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Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
Building An Effective Sales Compensation Framework
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Building An Effective Sales Compensation Framework

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  • wow! great slide deck. It was really helpful to see your flow charts and how everything interacts, something that’s been missing from a lot of the the other compensation plans i’ve been reading. Thanks!

    Annette C.
    http://www.oneclickcommissions.com/sales-compensation.html
       Reply 
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  • Very insightful Paolo. It really illustrates how important it is to make sure your sales comp plans are flexible and adaptable to meet changing conditions so that you are getting performance value for your incentive pay. It also shows how the whole process is important -- planning, communication, etc. From my perspective, it also shows that you need systems in place that manage the process in a flexible way and adapt easily to change so that you can continually optimize your SIPs.
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  • 1. Building An Effective Sales Compensation Framewok
    CIPD – London May 7 th, 2010
    Paola Gheis
    1
  • 2. CIPD Sales Compensation May 7, 2010 Paola Gheis
    2
    Content
    The Sales Management System
    Why using Sales Incentive Plans (SIP)
    SIP Eligibility and roles’ review within the sales strategy
    Sales Comp Design Fundamentals
    Some SIP design fundamental and criteria for choosing them
    How to Ensure SIP Alignment to Sales Strategy Over Time
    SIP stakeholders
    SIP learning process
    SIP Evaluation
    How to build the tool kit for a SIP review with sales leaders
    SIP assessment: some critical questions
    The Communication Process
    Some critical aspects
    A recommended model
    Bibliography
  • 3. The Sales Management System
    Why using Sales Incentive Plans (SIP)
    SIP Eligibility and roles’ review within the sales strategy
    CIPD Sales Compensation May 7 Paola Gheis
    3
  • 4. CIPD Sales Compensation May 7, 2010 Paola Gheis
    4
    The Sales Management System
    Sales Management System TM
    Customer Accountability
    Sales Coverage Strategy
    Sales Effectiveness
    1
    2
    3
    4
    6
    7
    5
    8
    Segment Definition & Targeting
    Sales Strategy
    Channel Design
    Organization
    Resource Deployment
    Performance Metrics & Tools
    Goals & Compensation
    People Management Programs
    & Job Design
    & Selection
    E N A B L I N G T E C H N O L O G I E S
    • Account assignment
    • 5. Territory assignment, etc.
    • 6. How many?
    • 7. New Markets Selling
    • 8. Maintenance selling, etc.
    • 9. Revenue and Profit goals
    • 10. Business Growth Expectations
    • 11. Global, regional
    • 12. High touch, low touch
    • 13. Product specialist, generalist, tele-sales
    • 14. Go-to-Market Strategy
    • 15. Indirect, direct, retail, etc.
    • 16. Revenue
    • 17. Volume
    • 18. Product mix
    • 19. Etc.
    • 20. Plan design features
    • 21. Pay mix, upside, MBO
    • 22. Costs & affordability
    • 23. Communication: content, planning
    • 24. Payout calculation
  • CIPD Sales Compensation May 7, 2010 Paola Gheis
    5
    Why Companies Use Sales Incentive Plans and What are the Objectives?
