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Is Your Sales Comp Plan Working?

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Alexander Group compensation experts Paul Vinogradov and Rachel Parrinello share their insights on how to assess your compensation plan for 2013.

Alexander Group compensation experts Paul Vinogradov and Rachel Parrinello share their insights on how to assess your compensation plan for 2013.

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  • 1. Is Your Sales Compensation Plan Working?How to Assess Your Compensation Plan and Prepare for 2013September 12, 2012Paul Vinogradov Rachel ParrinelloVice President Principal, Sales Compensation Practice415-276-5670 415-276-5664pvinogradov@alexandergroup.com rparrinello@alexandergroup.com Atlanta | Chicago | San Francisco | Scottsdale | Stamford
  • 2. Welcome! Introductions – Us and You! Is Your Plan Working? AGI Framework and Guidance AGI Offerings and Concluding Remarks Questions and Answers© 2012 The Alexander Group, Inc.® 2
  • 3. About Us Paul Vinogradov Rachel Parrinello Vice President Principal, Sales Compensation Practice  15+ years of sales effectiveness consulting  12+ years of sales compensation consulting  Runs AGI’s western region office  Manages AGI’s Sales Incentive Benchmarking  Runs AGI’s benchmarking practice  Sales compensation speaker  Sales compensation speaker© 2012 The Alexander Group, Inc.® 3
  • 4. About You How many employees total in your company? 39% 28% 13% 14% 6% 1 to 500 501-1,000 1,001-5,000 5,001-10,000 10,001+© 2012 The Alexander Group, Inc.® 4
  • 5. About You How many unique compensation plans do you manage? 36% 26% 21% 17% 1 to 10 11 to 30 31 to 50 More than 50© 2012 The Alexander Group, Inc.® 5
  • 6. About You Do you have less, equal or more plans than you have selling roles? 46% 40% 15% Less Plans Equal Number of Roles More Plans than Roles and Plans than Roles© 2012 The Alexander Group, Inc.® 6
  • 7. About You What degree of pain are you experiencing with your current sales compensation program? 75% 12% 10% 3% 0-2 LOW: 3-5 MEDIUM: 6-8 HIGH: 9-10 VERY HIGH: plans work well, some adjustments signs of failure, complete overhaul few complaints needed changes needed required!© 2012 The Alexander Group, Inc.® 7
  • 8. Most Companies Update Their Plans Each Year Major changes affecting 13% most all incentive plans 97% Significant changes plan to make 31% program changes affecting some of the plans for 2012 Minor changes to some of 53% the plans No changes will be made 3% *Source: The Alexander Group (AGI) 2012 Sales Compensation Trends Survey (n= 118)© 2012 The Alexander Group, Inc.® 8
  • 9. Where does your company’s compensation plan fit along this continuum? World Class Laggard© 2012 The Alexander Group, Inc.® 9
  • 10. Assessment Framework Does your program drive your company’s strategy and align with Strategic its job roles?1 Alignment Program Effectiveness Principle Market Alignment Alignment2 3 Does your program How aligned is your align to best in class program to the principles? market?© 2012 The Alexander Group, Inc.® 10
  • 11. 1 Strategic Alignment – Why? THE EIGHT PILLARS MODEL SALES LEADERSHIP STRATEGY STRUCTURE MANAGEMENT 1 2 3 4 5 6 7 8 Job Design & Performance Opportunity Coverage Resource Productivity Sales Process Organizational Sales Talent Management & Segments Design Deployment Metrics Structure Compensation SALES OPERATIONS & TECHNOLOGIES © 2012 The Alexander Group, Inc.® 11
  • 12. 1 Strategic Alignment – How to Do It  Review and confirm your go-to-market model  Conduct interviews  Conduct ride-along’s with sales employees  Inventory your sales roles – create profiles for each  Summarize findings/issues and confirm with sales leadership © 2012 The Alexander Group, Inc.® 12
  • 13. 1 Illustrative Segmentation and Coverage Map Product Account Specialist Manager Strategic Inside Sales Sales Engineer Sales Support Enterprise Small and Medium Channel Manager Business © 2012 The Alexander Group, Inc.® 13
