2014 Alexander Group Webinar - Is your sales comp plan working?

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Is Your Sales Compensation Plan Working?

How to Assess Your Compensation Plan and Prepare for 2013

September 24, 2013

Rachel Parrinello

Principal, Sales Compensation Practice

415-276-5664

[email protected]

Paul Vinogradov

Vice President

415-276-5670

[email protected]

© 2013 The Alexander Group, Inc.® 2

Welcome!

Introductions – Us and You!

Is Your Plan Working?

AGI Framework and Guidance

Questions and Answers


About Us

Rachel Parrinello Principal, Sales Compensation Practice

Paul Vinogradov Vice President

16+ years of sales effectiveness consulting

Runs AGI’s western region office

Runs AGI’s benchmarking practice

Sales compensation speaker

13+ years of sales compensation consulting

Manages AGI’s sales compensation benchmarking

Sales compensation speaker

http://www.alexandergroup.com/about/leadership-team/sanfrancisco


About You – Industries


About You – How Many Sales Roles


About You – How Many Compensation Plans


About You – Plans to Roles


About You – Degree of Pain


Sales Compensation is a Material Cost

Source: Alexander Group Benchmark Database. Costs include all sales and sales related roles that participate in the sales

compensation program, including sales management.

Compensation Cost of Sales Figures


9%

51%

27%

13%

No changes will bemade

Minor changes tosome of the plans

Significant changesaffecting some of the

plans

Major changesaffecting most allincentive plans

Most Companies Update Their Plans Each Year

91% plan to make program

changes for 2013

For 2013, the extent of changes you plan to make to your sales compensation program are:

*Source: Alexander Group 2013 Survey


Laggard

World Class

Where does your company’s compensation

plan fit along this continuum?


What Is a World Class Sales Compensation

Plan?

The Sales Compensation Plan

is a Valuable Management

Tool to Drive Sales Results if

Done Correctly

Drives business goals and sales strategy

Aligns with each sales job’s role and objectives

Closely links pay to performance

Motivates and rewards higher levels of achievement

Provides market-competitive pay to attract and retain appropriate level of talent

Is simple to understand


What is a World Class Sales Compensation

Program?

Linked with fair, equitable and stretch goals

Effectively communicated and documented

Sale force understands the plan

Sales leadership messages how the plan supports strategy

Is fiscally responsible and aligns with budget

Efficiently administrated to provide consistent, accurate, and timely pay

Provides the right level of alignment / equity across the organization

Includes ongoing governance to ensure program integrity

Designed by a collaborative process with key stakeholders from sales, finance, human resources, and sales operations

The Plan’s Effectiveness

Depends on the Support of

People, Processes, and

Systems


Assessment Angles

Program

Effectiveness

Strategic

Alignment

Market

Alignment

Principle

Alignment

Does your program

drive your company’s

strategy and align with

its job roles?

Does your program

align to best in class

principles?

How aligned is your

program to the

market?


Overall Strategic Goal

Component

Guidelines

Execution

Principles

Goal

Rules To Govern Design Solutions

Guidelines for Specific Program Components

Supporting Programs: Required for Any Sales

Compensation Plan

Design Framework


Rules To Govern Design Solutions



Compensation Plan

Design Framework

Attract, Retain and Reward Sales Resources To Drive Sales Results

Component

Guidelines

Execution

Principles

Goal




Compensation Plan

Design Framework

Strategy & Job

Alignment

Sales Force

Motivation

Pay for

Performance

1 2 3


Component

Guidelines

Execution

Principles

Goal



Compensation Plan

Design Framework

Strategy & Job

Alignment

Sales Force

Motivation

Pay for

Performance

1 2 3


Eligibility Pay

Levels

Pay

Mix Leverage Measures

Mechanics

& Pay

Curve

Perf &

Payout

Periods

Quotas/

Targets

Special

Incentives

Crediting

& Policies

1 2 3 4 5 6 7 8 9 10

Component

Guidelines

Execution

Principles

Goal


Design Framework

Strategy & Job

Alignment

Sales Force

Motivation

Pay for

Performance

1 2 3


Eligibility Pay

Levels

Pay


Mechanics

& Pay

Curve

Perf &

Payout

Periods

Quotas/

Targets

Special

Incentives

Crediting

& Policies

1 2 3 4 5 6 7 8 9 10

Investment ROI Communication Administration Governance and

Process

1 2 3 4

Component

Guidelines

Execution

Principles

Goal


Assessment Tools

1

2

3

4

5

Job Confirmation

Sales Force Survey

Pay and Performance Analytics

Market Benchmark Data

Philosophy


Low Performers Median Performers High Performers

75th

50th

25th

What is Your Pay For Performance

Philosophy? 1

Ma

rket

Com

parison


Illustrative Segmentation and Coverage Map 2

Strategic

Enterprise

Small and Medium

Business

Sales Engineer

Account Manager

Inside Sales

Sales Support

Product Specialist

Channel Manager


Primary Input – Job Design

Customer:

