Strategies for Managing Sales Teams: How to find, select and compensate these critical hires

business sherpa group


Entrepreneur’s Toolkit: www.marsdd.com/entrepreneurs-toolkit.html

HR Workbook 1: Building an A-TeamHR Workbook 2: CompensationHR Workbook 3: HR at Work

Creating an HR plan: Butteriss on human resourcesBuilding HR processes, policies and proceduresCompensating employeesHiring your friends: Is it such a good idea?

Video: Human Capital: Building high performance teamsVideo: Human Resources Management


Best Practices HR Series

Finding, Managing and Compensating Your Sales Team Effectively


Agenda

1. Why must companies pay attention to the sales function?▫ Focus on the impact to the business.

2. Tips on hiring and managing sales.▫ Sales DNA; knowing what you need and then finding it.▫ Tips on managing sales teams for effective results.

3. Sales Compensation▫ Strategy Design Implementation Evaluation

4. War stories and lessons learned.▫ Sharing real stories from the field - what worked, what

didn’t.


Why companies need to pay attention to the sales function….

One assumption:

▫ Your business needs to make money!▫ If so, then this topic is of critical importance.


Revenue Stream

Cost to create revenue

Margin


Revenue Stream


Margin

Deal structure will drive the amount of margin.

MarginMargin

Sales Rep. will use ALL of these levers to close the deal.


Revenue Stream


Margin

Selling costs will further impact margin.

• Costs associated with each new sales hire:▫ Salary▫ Travel▫ Additional staff (SE’s)

Margin

• Sales Compensation Plan Design:▫ Poorly set quotas▫ Multi-layered sales teams▫ Commission payment

triggers


Sales DNA

Hunter▫ Will sell what product you have now▫ Will sell what is easiest▫ Will drive to close deals

Will use and overuse every lever available

▫ Will continually hunt out new business So will not focus on post-sales

activities▫ Will place lots of demands on your

team to respond to customers wants/needs

Compensation Features▫ Higher ‘at risk’ pay▫ Incentive based on

quotas Revenue targets, or

margin targets


Farmer▫ Will milk additional sales from

existing accounts▫ Will not seek new accounts▫ Will use levers to drive repeated

sales▫ Will operate more autonomously▫ Will have more focus on post-

sales support Values ongoing customer

relationship

Compensation Features▫ Lower ‘at risk’ pay▫ Incentive based on

quotas Revenue targets, or

margin targets More support/service

revenues targets

Sales DNA


Business Development▫ Focus on early engagement &

evangelizing▫ Usually has a more technical

background, or extensive sector experience

▫ Focused on building relationships; influencing strategic decisions

▫ Selling product and ideas at multiple levels

▫ Not driven to close a deal Relationship focused

▫ Usually after a target list of customers or partners May focus more on the ‘big fish’ Not uncovering every stone for

new accounts

Compensation Features▫ May have no incentive,

or low ‘at risk’ pay▫ Incentive based on pre-

sales milestones MOU’s Trials Partnering agreements

Sales DNA


Channel Management▫ Focus on developing sales

through 3rd party channels▫ Not focused on direct sales

Compensation Features▫ May have no incentive,

or low ‘at risk’ pay▫ Incentives based on

revenue quotas achieved through channel partners

▫ Layered commission - $$ to channel manager & to channel partner

Sales DNA


• Very difficult to find one individual with multiple Sales DNA styles

• HOWEVER – as company’s needs change – you may need different sales DNA ▫ Very expensive to have the wrong sales person in place▫ Not just $$$, but highly distracting to the business and the

team

• Must be prepared to make changes as necessary

Sales DNA Challenges


How to hire the RIGHT sales person….

STEP 1• Know what you need to (or can) accomplish – the GOAL

▫ Amount and timing of revenues required in your business plan (has it changed!)?

▫ Do you have something to sell…is the product ready?▫ Is there a loss leader product?

To drive adoption; create footprint; establish relationships▫ Do you need partnerships or sales or both?

STEP 2• Understand the SELLING ECOSYSTEM

▫ Is it a complicated sale? Are there multiple influencers involved? Can have organizations that create demand but will not buy your

product Can have organizations that will influence demand through technical

standards, regulatory environment, etc. Can have organizations that will buy your product, BUT will not buy

directly from you and will only buy through partners or resellers


How to hire the RIGHT sales person….

STEP 3• Match the SALES DNA to the GOAL and the SELLING

ECOSYSTEM▫ This will also help in designing an effective sales compensation

plan

STEP 4• Consider where the sales function should be located?

1.Close to the customer2.Close to a regional hub3.Close to HQ

STEP 5• Create a description that reflects all of the above

▫ Review session on Recruiting your A-team for tips on sourcing candidates


Tips on successfully interviewing for Sales

• What to find out about the candidate:▫ Building a pipeline▫ Success in closing deals▫ Post-sales focus (or not)▫ Sales team support needed▫ Quota results

Types of deals (size of deals, number of customers, types of customers) Hitting quotas

• Remember that these are sales professionals – very adept at convincing you they can achieve anything▫ Must validate their claims

• Understand their personal drivers▫ Key to determining a good match▫ Will also help in designing an appropriate compensation plan▫ Doing a 2nd interview is key; the candidate shifts from selling mode to

asking mode

• Validate everything through references


Managing Sales Teams Effectively• Requires a lot of maintenance!!