  • 14. 1 Primary Input – Job Design Customer: Products and Services:  Target Segments  Product Type and Complexity  Target Accounts  Knowledge Required  Buyer Needs Job  New Versus Current Product  Sales Potential Bandwidth Sales Process:  Lead Generation  Account Development  Propose/Close  After Sales Service  Conversion, Penetration, Retention © 2012 The Alexander Group, Inc.® 14
  • 15. 1 Job Profile Example – Strategic AMJob Summary Sales Strategy Responsible for end user sales of Company products and services to new and existing Segment Global Strategic Enterprise Commercial SMB strategic (5,000+ employees) accounts Executes complex sales and effectively manage the sales process and activities Sales Process Sales Focus Qualify & Validate & Effectively engages other sales resources as Identify / Qualify Develop Approve Fulfill New Business in New Lead Accounts required Oppty Solution Quota $4M - $10M New Opportunities in Sell-Thru / Renew Existing Accounts Account Load 3 – 5 Accounts Enablement Renewal / Recurring in Existing AccountsSales Motion Primary Secondary No / Minimal Focus Job Category Selling Type Market Coverage Account Product Field Hybrid Mature Emerging Technical Partner Inside Sales Process Key Metrics Specialization Sales Process Complexity New Bookings Generalist Specialist Renewal Bookings Low Medium High Teaming E/B Type of Sale Independent Small Team Large Team Product Type Channel-led Transactional Strategic Management Sales Cycle Point Product Solution Architecture None 0 Months 6 Months 18 Months 24+ Months People Manager © 2012 The Alexander Group, Inc.® 15
  • 16. 2 Principle Alignment – Why? Charter Overall Strategic Goal GuidingParameters Rules To Govern Design Solutions PlanElements Guidelines for Specific Program ComponentsExecution Supporting Programs: Required for Any Sales Compensation Plan © 2012 The Alexander Group, Inc.® 16
  • 17. 2 Sales Compensation Principle Framework Charter Attract, Retain and Reward Sales Resources To Drive Sales Results GuidingParameters Rules To Govern Design Solutions PlanElements Guidelines for Specific Program ComponentsExecution Supporting Programs: Required for Any Sales Compensation Plan © 2012 The Alexander Group, Inc.® 17
  • 18. 2 Sales Compensation Principle Framework Charter Attract, Retain and Reward Sales Resources To Drive Sales Results 1 2 3 Guiding Strategy & Job Sales Force Pay forParameters Alignment Motivation Performance PlanElements Guidelines for Specific Program ComponentsExecution Supporting Programs: Required for Any Sales Compensation Plan © 2012 The Alexander Group, Inc.® 18
  • 19. 2 Sales Compensation Principle Framework Charter Attract, Retain and Reward Sales Resources To Drive Sales Results 1 2 3 Guiding Strategy & Job Sales Force Pay forParameters Alignment Motivation Performance 1 2 3 4 5 6 7 8 9 10 Mechanics Perf & Plan Eligibility Pay Pay Leverage Measures & Pay Payout Quotas/ Crediting Special Levels Mix Targets & Policies IncentivesElements Curve PeriodsExecution Supporting Programs: Required for Any Sales Compensation Plan © 2012 The Alexander Group, Inc.® 19
  • 20. 2 Sales Compensation Principle Framework Charter Attract, Retain and Reward Sales Resources To Drive Sales Results 1 2 3 Guiding Strategy & Job Sales Force Pay forParameters Alignment Motivation Performance 1 2 3 4 5 6 7 8 9 10 Mechanics Perf & Plan Eligibility Pay Pay Leverage Measures & Pay Payout Quotas/ Crediting Special Levels Mix Targets & Policies IncentivesElements Curve Periods 1 2 3 4 Governance,Execution Investment ROI Communication Administration Assessment, Design © 2012 The Alexander Group, Inc.® 20
  • 21. 2 Principle Alignment – How?  Confirm or create principles based on pay philosophy  Gather seller feedback via survey and interviews  Analyze pay, performance, and plan design data  Summarize findings - what’s working and what’s not?  Summarize topics and issues that require addressing for next plan period © 2012 The Alexander Group, Inc.® 21