Target Segments

Target Accounts

Buyer Needs

Sales Potential

Sales Process:

Lead Generation

Account Development

Propose/Close

After Sales Service

Conversion, Penetration, Retention

Products and Services:

Product Type and Complexity

Knowledge Required

New Versus Current Product Job

Bandwidth

2


Inventory Sales Roles—Confirm Job Focus

Example Roles By Sales Strategy

Sales Support

Account Executive

Product Specialist

Vertical Specialist

Supports seller with orders, systems, data requests, etc.

Sells to and services current and new accounts

Focus on set of named accounts, generally within a vertical industry

Overlay specialist called upon by the Account Executive to help sell specific product to current and new accounts

Develops vertical industry strategy and evangelizes company to that vertical market

Acts as an SME and overlay specialist on an as-needed basis

Account Manager

Teamed with assigned seller to provide pre-sales and service to assigned accounts

Generally focused on selling existing products to existing accounts

Products

Current New/Different

Buyers

Prospects

Customers

Retention

Selling

Conversion

Selling

Penetration

Selling

New Market

Selling

Sales Strategy Matrix® Line of

Specialization

2


Job Profile Example – Strategic AM

Job Summary

Responsible for end user sales of Company

products and services to new and existing

strategic (5,000+ employees) accounts

Executes complex sales and effectively

manage the sales process and activities

Effectively engages other sales resources as

required

Primary Secondary

Teaming

Independent Small Team Large Team

Product Type

Point Product Solution Architecture

Job Category

Technical

Account

Partner

Product

Sales Motion

Market Coverage

Mature Emerging

Segment

Generalist Specialist

Selling Type

Inside

Field Hybrid

Sales Strategy

Identify / Qualify Lead

Qualify & Develop Oppty

Validate & Approve Solution

Fulfill

Renew Sell-Thru /

Enablement

Sales Cycle

0 Months 18 Months 24+ Months 6 Months

Sales Process Complexity

Low Medium High

Sales Process

Management

People Manager

None

Global

No / Minimal Focus

Strategic Enterprise Commercial SMB

Specialization

Quota $4M - $10M

Account Load 3 – 5 Accounts

New Opportunities in

Existing Accounts

Renewal / Recurring

in Existing Accounts

New Business in New

Accounts

Sales Process Sales Focus

Type of Sale

Channel-led Strategic Transactional

Key Metrics

Renewal Bookings

New Bookings

E/B

2


Complete a Survey to Capture Sellers

Sentiments

Competitive

TTC

Motivates

Overachievement

Challenging,

Achievable

Quotas

Clearly

Communicated

Easily Track

Comm. Earned

Overall

Rating

3.4 3.6 2.8 3.7 3.1 3.2

Strongly Agree Agree Disagree Strongly Disagree

3

-13% -9%

-28%

-10% -23% -19%

-5% -9%

-13%

-4%

-10% -5%

51% 49% 31%

53% 36%

38%

7% 16%

4%

19%

9% 5%


Use Time To Drive Design & Measure Success

Selling Time

Product B

Selling Time

Product A 80%

20%

55%

45% Selling Time

Product B

Selling Time

Product A

3

FY12 Time Profile FY13 Time Profile New Plan

0%

100%

200%

300%

400%

0% 100% 200%

% T

arg

et

Inc

en

tive

% of Quota Achievement

5x

3x

5x Accelerator if Achieve

Product B Quota


5 Must Do Pay and Performance Analyses 4

A

B

C

D

E

Pay Vs. Performance Scatter Plot

Incentive Payout Percentile Distributions

Quota Size Correlation Scatter Plot

Quota Performance Distributions

Quota Performance Percentile Distributions


A) Pay vs. Performance Scatter Plots 4

What: Correlation of incentive pay and sales performance.

Purpose: Identify inconsistencies between pay and performance.


B) Incentive Payout Percentile Distributions 4

What: Range of incentive payouts across incumbents by percentile.

Purpose: Examine pay discrimination and assess upside opportunity.


C) Quota Performance Distributions 4

What: Performance distribution across incumbents.

Purpose: Assess the effectiveness of the goal-setting process and compare performance range and shape with best practice distribution.


D) Quota Size Correlation Scatter Plots 4

What: Effect of quota size on target achievability.

Purpose: Assess the effectiveness of the goal allocation process and need varied accelerator structures based on quota size.


E) Quota Performance Percentile Distributions 4

What: Range of quota performance across incumbents by percentile.