▫ Set and monitor clear targets Quotas – revenues; margins; etc. Milestones – must have meaningful value to the company Continually monitor results & pipeline – test credibility and

assign appropriate probabilities Size of funnel 3:1 (depends on sector)

• When results don’t happen – understand why▫ Wrong DNA for type of selling needed▫ Market adoption of the product▫ Availability of GA product▫ Support to sales▫ Changes in technology, regulatory environment,

standards, competitive landscape, etc.

• Remember it is difficult to get different sales DNA in one person


Sales Compensation

1. Linking the sales compensation plan to your business strategy

2. Establishing the design team2. Assessing the existing plan (if required)3. Designing the new plan4. Implementing the new plan5. Evaluating results


Linking the Sales Compensation Plan to your Business Strategy

Drive Desired Results:▫ Sales objectives which support business plan▫ Building customer faith▫ Supporting revenue generation and profitability▫ Incenting achievement of short term and long term

goals


Understanding the Strategy• Who?- Customers/Dealers• What? - Specific Products & Services• When?- Sales Cycle• Where? - Competitive Environment• Why? - Profitability, market share• How? - By Customer? By Territory? by Product?


Balancing Business Objectives

• In-year objectives▫ Sales volume goals▫ Sales channel

development▫ profit targets▫ % revenue growth▫ specific customers▫ specific products or

services▫ penetration of new

markets▫ keep salespeople

focused

• Long term objectives▫ Increasing

shareholder value▫ sustained profitability▫ strategic customer or

dealer base, customer loyalty

▫ improved market share

▫ product evolution▫ retention of

salespeople


Balance Revenue and Profit

• Margins - requirements and flexibility

• Meeting commitments to shareholders

• Affordability of incentive plan


2. Establishing the Design Team

•Sales & Marketing•Finance•HR•Legal•Possibly IT


3. Assessing the Existing Plan

• Business goals and strategies – review and assess▫ Costs and productivity▫ products

• Customers• Employees• Metrics

▫ Sales Productivity▫ Customer Service▫ Return on Compensation Investment (ROI)


Design Elements• Eligibility• Mix/Leverage• Total Target Compensation• Performance Measures• Incentive Formulas• Formula features


Eligibility• Sales vs Non-sales focus

▫ Technical, Administrative staff etc.• Team vs Individual

▫ Bonus• Senior management

▫ Executive or Sales Compensation?


Compensation Mix/Leverage• Factors influencing leverage:

Leverage

- degree of sales focus- level of influence- management responsibility- administrative responsibility- customer service focus- product sales cycle

+ -


Total Target Compensation

• Determine Organization’s compensation strategy• Define job design and org structure • Slot employees into jobs• Collect relevant market data• Focus on Total target compensation• Create individual plans


Performance Measures

Performance Measures – Sales staff• Volume • Profitability• Strategic Objectives – MBO


Incentive Formulas and Features• Tie market data to the target incentive• Determine incentive payout

▫ Performance measures by job level ▫ Weightings by job level▫ Accelerators by job level


Affordability - Cost Modeling

• Use financial ratios (profit margins by product, cost of sales etc) to determine affordability of plan design

• Finalize Accelerators, Performance measures and weightings


Terms and Conditions• Eligibility• Transfers• Terminations• Split credits• House accounts• Territory or accounts changes• Foreign currencies• Pricing• Adjustments to payments• “Out Clause”


Implementation• Communication Plan

▫ Explain any new or revised changes to plans▫ Updates on forecasting models, product, customer,

employee changes▫ Individual meetings▫ Makes changes as required

• Administration▫ Finance reports and payouts▫ Quarterly updates


Evaluation

• Back to step # 3 “Assessing the existing plan” Performance Measures – Sales Plan

• Business goals and strategies – review and assess▫ Costs and productivity▫ products

• Customers• Employees• Metrics

▫ Sales Productivity▫ Customer Service▫ Return on Compensation Investment (ROI)


Driving Behaviour – Keys to Effective Sales Compensation

• Setting pre-revenue sales targets – must be milestones that create significant value in the eyes of board/investors

• Paying out incentives at end of year for more strategic roles: ▫ gives more opportunity to build revenue stream and

‘afford’ the incentive payout▫ allows time for success to be measured

• For BD roles – make payment of incentive conditional upon closing a financing round ▫ aligns to the goals of the whole team/company

• Higher ‘at risk’ pay plan design


Trends Cont’d

• Move to growth focus, • Move to more value-add solutions sales - not box

products• Sales staff want access to plan details and

performance/incentive - not 3 months for statement.

• 3 or less performance measures - less is more• HR and Finance working more closely - critical

for evaluation of plan• Improved modeling and testing


War Stories and Lessons Learned

Lesson 1Hiring pedigree over substance.

Lesson 2The Asian footprint – tread carefully.

Lesson 3Multi-layered sales teams – who really makes the deal happen?


War Stories and Lessons LearnedLesson 4Think global – act local…

Lesson 5Quota nightmares – adjustments, windfalls, turnover…

Lesson 6

Late Sales Contracts – meet your deadlines or…


Thank You!

Questions?