Sales Management Association Webcast Exploring New ... · Anaplan Customer Case Study Defining...

© Copyright 2015 The Sales Management Association.

Sales Management Association Webcast

18 March 2015

Presented by

Exploring New Territory – The

Geography of Compensation Planning

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About The Sales Management Association

Slide 2© 2015 The Sales Management Association. All rights reserved.

A global, cross-industry professional association for sales

operations and sales management.

Focused in providing research, case studies, training, peer

networking, and professional development to our membership.

Fostering a community of thought-leaders, service providers,

academics, and practitioners.

Learn More: www.salesmanagement.org

http://www.salesmanagement.org/

Today’s Panelists


#SalesComp

https://twitter.com/smassociation














© Copyright 2015 The Sales Management Association.

Sales Management Association Webcast

18 March 2015

Presented by

Exploring New Territory – The

Geography of Compensation Planning













Agenda


Sales Planning Today

Aligning Sales Plans with Corporate Objectives

Unstoppable Sales Performance Framework

Anaplan Customer Case Study

Defining Optimal Territory Planning

Various Levels of Territory Planning Practices

How Sales Compensation Supports Territory Planning

Use of Absolute Commission vs. Quota Based Plans

Better Sales Comp (BSC) Case Studies – Where

Compensation and Territory Planning Go Wrong

$5M to $10M Lost Annual Sales Revenue.

Critical to “Get It Right” and “Keep It Right”

Slide 6© 2015 Anaplan. Used with permission by The Sales Management Association. All rights reserved.

S p e n d50% less time

7 X l e s s

e x p e n s e

S p e n d50% less time

7 X l e s s

Improved Sales Territories, Quotas

& Incentive Compensation

5% to 10%of Annual Sales as

“Lost Opportunity” that could have been

captured through

improved Sales Planning

Source: Gartner.

$100MCompany

OPERATIONS

SALES

HR

FINANCE

ITMARKETING

Limited Scale &

Collaboration

No Audit & Controls

Resource Intensive

XLS

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Misaligned Plans

No Trust in Data

A BROKEN LANDSCAPE

Slide 7

Sales Planning Today

© 2015 Anaplan

REALITY & MINUTIA

© 2015 Anaplan

Improving Sales Performance is a Constant Struggle

• Manual processes and spreadsheets

• Changing priorities in corporate objectives

• Legacy systems that are not flexible

• Increasing complexity in sales processes

• Inability to adapt to change and disruption

• No modeling & planning solutions (What-If Scenarios)

• Data stored in disparate systems (CRM, ERP, HR)

• Lack of collaboration across the enterprise/stakeholders

• Visibility of accurate sales data (i.e. forecasts, historical)

