an implementation strategy, plan documentation, training and roll-out campaign The Alexander Group, Inc. 10

11 Timeline In Weeks Phases Phase I: Assess Gather Information Analyze Effectiveness Provide Evaluation Phase II: Align Phase III: Develop Phase IV: Implement Confirm Strategy Define Approve Solutions Design Plans Define Policies and Practices Document and Cost New Plans Develop Roll-Out Strategy Prepare Collateral Assess Automation Readiness Interviews Steering Committee Project Team Staff 2015 The Alexander Group, Inc. 11

12 Resources Who Does What Phases Roles Steering Committee Project Team Internal Project Manager Interviewees Provides strategic direction and guidance on project objectives Provides mid-project review feedback Reviews and approves final recommendations and solutions Small and representative team comprised of key stakeholders Provides project oversight, direction and approval Tests ideas, brainstorms solutions, represents functional interests, commits to decisions and balances the project s goals against the company s overall mission You Oversees the data and information collection, arranges interviews, schedules meetings and monitors the progress of the project Provides continuity for all project steps Consist of relevant stakeholders and interested parties Participate in a 60-minute interview to provide business context, insights and perspective 2015 The Alexander Group, Inc. 12

13 Program Governance Describes the internal process, roles and responsibilities and timing for end-toend management of Sales Compensation. PLAN DESIGN IMPLEMENT ADMINISTER ASSESS Business Strategy and Objectives Design Session Preparation Playbook Creation Payment Processing Compensation Plan Assessment Sales Strategy and Coverage Model Compensation Design Sessions Model and Cost Territory Planning Quota Planning System Setup I (Templates) Additions Adjustments, Issues & Disputes Compensation Program E2E Assessment Plan Roll-Out Job Roles Compensation Plan Approval System Setup II (Filters) Incumbent Inquiry Pay Level Benchmarking 2015 The Alexander Group, Inc. 13

14 4 Establish Principles Goal Attract, Retain and Reward Best-in-Class Sales Force Guiding Principles Strategy & Job Alignment Sales Force Motivation Pay for Performance Component Guidelines Eligibility Pay Levels Pay Mix Leverage Measures MBOs Mechanics & Pay Curve Perf & Payout Periods Quotas/ Targets Crediting & Policies Special Incentives Support Elements Investment Communication Management & Execution Governance 2015 The Alexander Group, Inc. 14

15 Eligibility Principle Illustration Eligibility Pay Levels Pay Mix Leverage Measures MBOs Mechanics & Pay Curve Perf & Payout Periods Quotas/ Targets Crediting & Policies Special Incentives Guidelines: Job must meet all of the following five criteria: 1. Preponderance of job role must be sales related 2. Significant customer and/or partner selling contact and relationship 3. Persuade the customer/partner to act in a positive financial benefit to the company 4. High level of sales process ownership/involvement 5. Clear and quantifiable sales objectives Sales managers who influence sales results through management of people are eligible. Exceptions are handled via a documented governance process The Alexander Group, Inc. 15

16 Pay Levels Principle Illustration Eligibility Pay Levels Pay Mix Leverage Measures MBOs Mechanics & Pay Curve Perf & Payout Periods Quotas/ Targets Crediting & Policies Special Incentives Guidelines: Clear and consistent pay philosophy Competitive pay levels to attract and retain the right level of talent required by the field org. Benchmark to the right roles based upon job content Benchmarking to the right set of companies based upon market competitors, talent competition and similar sales motion 2015 The Alexander Group, Inc. 16

17 5 Add Value Adding Value Create a Plan Inventory Conduct Market Pay Analysis Actions Prepare Pay/Performance Analysis Undertake an Employee Survey Rationalize Job Titles with Platform Jobs 2015 The Alexander Group, Inc. 17

18 Create A Plan Inventory Gather all sales compensation plans Job Title Global Account Manger Key Account Manager Target Pay Pay Mix $250,000 80/20 $175,000 70/30 Product Specialist $140,000 85/15 Territory Representative Telesales Representative $110,000 60/40 $85,000 70/30 Upside Measures Weight Quota Formula 3x uncapped 3x uncapped 2.5x uncapped 3x uncapped 2.5x uncapped Revenue 50% Individual Bonus Profit 30% Individual Bonus Product Mix 20% Individual MBO Revenue 70% Individual Bonus Profit 30% Individual Bonus Product Mix 0% Revenue 70% Individual Bonus Profit 0% Product Mix 30% Individual MBO Revenue 100% None Commission Profit 0% Product Mix 0% Revenue 60% Team Bonus Profit 0% Product Mix 40% Team Bonus 2015 The Alexander Group, Inc. 18