    Sales people drive the company’s top line (and often impact the bottom line)
    Drivesales growth & profitability
    Align rewards tightly to sales results for individuals and sales teams
    Create performance differentiation and sustain a performance culture
    Drive individual accountability (while balancing team effectiveness as necessary)
    Drive motivation by offering (attractive) above target incentives
    Focus employees’ behavior to sales priorities with key metrics
    Provide flexibility to align sales behavior with market dynamics
    Create a win-win situation for the company and employees
  • 25. CIPD Sales Compensation May 7, 2010 Paola Gheis
    6
    Eligibility to Sales Incentive Plan
    • The Sales Incentive Plan are designed specifically for sales employees who are directly involved in selling and persuading a defined customer to buy
  • CIPD Sales Compensation May 7, 2010 Paola Gheis
    7
    Sales Roles – Sales Strategy Matrix
    Conversion focus
    Conversion Selling
    “Grow Base”
    New Market Selling
    “Develop Markets”
    Prospects
    Buyers
    Maintenance Selling
    “Protect Base”
    Leverage Selling
    “Penetrate Accounts”
    Customers
    Retention focus
    Current
    New
    Penetration focus
    Products
    This is a useful tool to help clarify the primary differentiation (R,P,C) between sales roles
  • 26. Sales Comp Design Fundamentals
    Some SIP design fundamental and criteria for choosing them
    CIPD Sales Compensation May 7 Paola Gheis
    8
  • 27. CIPD Sales Compensation May 7, 2010 Paola Gheis
    9
    Sales Compensation DesignDesign Fundamentals
    Upside Pay
    Incentive Program
    Target Incentive
    Upside
    Target Incentive
    Pay Mix
    Total Target Cash
    Base
  • 28. CIPD Sales Compensation May 7, 2010 Paola Gheis
    10
    Pay Mix and Upside
    Extent of Upside Potential
    Target
    80
    50
    20
    Upside Earnings
    100%
    Target
    10
    10
    Target Compensation
    25
    40
    Base
    90
    75
    60
    0%
    Low
    High
  • 29. CIPD Sales Compensation May 7, 2010 Paola Gheis
    11
    Sales Incentive Plan Pay Mix and Upside Criteria
    Less Aggressive Pay Mix/Upside More Aggressive
    Added Value Sales Focus Price
    Many Co. Employees Customer Contact Sales Person Only
    Many Reasons Buy Decision Seller Driven
    Weak Line of sight Strong
    Non-Predictable resultsForecast Ability Predictable Results
    Emerging Market Mature
    Country/Region Level of measure Individual
    Companies may determine a streamlined choice of plan variations for:
    Choice of simplicity of plan administration and communication, easiness to manage compensation in case of mobility across roles, affordability, etc.
  • 30. How to Ensure SIP Alignment to Sales Strategy Over Time
    SIP stakeholders
    SIP learning process
    CIPD Sales Compensation May 7 Paola Gheis
    12
  • 31. 13
    Compensation Plans are Dynamic Programs
    Because the drivers (market forces, company strategy, etc.) are constantly shifting, job definitions evolve. As job definitions change, the compensation plan must also change to support the new selling roles.
    Objectives and Strategies
    Compensation Implications
    Job Definition
    Change Drivers
    Customer Responsibility
    Market Forces
    Measures
    Marketing Priorities
    Weights
    Sales Strategy
    Competition
    Leverage
    Product/
    Service
    Mix
    New Products
    Funding
    Product Responsibility
    Process Responsibility
    Customer Coverage Requirements
    Measurement and Tracking
    Technological Change
    CIPD Sales Compensation May 7, 2010 Paola Gheis
  • 32. CIPD Sales Compensation May 7, 2010 Paola Gheis
    14
    SIP Stakeholders
    Drive sales performance
    Provide plan feedback
    Manage processes to translate sales outcomes into incentive payout
    Drive sales priorities, coach sales, ensure SIP understanding within team
    Provide leadership on sales strategy, approve performance metrics and SIP design
    Consult on SIP affordability
    Drive target setting process
    Drive pay competitiveness and consistency with company pay philosophy
  • 33. CIPD Sales Compensation May 7, 2010 Paola Gheis
    15
    Sales Incentive Plan Learning Process
    Process Start
  • 34. SIP Evaluation
    How to build the tool kit for a SIP review with sales leaders
    SIP assessment: some critical questions
    CIPD Sales Compensation May 7 Paola Gheis
    16
  • 35. CIPD Sales Compensation May 7, 2010 Paola Gheis
    17
    Building a Tool Kit to Evaluate & Review SIP with Sales Leaders
    Key question
    Data Source
  • 36. Is SIP Driving the Desired Behavior?
    Periodic interviews and surveys in the field needed to support the assessment:
    Define relevant population segment depending on organization size and model:
    GMs
    District Mgr (first line sales mgrs)
    Field Sales Employees
    Etc.