  • 22. 2 What Is a World Class Sales Compensation Plan?The Sales Compensation Planis a Valuable Management  Drives business goals and salesTool to Drive Sales Results if strategyDone Correctly  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 © 2012 The Alexander Group, Inc.® 22
  • 23. 2 What is a World Class Sales Compensation Program?  Linked with fair, equitable and stretch goalsThe Plan’s Effectiveness  Effectively communicated and documentedDepends on the Support ofPeople, Processes, and  Sale force understands the planSystems  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 © 2012 The Alexander Group, Inc.® 23
  • 24. 2 What is Your Pay For Performance Philosophy? 75th 50th 25th Low Performers Median Performers High Performers © 2012 The Alexander Group, Inc.® 24
  • 25. 2 Complete a Survey to Capture Sellers Sentiments Competitive Motivates Challenging, Clearly Easily Track Overall TTC Overachievement Achievable Communicated Comm. Earned Rating Quotas 3.4 3.6 2.8 3.7 3.1 3.2 7% 16% 19% 5% 9% 4% 51% 49% 53% 38% 31% 36% -5% -9% -4% -5% -13% -10% -10% -13% -9% -19% -23% -28% Strongly Agree Agree Disagree Strongly Disagree © 2012 The Alexander Group, Inc.® 25
  • 26. 2 Analyze Your Program’s DataPay Mix Analysis  What: Pay mix averages and variance for each role.  Purpose: Assess appropriateness and consistency of pay mixes.Pay vs. Performance Scatter Plots  What: Correlation of incentive pay and sales performance.  Purpose: Identify inconsistencies between pay and performance.Incentive Payout Percentile Distributions  What: Range of incentive payouts across incumbents by percentile.  Purpose: Examine pay discrimination and assess upside opportunity. © 2012 The Alexander Group, Inc.® 26
  • 27. 2 Analyze Your Program’s Data (Continued)Quota Size Correlation Scatter Plots  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.Quota Performance Distributions  What: Performance distribution across incumbents.  Purpose: Assess the effectiveness of the goal setting process and compare performance range and shape with best practice distribution.Quota Performance Percentile Distributions  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. © 2012 The Alexander Group, Inc.® 27
  • 28. 2 Illustrative Assessment Using the Framework Charter Attract, Retain and Reward Sales Resources To Drive Sales Results 1 2 3 Guiding Strategy & Job Sales Force Pay forParameters Alignment Motivation Performance 1 2 3 4 5 6 7 8 9 10 Mechanics Perf & Plan Eligibility Pay Pay Leverage Measures & Pay Payout Quotas/ Crediting Special Levels Mix Targets & Policies IncentivesElements Curve Periods 1 2 3 4 Governance,Execution Investment ROI Communication Administration Assessment, Design = Working Well = Minor Area for Improvement = Major Area for Improvement © 2012 The Alexander Group, Inc.® 28
  • 29. 3 Market Alignment – Why? World Class Market Laggard Practice  x Know how you compare to market practice  Know how you compare to the competition for x top sales talent  Make fact-based and data-driven decisions on x how you will compete and differentiate © 2012 The Alexander Group, Inc.® 29
  • 30. 3 Market Alignment – How?  Capture internal employee’s sentiments and knowledge – use caution  Network with peers in your industry  Formulate your hypotheses  Use 3rd party data – survey houses, research associations, and consultants; research your options  Invest time/resources/budget to get good data  Interpret the results carefully – in light of your phase of growth and strategy © 2012 The Alexander Group, Inc.® 30
  • 31. 3 Analyze all plan design components Plan Design Components Sample Plan Component Analysis 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 © 2012 The Alexander Group, Inc.® 31
  • 32. 3 Illustrative Market Comparison Data Plan Data at Job Measure Level Data Program Data  Plan Type  Measures  Policies  Sales Incentive  At-Risk  HR Changes Plan  Add-On  Quota Changes  Mgmt. Incentive  Linked  Cost Metrics Plan  Pay Curve  Plan  Profit Sharing  Thresholds  Administration  Pay Levels  Excellence  Administration  Pay Mix  Caps  Tool  New Hire Practices  Formula / Calculation  FTE  Excessive Payout Methodology  Ticket Practices  Performance Period  Accuracy Rate  Payout Frequency  Processing  Crediting Rules  Communication © 2012 The Alexander Group, Inc.® 32