19 Conduct Market Pay Analysis Market Data Company Data 10th $ 122,000 $ 132,000 25th $ 135,000 $ 143,000 50th $ 146,000 $ 148,000 75th $ 162,000 $ 155,000 90th $ 182,000 $ 170,000 $200,000 $180,000 $160,000 $140,000 $120,000 $100,000 10th 25th 50th 75th 90th Market Data Company Data 2015 The Alexander Group, Inc. 19

20 % of Target Incentive Earned Prepare Pay/Performance Analysis 250% 200% 150% 100% 50% 0% 0% 25% 50% 75% 100% 125% 150% 175% 200% % of Quota Achievement 2015 The Alexander Group, Inc. 20

21 Undertake An Employee Survey Competitive TTC Motivates Overachievement Challenging, Achievable Quotas Clearly Communicated Easily Track Comm. Earned Overall Rating % 51% 16% 19% 4% 9% 49% 31% 53% 36% 5% 38% 24% 18% 23% -13% -9% -5% -9% -28% -13% 15% 21% 34% -10% -4% -23% -19% -10% -5% 2015 The Alexander Group, Inc. 21

22 Rationalization Reduce Redundant Titles Actual Title Global Manager Enterprise Seller Corporate Asset Manager Kellogg Account Manager Region Sales Executive Senior Sales Representative Customer Leader Senior Account Manager Sales Manager Customer Success Manager drox Application Seller Region Support Seller Platform Title Key Account Manager Account Manager Territory Representative Sales Specialist 2015 The Alexander Group, Inc. 22

23 Customer Focus Expertise Segment Route-to-Market Sales Strategy Sales Process Deployment Management Responsibility Platform Jobs Group roles into platform jobs. Framework Example Job Attributes Job Title 1 Job Title 2 Job Title 3 Job Title 4 Platform Job 1 Platform Job 2 Platform Job Example Territory Sales Rep Territory Manager Sales Rep Sales Specialist Territory Sales Rep Field-based role focused on retaining and growing existing base of customers and acquiring new customers. Sells to a large number of mid-size accounts within a given geographic territory The Alexander Group, Inc. 23

24 6 Bench Test The Design Types Test the Cost Implications Set and Test Payout Curves Test Distribution Payouts Run Payout Scenarios 2015 The Alexander Group, Inc. 24

25 7 Fortify The SC Ecosystem Look For Leakage Quota Systems Discipline and accuracy of quota allocation Frailness of quotas Quota changes guidelines Account Assignment Crediting Administration SPIFFS and Contests Account assignments (balance, fairness) Account assignment changes (and how it affects quotas) Account status changes Split credits Double crediting Timing of sales credit Clawback provisions Automation support: timeliness and accuracy Exception policies and protocols Reporting to reps Alignment with SIP Rules for SPIFFS and contests Governance model 2015 The Alexander Group, Inc. 25

26 8 Ensure Legality Did you have any legal issues with the sales compensation plan? 29% Had Legal Issues! 2015 The Alexander Group, Inc. 26

27 Legal Issues Work With Your Lawyer! Topics FLSA: Exempt Non-exempt Status Legal Wingdings Earned Income No Holdbacks (California) Signed Acknowledgments (California* & New York) California!! *California Labor Code 2751: Signed Acknowledgments Plan Must be in writing. Must set forth the method by which the commissions shall be computed and paid. Employer Must sign. Must give signed copy to employee. Employee Must sign acknowledgment of receipt The Alexander Group, Inc. 27

28 Documentation Legal Checklist Complete These Checklist Items Legal Checklist Action Item Written Document Program Start and End Dates Definition of Earned Sales Crediting Rules Calculation Method Documented Timing of Payments Treatment of Draws, Advances, Paybacks Exemption Status Legal Counsel Review Employer Signed Plan Document Employee Acceptance Signature Completed 2015 The Alexander Group, Inc. 28

29 Plan Document Sections Sales Compensation Plan Document Purpose Sales rep role and purpose for pay plan Overview Summary of plan components Pay Components Program Qualifiers Employment Status Legal Statement Describe base and incentive Limits, crediting, adjustments New hire, termination, leave Rights and responsibilities Appendix Payment schedules and rates 2015 The Alexander Group, Inc. 29

