Leveraging the Sales Manager Role to Improve Performance Role and Compensation Design Considerations by Darren Tse and Jennifer Frei August 25, 2015 Discussion topics Why should we care about sales manager effectiveness? Three things we have learned about highperforming sales managers How sales manager compensation can get in the way Reinforcing the coaching role of the sales manager 2 1
Why Should We Care About Sales Manager Effectiveness? 3 Is your organization wrestling with any of these sales force challenges? We can t hire reps We are not selling the right mix of product We are not retaining reps Competitors are gaining share Our sales force is giving away the store Our cost of sale is out of hand Teamwork is lacking Customer satisfaction is declining 4 2
We all know that sales managers are important, yet there is a lot of skepticism about sales managers Employees perception of their sales managers effectiveness is low Sales Global 18% 15% 25% 57% 25% 61% Favorable Mixed Unfavorable Source: Towers Watson 2014 Global Workforce Study Global Sales. 5 The top drivers of sustainable engagement provides relevant context Top drivers of Sustainable Engagement: Sales Employees 1 Leadership 4 Image Effective at growing the business Sincere interest in employees well-being Behaves consistently with organization s core values Trust and confidence in job being done Organization highly regarded by general public Organization conducts its business with honesty and integrity 2 Supervision 5 Career Development Treats me with respect Encourages new ideas and ways of doing things Acts in ways consistent with his or her words Effective career development conversations 3 Goals and Objectives Organization provides useful career planning tools/resources Organization provides opportunities for personal development and career advancement Access to effective training programs Good understanding of organization s business goals and steps needed to reach those goals Understanding of how job contributes to the organization achieving its business goals Source: Towers Watson 2014 Global Workforce Study North America Sales 6 3
Sales managers play a pivotal role in shaping the work experience that drives sustainable engagement Supervision Managers play a pivotal role in shaping the work experience Career Development Goals and Objectives Managers are in the best position to clearly communicate goals and assignments, and then to coach all team members in a customized fashion to emphasize the activities that will increase productivity and enhance career development for each individual How do you equip your sales managers to play this role? 7 Three Things We Have Learned About High- Performing Sales Managers 8 4
Learning 1: The 80/20 rule doesn t apply to sales talent management Myth busted: The 80/20 rule does not apply to sales talent management Percentage of Sales Managers Who Spend Time with Their Sales Team Spread evenly across the entire team 46% 63% Focused primarily on a few key members of the team, such as top performers or poor performers 22% 37% High-performing sales managers Other sales managers Source: Towers Watson report: Leverage Sales Managers to Create Superior Performance, 2011 9 Learning 2: Sales managers are viewed as more effective by their staff if they have more frequent interaction Sales representatives who interact with their managers more frequently are more likely to consider them effective Percentage of Employees Who Find Their Sales Manager Effective Based on Frequency of Interaction with Immediate Manager* Several times a day 51% About once a day 24% About once every few days 13% About once a week 9% About once every two weeks About once a month or less often 2% 1% *Employees were grouped into categories based on how frequently they interacted with their immediate managers. Percentages represent the percentage of sales employees who interact with their manager with that frequency who consider their manager effective. 10 5
Learning 3: Enabling sales leaders and managers to be more effective means focusing on some key areas Goals and objectives Clearly communicates goals and assignments Helps set appropriate performance goals 33% 40% 83% 80% Productivity Coaches me to improve my performance Removes obstacles to better performance 20% 29% 75% 75% Highly engaged Disengaged Fair performance evaluation Gives fair performance rating 29% 81% Makes fair pay decisions 25% 69% Source: Towers Watson 2012 Global Workforce Study 11 How Sales Manager Compensation Can Get in the Way 12 6
Polling question Our sales manager compensation plan drives the behaviors we want to see A. Strongly agree B. Agree C. Disagree D. Strongly disagree E. Don t know 13 Different compensation plans inherently send different messages Match the compensation plan to the message 1. Override on rep earnings 2. Multiple of average rep compensation 3. Customized commission plan 4. Bonus flip to commission 5. Goal-based plan 6. Annual incentive plan A. Achieve your goals and you will be rewarded B. Help your reps earn more money C. Drive up average compensation D. You will share in your team s success E. Everything over goal is gravy F. You are a leader in our organization, just like leaders in other departments G. Drive up average compensation 14 7