  • 33. 3 Illustrative Market Alignment Comparison Summary Benchmark Findings AM Key areas of misalignment include # of accelerator rates, the rates and crediting.Overall Comparison Market Plan Component Comparison Details ComparisonPay Mix • Pay mix is on par with benchmark companiesMeasures • Benchmark companies use between 2-3 measures, including linked metricsMechanics • All benchmark companies use a quota based mechanic# of Pay Curves • More pay curves than benchmark companiesThresholds • Most benchmark companies pay from the first dollarPayout Limits • Most benchmark companies do not use a deceleration rate and/or capLeverage • Equal upside opportunity than the benchmark companiesExcellence • Calculated excellence points appear aligned to marketPay Curve • Rates >100% are below average relative to benchmark companiesPerformance Period • Most benchmark companies use annual performance periodPayout Frequency • Most benchmark companies provide monthly payoutsCalc. Methodology • Most companies use cumulative methodology; some use cumulative-period-to-dateCrediting • Sales crediting at bookings aligns; however shipment/invoice payment credit does not Legend: Aligned w/ Market Minor Misalignment w/ Market Major Misalignment w/ Market To Be Determined © 2012 The Alexander Group, Inc.® 33
  • 34. AGI’s Sales Compensation Services 1 Plan Design Sales Compensation Process 2 Design and Optimization Sales Compensation Design 3 Principles Sales Compensation 4 Scorecard Sales Incentive 5 Benchmarking 6 Surveys On-Going Advisory 7 Services© 2012 The Alexander Group, Inc.® 34
  • 35. AGI’s Sales Incentive Benchmarking (SIB)  Pay Mix  Leverage  Measures  Measurement Level  # of Pay Curves  Thresholds  Caps  Pay Curve  Linkages  Performance Period  Payout Frequency  Crediting Events  New Hire Practices  And 15 More Topics© 2012 The Alexander Group, Inc.® 35
  • 36. Closing Remarks 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!  Convene a design team with the right stakeholders  Develop a work plan of activities and events – typical process takes 8-20 weeks depending on # of jobs & payees and degree of change  Develop a scorecard to assess your overall program and drive continual improvements© 2012 The Alexander Group, Inc.® 36
  • 37. 2012 Chief Sales Executive Forum October 24 – 26 | The Breakers | Palm Beach, FL Speakers & Topics: Kerry Grimes, VP, Global Solution Partner Sales - Siemens PLM Channel Partners - Optimize Sales Coverage to Drive Value & Margin Neil Isford, VP, Smarter Analytics – IBM Customer Analytics: Dig Deeper for Competitive Advantage Glenn Mason, President, Sales Strategy & Sales Operations – UPS Healthy Paranoia; Bold Leadership Means Never Being ComfortableTop sales leaders across industries and Fortuneorganizations are convening to discuss the bold Mark Ouellette, SVP Business Operations - CA Technologiessolutions they’re using to drive sales growth in 2012 Transformation Journey: Building Value Into the Sales Ecosystemand beyond . . . ones that are redefining salesexcellence! Andrew Sage, VP, Worldwide Partner Led – Cisco Scaling Into the Mid-Market With Partner Led SellingJoin these leaders and Alexander Group’s salesgrowth experts this October. You will bring backactionable sales growth strategies and tactics to your Mark Toland, SVP, Cardiology Sales & Corporate Accounts – Boston Scientificcompany for 2013! Sales Transformation; From Talking Product to Delivering Solutions www.alexandergroup.com/events/2012-cse-annual-forum © 2012 The Alexander Group, Inc.® 37
  • 38. Questions?© 2012 The Alexander Group, Inc.® 38
  • 39. Paul Vinogradov Rachel Parrinello Vice President Principal, Sales Compensation Practice 415-276-5670 415-276-5664 pvinogradov@alexandergroup.com rparrinello@alexandergroup.com Please contact either of us for any additional information or questions.© 2012 The Alexander Group, Inc.® 39