30 9 Sell The Plan Effective Communication Principles Communicate a Theme, Not Just Mechanics Train Field Managers Develop Presentations and Scripts Communications Guidelines Use Leadership Messages Provide Web-Based Documentation and Calculation Models Give Ongoing Access to Pay and Performance Results Notify Promptly of Any Program Changes or Plan Interruption Show How Pay and Performance Contributes to Company and Personnel Rewards 2015 The Alexander Group, Inc. 30

31 Communication Questions To Answer Effective Communication Principles Why Are We Changing? How Will This Impact My Pay? What Is Changing? Ask These Questions Set the Vision & Show the Impact How Should I Change the Way I Operate? How Will It Work? When Will It Go Into Effect? 2015 The Alexander Group, Inc. 31

32 Communication Parameters Suggested Communication Ideas Communication Set the Vision Show the Impact What does it mean to the company? How does this affect me? What can I expect and when? Knowledge Transfer Jumpstart Impactful & Immediate Manager Coaching and Messaging Long-term Education & Training Repetitive Communication Implementation Tools Town Halls, Sales Meetings and 1:1s Playbooks Framework Documentation FAQs Governance, Oversight and Metrics 2015 The Alexander Group, Inc. 32

33 Communication Framework Elements Communication Requirements Audiences Key Corporate Leaders Steering Committee Sales Leadership (VPs/Managers) Entire Sales Force Individual Sellers Entire Organization Type of Message Visionary/Macro Informational (Introduction) Informational (Update) Request Call to Action Channel Broadcast/Webcast Manager to Team Ongoing Newsletter Direct One-on-One By Whom Executive Leadership Change Leadership Team Sales Leadership Work Team Leader When Set timing to match message level Communicate with urgency Don t send multiple or confusing messages 2015 The Alexander Group, Inc. 33

34 10 Monitor And Assess Suggested Communication Ideas Strategic Alignment Test alignment with corporate business objective Review the balance of plan metrics Best Practices Compare our practices to market benchmarks Confirm desired competitive position Principal Assessment Compare to proven center-practice design principles 2015 The Alexander Group, Inc. 34

35 Assessment Report 2015 The Alexander Group, Inc. 35

36 What Sales Comp Results Do We Seek? Improved Performance Reduced Cost Mitigated Risk Improved Corporate Culture 2015 The Alexander Group, Inc. 36

37 10 Sales Compensation Mandates For HR 1 Get Educated 2 Establish Your Charter 3 Manage the Process 4 Establish Principles 5 Add Value 6 Bench Test the Design 7 Fortify the SC Ecosystem 8 Ensure Legality 9 Sell the Plan 10 Monitor and Assess 2015 The Alexander Group, Inc. 37

38 Questions? 2015 The Alexander Group, Inc. 38

39 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 Compensating the Sales Force (2 nd edition) and 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. His most recent publication is the 2014 Sales Compensation Almanac, published by AGI Press. M.S., Michigan State University B.S., Pennsylvania State University Faculty Experience: Merage Foundation University California, Irvine; WorldatWork; Columbia University Please contact David at [email protected] 2015 The Alexander Group, Inc. 39

40 About Alexander Group OUR MISSION Alexander Group provides sales strategy and execution consulting services. Our goal is to partner with Chief Sales Executives to help them achieve the maximum return on their investment in the Sales Force. We leverage our market and client knowledge, sales expertise and our proprietary repository of sales benchmarks. OUR VALUE Our single focus is helping the world s leading sales teams drive growth. Backed by 29 years of experience, deep industry data and a proven methodology, Alexander Group provides insight that allows sales organizations to anticipate change, align their sales force with company goals and drive sales ROI. OUR PEOPLE The majority of our consulting team joined Alexander Group with sales and/or marketing experience. Many join us from other prestigious consulting firms out of a desire to focus on sales strategy and execution. Once on board, we provide continual training and certification across sales-related specialties. OUR HISTORY Founded in 1985, the Alexander Group has provided sales management consulting services to sales and marketing executives at over 1,000 companies, including more than 70% of the Fortune The Alexander Group, Inc. 40

41 2015 The Alexander Group, Inc. Atlanta Chicago San Francisco Scottsdale Stamford 41