Managers' analytics workbench final 22 june10

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Managers' analytics workbench final 22 june10

  1. 1. Managers’ Analytics Workbench Analyses that Enable Growth June 24, 2010 Tom Knight Partner Evergreen Growth Advisors Chicago, IL tnight@evergreengrowthadvisors.com © 2010 The Sales Management Association. All Rights Reserved.
  2. 2. Session Overview • What’s Required to Grow more, predictably? • Key Analyses in Detail • Questions and Answers 2 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  3. 3. What’s Required to Drive Growth? Our experience indicates that sustained growth requires alignment of Strategy, Organization, and Execution. Which markets? Optimal sales organization Sales Management structure and roles? Processes? Which customers? Complete market coverage? Sales Skills and Capability? How much sales potential exists? Ideal channel network & Data Driven Planning and partner ecosystem? Analysis? What products and services? Most efficient sales Performance Measurement What value proposition(s)? processes? Systems? Most effective sales tools? Sales Force Enablement? Compensation Plans? Actionable Optimized Revenue Operating Platform for Growth Plan Engine Revenue Growth 3 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  4. 4. What’s Required to Drive Growth? While all questions are important, some are more critical than others… Which markets? Optimal sales organization Sales Management structure and roles? Processes? Which customers? Complete market coverage? Sales Skills and Capability? How much sales potential exists? Ideal channel network & Data Driven Planning and partner ecosystem? Analysis? What products and services? Most efficient sales Performance Measurement What value proposition(s)? processes? Systems? Most effective sales tools? Sales Force Enablement? Compensation Plans? Actionable Optimized Revenue Operating Platform for Growth Plan Engine Revenue Growth 4 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  5. 5. What Analyses Help Us Drive Growth? ..answering these questions requires strong analytical capability. Sales Strategy Organization Execution 1. MAP Analysis 2. Capacity vs. 4. Territory Gains vs. (Maintained, Opportunity Losses Acquired, 3. Cost of Sales and 5. Upside Analysis Penetrated) Spans of Control 5 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  6. 6. 1. MAP Analysis – Are We Growing Where We Should Be? 6 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  7. 7. A growth MAP is a critical first step in understanding whether growth is occurring where and how you planned. A Sales Growth MAP $620 $10,720 $10,000 Churn $2,450 $(7,650) SALES ($000) Last Year’s Maintenance Acquisition Penetration This Year’s Sales Sales $3,407 M A P Calculation detail: $7,650 Maintenance sales ÷ baseline period sales of $10,000 = 76.5% Maintenance $ 620 Acquisition sales ÷ baseline period sales of $10,000 = 6.2% Acquisition growth $2,450 Penetration sales ÷ baseline period sales of $10,000 = 24.5% Penetration growth 107.2% total sales growth 7 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  8. 8. Building A growth MAP requires customer level performance data. 8 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  9. 9. MAP can provide some meaningful insights… 9 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  10. 10. …and can be useful for benchmarking and decision making about how to adjust one’s sales model. 10 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  11. 11. Incorporating profitability provides an added level of insight far more useful than volume alone. Incorporating Profitability into the Sales Growth MAP $620 $10,720 $10,000 Churn $2,450 SALES ($000) $(7,650) Last Year’s Maintenance Acquisition Penetration This Year’s Sales Sales $3,407 M A P Calculation detail: Growth Source Growth Category Profitability Last year’s sales of $10,000 “Baseline” $7,650 Maintenance sales ÷ baseline period sales of $10,000 = 76.5% Maintenance $2,180 in Maintenance profit dollars = 28.5% profitability $ 620 Acquisition sales ÷ baseline period sales of $10,000 = 6.2% Acquisition growth $ 140 in Acquisition profit dollars = 22.5% profitability $2,450 Penetration sales ÷ baseline period sales of $10,000 = 24.5% Penetration growth $ 884 in Penetration profit dollars = 36.1% profitability 107.2% total sales growth $3,204 in profit dollars (M+A+P) = 29.9% profitability on this year’s sales 11 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  12. 12. 2. Capacity vs. Opportunity Analysis 12 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  13. 13. Sales Capacity in the Context of Growth Capability Market Factors Total Market Size Target Market Size Needs for Offering Competitive Share and Churn Accessible Market Growth Organization Factors Capability Market Targets Channel Coverage Factors Sales Strategy Segmentation Coverage Sales Org. Coverage and Strategy Design Historic Growth Marketing, Service Coverage Sources Alignment with Sales Availability Strategy and Coverage Performance Sales Sales Process Workload (E+D) Management Capacity Workload Adjusted Close Rates Compensation, Quotas, Metrics 13 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  14. 