    Design questions for managers around sales priorities and assess SIP is not driving disruptive behaviors:
    Is the sales force spending time on pushing product X (performance data analysis also provides insights to this question)
    Is SIP ensuring the necessary collaboration among your sales reps
    Etc.
    Ask Sales Employees if:
    They understand the plan
    Is SIP supporting the objective of the job and if not why
    Etc.
    CIPD Sales Compensation May 7, 2010 Paola Gheis
    18
  • 37. Are We Getting What We Are Paying For?
    Acquire intelligence on plan costing and its relation to the revenue achieved
    Target Incentive Paid % vs. Total Net Revenue Achieved
    This basic metric should be broken down by the relevant organization segments
    Global, regional, country, district, etc.
    Correlate % of incentive paid for each plan metric to the results achieved for that particular metric goal. Example:
    A few questions to interpret the data in the example table:
    • What is each product maturity and strategic relevance?
    • 38. Is the field force trained to sell product Z?
    • 39. Is 10% weight relevant enough to focus sales to Product Z or are sales employees shopping the plan?
    • 40. How is the quota set for Product Y
    CIPD Sales Compensation May 7, 2010 Paola Gheis
    19
  • 41. Is SIP Attractive (or too attractive) Relative to Competition?
    Salary surveys provide compensation data on base, target and actual cash
    Helpful to set compensation levels by role and to design certain element of the plan mechanics (e.g. pay mix)
    Sales practices surveys is another source to enhance intelligence on plan design
    Networking with comp colleagues and setting up benchmarking clubs with a rigorous method of exchanging qualitative information is a very good source to gain market insights on incentive design practices
    All of the above help to assess how to position your plan design payout potential relative to the market of reference
    CIPD Sales Compensation May 7, 2010 Paola Gheis
    20
  • 42. The Communication Process
    Some critical aspects
    A recommended model
    CIPD Sales Compensation May 7 Paola Gheis
    21
  • 43. CIPD Sales Compensation May 7, 2010 Paola Gheis
    22
    Critical Elements of Communication
  • 44. CIPD Sales Compensation May 7, 2010 Paola Gheis
    23
    A Recommended Communication Process
  • 45. Bibliography
    A few good books to get started on Sales Comp
    24
    CIPD Sales Compensation May 7, 2010 Paola Gheis
  • 46. A Few Good Books to Get Started on Sales Comp
    The Channel Advantage. Going to market with multiple sales channels to reach more customers, sell more products, make more profit. Laurance G. Friedman, Timothy R. Furey. Butterworth Heinemann. 2001
    Compensation the Sales Force. David J. Cichelli. Mc Graw Hill. 2004
    The Complete Guide to Sales Force Incentive Compensation. How to Design and Implement Plans That Work. Andris A. Zoltners, Prabhakant Sinha, and Sally E. Lorimer. AMACOM. 2006
    Compensating New Sales Roles. How to Design Rewards That Work in Today’s Selling Environment. Jerome A. Colletti, Mary S. Fiss. AMACOM. 2001
  • 47. Paola Gheis’ Bio and Contact Details
    CIPD Sales Compensation May 7, 2010 Paola Gheis
    26
  • 48. Paola Gheis is a seasoned HR professional with 15+ years of experience acquired in blue chip companies such as Nokia, Agilent Technologies and Hewlett-Packard.
    Paola has a large experience in developing and implementing strategic performance-base HR programs and sales compensation programs and a solid experience in change management, business consulting and talent management. Her professional activity has been deployed in multi-cultural environments with geographical responsibilities ranging from local roles for the Iberian market to European and Global responsibilities covering EMEA, Asia Pacific and Americas.
    Paola got educated in Italy and the United States with a B.S. in Economics and an M.S. in Industrial Relations. She lived in seven countries, speaks five languages and traveled in any continent to work on her projects.
    Paola currently lives in Barcelona, Spain, and can be reached at:
    Email: paolagheis@gmail.com
    Cell.: +34 648 01 3914
    Linkedin profile: http://es.linkedin.com/in/paolagheis
    CIPD Sales Compensation May 7 Paola Gheis
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