Your Sales Compensation Future - SARA storage/Documents/Conference2013/David... · Your Sales Compensation Future: ... • Send to a Training Session/Seminar ... • Compensating

© 2013 The Alexander Group, Inc.® SARA – October 25, 2013

Your Sales Compensation Future:Why Sales Leadership Needs Your Help

David Cichelli

Senior Vice President

[email protected]

480.315.5828

Atlanta | Chicago | San Francisco | Scottsdale | Stamford

October 25, 2013


TS13 Individual Performance Plan

Quick Reference Card (QRC)

Tax Preparation Fees Per

Return Bucket

TS13

Incentive

$1.00 - $36.00 $1.50

$36.01 - $69.00 $4.50

$69.01 - $102.00 $8.75

$102.01 - $136.00 $13.00

$136.01 - $169.00 $19.00

$169.01 - $209.00 $24.00

$209.01 - $245.00 $29.50

$245.01 - $287.00 $35.00

$287.01 - $360.00 $44.75

$360.01 - $432.00 $56.75

$432.01 - $504.00 $76.50

$504.01 - $573.00 $90.00

$573.01 - $645.00 $128.00

$645.01 - $718.00 $145.00

Over $718.00 30.0%

Other 15.0%

AllState 20.0%

CertificationTS13

Incentive

Tax Associate $0.00

Tax Specialist 1 $0.30



Tax Advisor 1 $1.00

Tax Advisor 2 $1.50

Tax Advisor 3 $2.00

Tax Advisor 4 $3.00

Senior Tax Advisor 1 $4.50





Master Tax Advisor $11.00

Client RetentionTS13

Incentive

1st and 2nd Year $7.50

3 Plus Years $6.00

1

Prior Related

Experience (PRE)

TS13

Incentive

0 Completed Years $0.00











Business Focus AreasTS13

Incentive

Paid 2nd Look $10.00

Paid 2nd Look Prior Year $10.00

POM $5.25

Ask a Tax Advisor $5.00

Emerald Card $3.00Blue indicates incentives that have changed in TS13


Sales Compensation Around the World

2


We are not hitting our sales numbers!

Who designed this mess?

Where is HR/Comp?

The costs are too high!

No audit practices!

Commission accounting is overwhelmed!

Sales Compensation Stakeholders

And, your survey data is wrong.

Gee, thanks—we don’t need your help.

3


We are not hitting our sales numbers!

Who designed this mess?

Where is HR/Comp?

The costs are too high!

No audit practices!

Commission accounting is overwhelmed!

HR/Comp

Sales Compensation Stakeholders

And, your survey data is wrong.

Gee, thanks—we don’t need your help.

4


Sales Excellence—Three Competencies

Operate Sales Force

Functions Effectively

Transformation

Align Sales Force with

Business Objectives

Adopt New Practices,

Discontinue Ineffective

Practices

ExecutionDestination 2 31

5


Elements Of Sales Effectiveness

Sales Management System™

SALES LEADERSHIP

STRATEGY STRUCTURE

Opportunity

Segments

1

Coverage

Design

2

Customer

Contact

Continuum

3

Job Design

and

Organization

Structure

4

Resource

Deployment

5

Sales Talent

and

Management

6

Productivity

Metrics

7

Performance

Management

and

Compensation

8

MANAGEMENT

SALES OPERATIONS & TECHNOLOGIES

6


Business Objectives

Sales Strategy

Sales Management

Sales Talent

Sales Compensation Plan

Strategic Alignment Drives Excellence

7

Achieving Alignment


2013 Sales Compensation Program Changes

Extent of changes to the 2013 sales compensation plan:

*Source: Alexander Group Survey

8

9%

51%

27%

13%

No changes will bemade

Minor changes tosome of the plans

Significantchanges affectingsome of the plans

Major changesaffecting most allincentive plans


2013 Plan Changes

For the primary sales job, the following elements of the incentive plan will

be changed in 2013.