• Many other challenges…

SALES

XLS

XLS

XLS

XLS XLS

XLS

REALITY & MINUTIA

© 2015 Anaplan


NEW CUSTOMERS

ACQUISITIONS

Corporate Objectives & AlignmentCROSS-SELL &

UP-SELL

OPPORTUNITIEs

RETAIN EXISTING

CUSTOMERS

NEW PRODUCT

LAUNCH

INDUSTRY

VERTICAL

EXPANSION

GLOBAL

REACH

REALITY & MINUTIA

© 2015 Anaplan


TERRITORY

PLANNING

INCENTIVE

COMPENSATION

PLANNING

QUOTA

PLANING

ACCOUNT

SEGMENTATION

PLANNING

SALES

CAPACITY

PLANNING

REVENUE

PLANNING

PLANNING & MODELING

CONFIGURE, PRICE

& QUOTE

TERRITORY

CREDITING

PROCESS

INCENTIVE

COMPENSATION

PROCESSING

EXECUTING

INCENTIVE

COMPENSATION

ELIGIBILITY

PROCESS

QUOTA

ATTAINMENT

PROCESS

NEW CUSTOMERS

ACQUISITIONS

Corporate Objectives & AlignmentCROSS-SELL &

UP-SELL

OPPORTUNITIEs

RETAIN EXISTING

CUSTOMERS

NEW PRODUCT

LAUNCH

INDUSTRY

VERTICAL

EXPANSION

GLOBAL

REACH

SALES FORECASTING KPI DASHBOARDS

EVALUATE

REPORTING ANALYTICS

SALES PLANNING & MODELING

© 2015 Anaplan

Sales Planning & Modeling to Align with Corporate Objectives

Corporate Objectives

AlignmentMisalignment

TERRITORY

PLANNING

INCENTIVE

COMPENSATION

PLANNING

QUOTA

PLANING

ACCOUNT

SEGMENTATION

PLANNING

SALES

CAPACITY

PLANNING

REVENUE

PLANNING

Account

Segmentation

UNSTOPPABLE SALES PERFORMANCE Framework


Revenue

Planning

Territory

Planning

Sales Capacity

Planning

Quota

Planning

Incentive Comp

Planning

Corporate Objectives & Goals

Territory Crediting

Process

Quota Attainment

Process

Incentive Comp

Eligibility Process

Incentive Comp

Process

Payment

Process

Planning & Modeling Execution

Evalu

ating, A

dap

ting to C

hange D

ashboard

, Reportin

g, A

naly

tics

Reconciliation

Process

Get It Right. Keep It Right.

Customer Case Study


Optimal Territory Planning

15

Maximize sales results from our market opportunities

Allocate enough sales time to appropriately cover our current and potential customers

Ensure we profitably cover all of our relevant accounts

You had me at “Optimal” but what does all this really mean?!

© 2015 Better Sales Comp Consultants. www.bettersalescomp.com

What is Territory Planning?

16

How we organize and evaluate our accounts

How we set expectations for those accounts

“A”

“B”

“C”

How we cover those accounts


How We Organize and Evaluate Our Accounts

Identify and group our accounts into logical coverage segments

17

“Ante Up” “Good” “Next Level”

• Review current account data to rank and organize accounts

• Group similar accounts needing similar seller skills and coverage

• Try to evaluate “potential growth opportunity” to modify account rankings or groupings

• Evaluation can be subjective, e.g., A/B/C growth potential or informed by data, e.g., “product gaps”

• Use external market data to help assess opportunity

• Recent BSC study – 35% used 3rd party data (e.g., D&B, IDC, Gartner, etc.) when growth planning for accounts and setting quotas

Common Factors to Consider

• Geography• Company size• Industry verticals

• Product applicability• Existing customers or new

customers

• Sales processes/cycle times• Related sales force skill sets

needed


How We Cover Those Accounts

Define deployment approach – which reps to what accounts; how many

18


• Have defined roles• Have salespeople suited to

fill those roles• Assign them logically

(location, windshield time, skill set, etc.)

• Create some logical gearing ratios – and consistently test and validate them

• Match sales time supply and demand

• Analyze and ensure enough “quality” selling time, e.g., 75%

• Use time-based coverage methodologies – time needed to cover each account’s sales process


• Basic gearing ratios, e.g., 10-20 accounts or $1M-$2M in revenue

• Types of sales reps needed• Time required from lead to

close (funnel analysis)

• Time available for quality selling (sales time vs. admin time)


How We Set Expectations for Those Accounts

* * * QUOTA SETTING = GROWTH PLANNING * * *

19


• Use “last year plus” • Use quantitative or qualitative approaches to determine account or territory level growth potential

• Involve bottom-up inputs and planning

• No really – use some kind of bottom-up planning!

• Use external data• Consider regression

analysis to help forecast reasonable expectations and inform the quotas


• Current sales results • Degree of account

penetration

• Sales funnel analysis• Account type, vertical, and

market growth rates

• Field and/or manager feedback

• Pipeline/CRM review

For more on the recent BSC Consultants quota study, please feel free to reach out to us.


What else matters? Hmm, let me see...

20

(You knew we’d say that!)(“Better Sales Comp” – it’s in our name!)

Effective territory planning requires effective sales compensation plans

They should drive and reward appropriately for the results you just so painstakingly planned for!

But there are “better plans” and not so good plans...


Where do sales compensation plans most “break”

good territory planning efforts?

21

Target Total Compensation

Pay Mix

Upside

Plan Measures

Plan Mechanics and Crediting

Pay Cycles

From the world of sales compensation, one area stands out as most problematic for good territory planning...

Absolute Commission vs. Quota Based Plans


Absolute Commission vs. Quota Based Plans

22

Disclaimer: No two roles, business models, or comp plans are the same, but we’ll now

share four issues we find when companies pay on Absolute Commission plans!


Absolute Commission Quota Based Plans

• Pays a flat percentage against

volume results, e.g., 3%

• “Cost of Sales” Model

• Pays a portion of Target Incentive

for hitting a portion of Quota, e.g.,

90% of TI for 90% of goal

• “Cost of Labor” Model

The “What”

• Startup phase

• Highly romanticized (“good old

days”)

• Simple but not as precise

• Post startup phase

• Requires growth planning effort

• Note: quota setting is not always a

comfortable task!