Purpose: Assess current threshold and excellence levels; determine percent of incumbents above and below target performance levels.


Illustrative Market Data

Plan Type

Sales Incentive

Plan

Mgmt. Incentive

Plan

Profit Sharing

Pay Levels

Pay Mix

New Hire Practices

Excessive Payout

Practices

5

Measures

At-Risk

Add-On

Linked

Pay Curve

Thresholds

Excellence

Caps

Formula / Calculation

Methodology

Performance Period

Payout Frequency

Crediting Rules

Policies

HR Changes

Quota Changes

Cost Metrics

Plan

Administration

Administration

Tool

FTE

Ticket

Accuracy Rate

Processing

Communication

Plan Data at Job Measure Level Data Program Data


Analyze All Plan Design Components

Plan Design Components

Pay Mix

Performance

Measures/Weights

Plan Mechanics (Bonus,

ICR, etc.)

Payout Curves & Rates

Thresholds

Excellence Points

Upside/Leverage

Caps

Linkages, Hurdles

Performance Period

Payout Frequency

Add-on Bonuses

Sales Quota Crediting

Sample Plan Component Analysis

5


Illustrative Market Alignment Comparison

Aligned w/ Market Minor Misalignment w/ Market Major Misalignment w/ Market To Be Determined Legend:

Plan Component Market

Comparison Comparison Details

Pay Mix • Pay mix is on par with benchmark companies

Measures • Benchmark companies use between 2-3 measures, including linked metrics

Mechanics • All benchmark companies use a quota based mechanic

# of Pay Curves • More pay curves than benchmark companies

Thresholds • Most benchmark companies pay from the first dollar

Payout Limits • Most benchmark companies do not use a deceleration rate and/or cap

Leverage • Equal upside opportunity than the benchmark companies

Excellence • Calculated excellence points appear aligned to market

Pay Curve • Rates >100% are below average relative to benchmark companies

Performance Period • Most benchmark companies use annual performance period

Payout Frequency • Most benchmark companies provide monthly payouts

Calc. Methodology • Most companies use cumulative methodology; some use cumulative-period-to-date

Crediting • Sales crediting at bookings aligns; however shipment/invoice payment credit does not

Key areas of misalignment include # of accelerator rates, the rates and

crediting.

Summary Benchmark Findings

AM

Overall Comparison

5


Investment ROI Communication Administration Governance and

Process


Eligibility Pay

Levels

Pay


Mechanics

& Pay

Curve

Perf &

Payout

Periods

Strategy & Job

Alignment

Sales Force

Motivation

Pay for

Performance

1 2 3

1 2 3 4

Quotas/

Targets

Special

Incentives

Crediting

& Policies

1 2 3 4 5 6 7 8 9 10

Illustrative Assessment Using the Framework

= Working Well = Minor Area for Improvement = Major Area for Improvement

Component

Guidelines

Execution

Principles

Goal


AGI’s Sales Compensation Services

Sales Compensation Process

Design and Optimization 2

Sales Compensation Design

Principles 3

Sales Compensation

Scorecard 4

Sales Compensation

Benchmarking 5

Surveys / Custom Studies 6

On-Going Advisory

Services 7

Plan Design 1


Closing Remarks

Convene a design team with the right stakeholders

Develop a work plan of activities and events – typical

process takes 8-12 weeks depending on # of jobs &

payees and degree of change

Develop a scorecard to assess your overall program

and drive continual improvements

The difference between an average program and a best-in-class

program can drive .5% - 5% difference in sales results.

Don’t miss your opportunity to leverage one of the most

powerful levers the sales organization has to drive results!


Great sales organizations add value to the products they sell

The 2013 Chief Sales Executive Annual Forum will recognize the value

creators - select companies and sales leaders with the creativity, agility and

foresight to build and execute a value centric growth strategy around the

unique capability of the sales force. We will explore in detail both the

leadership elements and tactical dimensions of their approach.

The 2013 Chief Sales Executive Annual Forum is for top sales executives

who are charged with launching a value centric growth strategy and building

a sales organization to support their sales growth objective.

As a sales or sales operations leader, you will have the opportunity to:

• Test your thinking on how to instill value in your sales force

• Compare yourself with skilled value creators

• Learn new approaches to address specific value challenges

www.alexandergroup.com/events/cse-annual-forum

Executive Level

Networking

Facilitated

Roundtables

Keynote

Sessions

St. Regis

Monarch Beach, CA

November 11-13


Questions?


Rachel Parrinello

Principal, Sales Compensation Practice

415-276-5664

[email protected]

Please contact either of us for any additional

information or questions.

Paul Vinogradov

Vice President

415-276-5670

[email protected]

2014 Alexander Group Webinar - Is your sales comp plan working?

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