*Source: Alexander Group Survey

9

43,20%

27,20%

26,40%

24,00%

22,40%

20,00%

18,40%

16,00%

12,80%

9,60%

8,80%

4,80%

4,00%

4,00%

2,40%

Performance measures

Upside potential

Ramps/accelerators

Thresholds/caps

Pay mix

None

Formula type

Rules affecting sales quota changes

Change individual/team relationship

Rules affecting territory changes

Sales crediting

Other

Payment period

Performance period

Eligibility

2013 Plan Changes


Sales Compensation: Why You?


Your Challenge

• Too Many Local Solutions…

• Too Many Plans…

• Too Many Exceptions…

• No Corporate Input…

• No Uniform Principles…

...The Needs Seem Endless; The Means to Contribute Not Clear.

...How Can You Get Engaged and Help?

11


World-Class Sales Compensation Plan?

Connects business goals and sales strategy

Aligns jobs to objectives

Links pay to performance

Motivates higher achievement

Attracts and Retains

Is simple to understand

12


Who Owns Sales Compensation?

Sales Management? Finance? HR? Sales Operations?

Who has the competency?

Who needs to be involved?

Don’t others have a stake in Sales Comp results?

Are there not competing objectives?

What about cross-functional teams?

And…who leads the design effort?

13


Eff

ec

tive

ne

ss

Ru

ler

How Do You Measure Up?

...Oversee Ongoing Governance Process

...Contribute to Redesign Effort

...Provide Survey Data

...“Quick, Sign Here”

...Doing E-Mail

Process Architect

Project Participant

Data Resource

Approver

Still In Your Office

14


2014: Your Action Steps


6 Things To Do Now!

Conduct An Assessment

Lead the Design

1

3

4

5

2

Effectively Communicate

6

Get Educated

Establish Principles

Set Up the Process

16


• Do an In-House Briefing

• Send to a Training Session/Seminar

• Share Articles of Interest

• Provide Books of Interest

• Sponsor In-House Workshop

Educate Stakeholders

17

Get Educated



Lead the Design

Communicate

Set Up the Process


Education Resources

WorldatWork Courses

• ESC: Elements of Sales Compensation

• SCP: Sales Compensation Design

Books

• Compensating the Sales Force: McGraw-Hill

• Sales Compensation Made Simple: WorldatWork

• Sales Compensation Math: WorldatWork

18


Develop A Work Plan

Phase II: Design

• Establish principles

• Develop and cost solution

• Launch the new compensation program

Phase I: Assess

• Gather information

• Evaluate practices

Phase III: Implement

Get Educated



Lead the Design

Communicate

19

Set Up the Process


Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7

Ph

as

es

an

d A

cti

vit

ies

Me

eti

ng

sExample Work Plan Summary

Implementation

Final Approval

= Design Team = Steering CommitteeLegend:

Cost Modelling

Design

Assessment

InterviewsSurvey

Data Collection

Pay & Perf Analysis

Initial Plan Design and Options

Finalize Plan Design

5

Strategy and Confirmation

2 6

2

Final Design

Communications

Approval

Kick Off

1 3

Initial Design

1

Strategy and Confirmation

4

Design and

Policies

Administration

Communication

Roll Out

20



Component

Guidelines

Support

Element

Guidelines

Guiding

Principles

Goal

Principles for each design component

Support program practices

Design constructs

Overall program goal

Get Educated



Lead the Design

Communicate

21

Set Up the Process


Confirm Philosophy!

Results

CustomersShareholders

Execution

Individual

InstitutionWork Team

Workforce

“...Establish roles and goals, reward

for getting the job done. Exit those not

on the same page...”

“…Hire people with destiny,

support them, pay them well

and get out of their way...”

“...Create a great customer

experience and customers

will be loyal to us...”

“...People are lucky to have a job

here. We are the leaders in our

industry...the company founders

gave us a proud tradition...”“...We know this business...get

the details right and the big stuff

will be easy...”

“...We are team driven...there

is no ‘I’ in team. Work together;

win together…”

“...We are here to serve the

shareholders of this

company...”