Different compensation plans inherently send different messages Match the compensation plan to the message 1. Override on rep earnings 2. Multiple of average rep compensation 3. Customized commission plan 4. Bonus flip to commission 5. Goal-based plan 6. Annual incentive plan A. Achieve your goals and you will be rewarded B. Help your reps earn more money C. Drive up average compensation D. You will share in your team s success E. Everything over goal is gravy F. You are a leader in our organization, just like leaders in other departments G. Drive up average compensation 15 What are the advantages and disadvantages of different plans? 1. Override on rep earnings example 2. Multiple of average rep comp example 3. Customized commission plan example 4. Bonus flip to commission example 5. Goal-based plan Performance Incentive Incentive Performance Performance to Goal or Standard Commission Rate Performance to Goal or Standard Commission Rate Performance to Goal or Standard Commission Rate All 15% of each representative s earnings All 1.5 x average rep comp 150%+ 4% 100% - 150% 4% 0% - 100% 2% 100%+ 100% 80% 100% of target incentive plus 4% of incremental sales 100% of target incentive 25% of target incentive 120% 100% 80% 200% of target incentive 100% of target incentive 25% of target incentive 16 8
Reinforcing the Coaching Role of the Sales Manager 17 We are seeing organizations formalize the sales manager coaching role ongoing Coaching is not a single event or even series of events, but a focused continuous-improvement effort dynamic Coaching evolves over time as needs and sales situations change job-embedded Unlike training, coaching is integrated real-time with day-today workflow and is directly relevant to actual business situations leader and rep Coaching is a joint responsibility. The coach needs to ask the right questions (but does not need to have all of the answers). The coach is a conduit for knowledge transfer An ongoing and dynamic series of job-embedded interactions between a leader and rep, designed to discover, inspire and reinforce behaviors, specific to that individual discover, inspire and reinforce Coaching is intended to help people selfgenerate results by bringing out the best in people behaviors Coaching is primarily about the application not the acquisition of knowledge, skills and behaviors. It is concerned with change and growth by providing information and guidance 18 9
The incentive plan can be a great vehicle to reinforce role expectations?what do you want me to do??how will I get paid? 19 One way to reinforce coaching expectations is through an explicit bonus Option 1: Bonus based on number or % of reps above specified production levels Example 100% of target incentive earned for targeted number of agents above specified production level Option 2: Bonus based on average productivity 100% of target incentive for achieving average targeted production level Considerations Every rep counts low-performing productivity must be brought up to win May incent even focus on all reps managed Average can be achieved by highperforming agents May not drive even focus on all agents 20 10
Example of coaching effectiveness bonus based on number of reps above goal Plan overview: Sales Manager Pay Mix: 70/30 Target Total Cash: 150,000 Total Target Incentive 45,000 SIP Sales Quota Coaching Effectiveness Components Bonus + Bonus + Strategic Sales Objectives Number of Reps at or Above Goal 3 4 5 6 7 8 9 10 Payout (% Target) Excellence 3 4 5 6 7 8 9 10 200% Above Target NA NA NA NA NA NA 8 9 150% Target 2 3 4 5 6 7 7 8 100% Below Target NA NA NA NA NA 6 6 6 7 50% Threshold NA 2 3 4 5 5 5 5 25% Below Threshold NA Less than 2 Less than 3 Less than 4 Less than 5 Less than 5 Less than 5 Less than 5 0% 21 Take-aways The overall perception of sales manager effectiveness is low Perception of Sales Manager Effectiveness: % Favorable = 57% Sales managers play a key role in driving sustainable engagement Sales managers shape the drivers of sustainable engagement by influencing: Supervision, Goals & Objectives, Career Development It is important to clarify sales manager role expectations Leading sales organizations have codified sales manager coaching programs Compensation for sales managers can get in the way Think about reinforcing the importance of coaching through $ Is the message being sent by the sales manager compensation plan aligned with what you want them to do? What unintended consequences might overrides have? Paying for the number or % of reps above goal (in addition to other things) is one way to reinforce the importance of even coaching 22 11
Discussion and Questions 23 Session description Leveraging the Sales Manager Role to Improve Performance During this session, we ll analyze the evolution of the sales manager role as the lynchpin of sales effectiveness; debate the pros and cons associated with different models for sales manager compensation; walk through a framework for developing a fit-forpurpose sales manager compensation program; and reveal our latest research and meaningful case studies. We ll show you how successful organizations have approached compensation design for sales managers, and how to avoid the pitfalls of those who failed. You ll leave with practical learnings that are transferrable and relevant to your daily responsibilities. 24 12