Application

• Territories often created to

ensure “right volume size” to

deliver “the needed pay”

• Less optimal territories

• Territories built on optimal

workload more than just volume or

account based gearing ratios

• More optimal territories

Impact on Territory Planning

Absolute Commission Issue 1:

“The Sacred Territories of the Sales Fat Cats”

23

“Startup Plans in a

Non Startup World”

1. Territory volume grows = pay grows (often above market)

2. Rep can live happily on run rate revenue = growth stalls

3. New hires get weak territories = no pay, no retention, no bench strength

4. “Fat Cat” reps = untouchable5. Overall = results stagnate

How Quota Based Plans

Can Help

“Fat Cats” still well-paid but rewarded for in-year growth, e.g.,• Commission – $500K for $5M under commission• Quota – still $500K+ but for 20% growth ($6M total results)

New reps start with smaller quotas for entry level target pay –affords time to ramp up and become your sales stars of tomorrow

Fat? I’m just big boned!

We all love high performing reps but “performance” should be in the current period.



“Tip of the Iceberg Territories” (aka “Prune the Bush”)

24

“Having More

Accounts Is Always

Better Than Less, Right?”

1. Rep’s patch = many accounts and may ways to match last year’s results and compensation

2. May only be “covering” a portion of accounts = most accounts get no “touch”

3. Reps tend to hoard accounts = no downside if fail to “maximize results”


Can Help

First, account planning can identify poor coverage and results You can then divide the territories (“prune the bush”) and add a

salesperson – legacy rep and new rep each get appropriate quotas and growth targets

You can create more custom growth expectations, and by specifying rep focus, drive better overall results



“Excessive-Bonsai-Tree-Pruning”

25

“Controlling Pay Through

Territory Cuts”

1. Bad pruning = too far/wrong reasons2. Growing results under commission plan

= some say “too much pay”3. Companies slash territories = control

pay or normalize pay across sales force4. Reps “figure it out” = only grow

territories to a point just below getting cut!


Can Help

Pay doesn’t go up or down in lock step just because absolute volume goes up or down

Providing target incentive for hitting target performance (quota) can avoid excessive pruning reactions

Territory assignments and changes are made to create optimal workload and drive growth each and every year

Please put down the

shears!



“There is No ‘Team’ in Team Selling”

26

“How Not to Drive Good

Team Selling”

1. Some sales models are complex = can “take a village” (cross-geo sales, product specialists, sales engineers, etc.)

2. Commission plans often require split crediting = “no one paid onsame dollar”

3. Split credit = reduced commission = less willing to bring in the right resources at the right time


Can Help

Can assign quotas to respective sale team members – works best with proactive account coverage

Effective territory planning means you’ll have a better handle on which accounts will need which salespeople

Territory planning also allows more granular deployment so overlays aren’t paid for accounts they likely won’t touch

GO TEAM! (Unless I have to give you some of my

commission $$$)


How Do We Move From Commission to Quota Plans?

1. Identify Target Incentive for each person

– Can be informed by past payouts as well as market data

2. Ensure clarity of account assignments (i.e., territory planning!)

3. Develop goal-setting methodology and set quotas for the assigned accounts and/or territory patch

4. Decide on quota plan mechanics details

– Threshold usage?

– Acceleration model?

5. Create appropriate rollout materials to explain the change –the what, how, and why

6. Communicate, communicate, communicate

27© 2015 Better Sales Comp Consultants. www.bettersalescomp.com

– Goal period?

– Payout timing?

WIIFM?

Territory Planning and Sales Compensation

28

Optimal territory planning requires...• Great diligence• A well-reasoned process and methodology• Ideally, a good tool to help enable that process

But territory planning without the right sales compensation designs cannot truly be optimal


Questions and Discussion


Enter your questions in the

“Questions” box on the right

hand side of the webinar

application window.

Did we run out of time before we got to your

question? Presenters can follow-up with you via

email. Feel free to submit more questions if

you’d like an offline response.

#SalesComp

















#SalesComp

So we have what you call the Fat Cat

problem. We are worried about

turnover risks. What can we do?

















#SalesComp

You mentioned ’Sales Capacity Planning’ as

part of the Sales Performance framework. This

seems like an HR function (I.e. Recruitment

and Hiring). Why is this part of your

framework?

















#SalesComp

Where do ICR plans fit in the

structural debate?















Sales Management Association Webcast Exploring New ... · Anaplan Customer Case Study Defining...

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