“...Our people are our greatest

asset...be loyal to them and

they will be loyal to us…”

22


Base

Salary

Base

Salary

Target Total

Cash

Compensation

Base

Salary

GainsharingAdd-On3x

Uncapped

Types of Variable Compensation Plans

Base

Salary

2x

CappedUnit Rate

No RiskRisk

Target PayTarget Rate

Explain Types Of Incentive Plans

23


Low Performers Median Performers High Performers

75th

50th

25th

Define Competitiveness

24


Establish Mix And Leverage

120

10

200

160

30

50

Mix

Upside

90 7050

Degree of Influence

Job A Job B Job C

Low High

1010 30

30

50

50

100 Leverage

3x

25


Target Total Compensation

Target Total

Compensation

Benefits

Sales Expenses

Recognition

Contests/Spiffs

Over Target

Incentive Pay

Target Incentive

Pay

Salary

Outstanding Pay

Retention/Non-Sales Pay

SecurityNeeds

Reimbursement

SpecialCompensation

FixedCompensation

Focused Efforts

Intrinsic Rewards

SalesCompensation

At-Risk Pay

Performance BasedCompensation

26


Principles—Illustrations

...3x Uncapped: Customer Contact, Persuasion, Quota; 2x Capped for Field Sales Support

...At 25th Pay Market; at 50th Pay Market; at 75th Pay 115% of Market

...High Persuasion = 60/40/3x-u; Low Persuasion = 80/20/3x-u; Pre-Sales Support = 90/10/2x-c

...No More than Three; None Weighted Less Than 15%; One Has to Be a Production Measure Worth at Least 45%

...65% Reach and Exceed Quota

Eligibility

TTC

Mix/Leverage

Measures

Quota

Distribution

27


Conduct An Assessment—Framework

Program

Effectiveness

Strategic

Alignment

Market

Alignment

Principle

Alignment

Does your program

align with company’s

strategy?

1

Does your program

align to best-in-class

principles?

2How aligned is your

program to the

market?

3

Get Educated



Lead the Design

Communicate

28

Set Up the Process


Strategic Alignment—How To Do It

● Confirm your go-to-market model

● Profile your sales roles

● Conduct executive/corporate interviews

● Gather sales personnel feedback

● Present findings

1

Program

Effectiveness

Strategic

Alignment

Market

Alignment

Principle

Alignment

29


Sales Compensation Feedback Illustration

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

-13% -9%

-28%

-10%-23% -19%

-5%-9%

-13%

-4%

-10% -5%

51% 49%31%

53%36%

38%

7% 16%

4%

19%

9%5%

30


Principle Alignment—How To Do It

● Confirm sales compensation principles

● Analyse pay, performance and plan design data

● Summarize findings—what’s working and what’s not?

● Present key issues for next plan period

2

Program

Effectiveness

Strategic

Alignment

Market

Alignment

Principle

Alignment

31


Assessment Framework

Investment ROI Communication Administration

Governance,

Assessment,

Design

Attract, Retain, Develop and Reward a World-Class Field Organization

EligibilityPay

Levels

Pay

MixLeverage Measures

Mechanics

& Pay

Curve

Perf &

Payout

Periods

Strategy & Job

Alignment

Sales Force

Motivation

Pay for

Performance

Plan

Elements

Execution

Guiding

Parameters

Charter

1 2 3

1 2 3 4

Quotas/

Targets

Special

Incentives

Crediting

& Policies

1 2 3 4 5 6 7 8 9 10

32


Market Alignment—How To Do It

● Network with peers

● Obtain good third-party data

● Interpret compared to your pay strategy

3

Program

Effectiveness

Strategic

Alignment

Market

Alignment

Principle

Alignment

33


Target Total Compensation—Market Data

...Medians and Averages Alone are Meaningless

Total W-2 Compensation

Percentile Our Data Survey Data Our Pay as Per Cent of Survey

10th $145,000 $130,500 111.0%

25th $152,000 $149,000 102.0%

50th $160,000 $161,000 99.0%

75th $165,000 $172,000 95.9%

90th $175,000 $210,000 83.3%

10th 25th 50th 75th 90th$130,000

$140,000

$150,000

$160,000

$170,000

$180,000

$190,000

$200,000

Percentile

Total W-2 (Thousands)

Our Data Survey Data

$210,000

34


Lead The Design Process

Use a Design Worksheet

Cost/Model the New Plan

Get Educated



Lead the Design

1

2

Communicate

35

Set Up the Process


Use A Design Worksheet

Role

EligibilityTarget Total Comp

Pay Mix and

Leverage

Performance Measures

Weights MechanicsPerformance

PeriodPayout

Frequency

Sales Rep

National Account Manager

Vertical Marketing Rep

Channel Sales Manager

Sales Associate

1

36


Make Shared Decisions

Role

EligibilityTarget Total Comp

Pay Mix and

Leverage

Performance Measures

Weights MechanicsPerformance

PeriodPayout

Frequency

Sales Rep Yes $120k50/50

3x

Sales 70% Commission Annual Monthly

Price 30% Modifier Annual Monthly

National Account Manager

Yes $140k70/30

3x

Sales 70% Bonus Formula Annual Monthly

Retention 30% Modifier Annual Monthly

Vertical Marketing Rep

Yes $150k75/25

3x


Rep Perf 30% Modifier Annual Monthly

Channel Sales Manager

Yes $120k80/202.5x


Partner Perf 30% Modifier Annual Monthly

Sales Associate No $70k 100/0Sales 85% Merit Annual Annual

MBO 15% Merit Annual Annual

37


Cost/Model The New Plan2

38


• Communicate a Theme, Not Just Mechanics

• Use Leadership Messages

• Train Field Managers

• Develop Presentations

• Provide Web-Based Documentation and Calculation Models

• Give Ongoing Access to Pay and Performance Results

• Connect Personal and Company Performance Alignment

• Notify Promptly of Any Program Changes or Plan Interruption

Communicate Get Educated



Lead the Design

Communicate

39

Set Up the Process


Why Is Effective Communication So Critical?

Perception is Reality

The compensation plan is only

as good as the sales

representative’s understanding

and acceptance

Comp Plan Confirms

Company’s Strategy

Unique opportunity for

leadership to reiterate the vision

and strategy of the business

Feedback is Crucial

for Management

Incumbent and management

feedback helps ensure the

success of the sales

compensation plan

40


Leadership Message Key Elements

State Compelling Business Condition

Disconnect from Past

Present the Future

Thank for Past Efforts

Call for Volunteers

41

1

2

3

4

5


Absolute buy-in from the executive team

A compelling business reason

Support from key stakeholders

Cascading communication approach

Appropriate level of training

Communication collateral for all employees

A smooth transition strategy for all individuals to the new plan

Administrative systems and reporting updated for program launch

Implementation Strategy Best Practices

Effective CHANGE MANAGEMENT principles are required to

successfully implement and communicate even the best-

designed sales compensation programs.

42


Closing Remarks

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

powerful management tools the sales organization has

to drive results!

43


Sales Compensation Plans Produce

Results If You Invest the Time to

Design Them Correctly.

44

© 2013 The Alexander Group, Inc.® SARA – October 25, 2013 45

David J. Cichelli, Senior Vice President

Business Experience

Prior to joining the Alexander Group in 1985, David served for five yearsas a national practice manager in sales compensation for a leadingcompensation consulting firm. Previously, he had spent seven yearsproviding support to the field sales organization of a multinationalFortune 200 chemical company.

Academic Credentials

M.S., Michigan State UniversityB.S., Pennsylvania State UniversityFaculty Experience: Merage Foundation University California, Irvine; WorldatWork; Columbia University

David Cichelli, a Senior Vice President with The Alexander Group, Inc., a sales effectivenessconsulting firm, contributes his knowledge and experience to a wide array of salesorganizations. His clients include leading companies in technology, telecommunications,wholesale/distribution, financial services and healthcare. David helps clients redefine anddeploy sales coverage to ensure optimal sales performance. By applying the AlexanderGroup’s Sales Management System™, he helps companies achieve their sales objectivesthrough 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 inlinking sales compensation to management's objectives, David is a frequent speaker on salescompensation topics. He is author of McGraw Hill’s Compensating the Sales Force (2nd

edition). He is also the author of The Sales Growth Imperative, published by McGraw Hill. Heserves a leadership role in the design of the firm's sales effectiveness conceptual models.David is an officer of the company.