14. Business Case Parameters Customer provided: • Account and rep data for the 2 districts • Call frequency and call duration values • Current territories assignment • Target work for each territory = 1,696 hours per year TerrAlign • Geocoded each store and rep record • Calculated travel time estimate and work for each store using TerrAlign 4 software and Drive Time Network • Work = call frequency x (travel time estimate + call duration) • Optimized territories within district boundaries balancing on work • Manually reviewed and fine tuned territories • Compared current and optimized alignment 14 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  15. 15. Travel Time Reduction Optimizing territories reduced travel time creating the following benefits: Travel time reduction • NE decreased by 5.2% • SE decreased by 4.7% • Total savings on mileage = 11,960 miles x $.50 = $5,980 Increased available call hours • NE increased by 1.6% • SE increased by .6% • Total value of increased call hours = $100,000 x 2.2% = $2,200 15 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  16. 16. Over/Under-Capacity Issues and Costs Optimizing Territories Improves Overall Balance • Over-capacity means that the reps can’t make all planned calls • Under-capacity means that reps can make more calls • Target for each territory is 1,696 +/- 10% hours per year 1,526 – 1,866 hours per year 16 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  17. 17. Over-Capacity Issues and Costs Optimizing Territories Improves Overall Balance CURRENT ALIGNMENT OPTIMIZED ALIGNMENT • 6 territories over 110% of target • 2 territories over 110% target • 877 total hours above 110% • 59 total hours above 100% • Value = $51,733 • Value = $3,466 • Improvement of 818 hours and $48,267 TOTAL ROI Mileage saving ($5,980) + increased call time ($2,200) + over-capacity improvement ($48,267) + under-capacity improvement ($43,266) = $99,713 17 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  18. 18. Ways to Improve Capacity Over-capacity • Add reps • Move reps from under-capacity areas to over-capacity areas • Reduce call frequencies • Reduce call durations • Remove stores from coverage Under-capacity • Reduce reps • Move reps from under-capacity areas to over-capacity areas • Increase call frequencies • Increase call durations • Add additional stores to coverage 18 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  19. 19. Territory Opportunity vs. Rep Capacity & the Impact on Incentive Compensation Opportunity by Territory Average Opportunity Rep capacity 4,000 3,500 3,000 2,500 Opportunity 2,000 1,500 1,000 500 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Territories 19 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  20. 20. Costly Resources Average Opportunity Opportunity by Territory Rep capacity Lost Opportunity 4,000 3,500 3,000 2,500 Opportunity 2,000 1,500 1,000 500 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Territories 20 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  21. 21. The Inverse Bell Curve Imbalanced Territories Create Over and Underperformers, Regardless of Talent Distribution of Attainment 25 % of Sales Force 20 15 10 5 0 50 60 70 80 90 100 110 120 130 140 % of Quota 21 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  22. 22. Improved Balance and Workload Opportunity by territory 2000 1800 1600 1400 Opportunity 1200 1000 800 600 400 200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 Territories 22 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  23. 23. The Desired Outcome Balanced Territories Lead to Expected Incentive Compensation Costs, Aligned with Revenue Distribution of Attainment 25 20 % of Sales Force 15 10 5 0 50 60 70 80 90 100 110 120 130 140 150 % of Quota 23 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  24. 24. Optimizing Territories Creates Predictable Incentive Compensation Costs Planned Incentive Comp Cost Actual Incentive Comp Cost 200 reps x $1M quota = $200M 100 reps x $75k var = $7.5M (not always attainable) + 100 reps x $150k = $15M 200 reps @ $200k OTE = $40M $22.5M IC Spent 50/50 Base vs. Variable = $100k/rep $20M IC planned Same Revenue - $2.5M Over-spent on variable incentive comp 24 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales Management Association. All rights reserved.
  25. 25. 3. Cost of Sales Analysis and Spans of Control 25 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  26. 26. How many of you have reviewed your Cost of Sales and Spans of Control recently? 26 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  27. 27. Questions to Ask When Optimizing Cost of Sales Spans of Control • Are we spending enough on • Are spans appropriate given the New vs. Retained business? nature of the role (transactional • Is our spend aligned with vs. strategic)? revenue and profit potential? • Do spans reflect the experience • Are our costs variable enough? level of direct reports (e.g. larger with tenured reports)? • Should we be spending more in alternate channels? • Do clearly understand how we want managers to interact with • Is the cost curve to our benefit; direct reports and the time do returns increase as we requirements of interactions? invest more? • Is our spend competitive? 27 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  28. 28. Despite the diminishing influence of wholesalers on demand, our investment is wholesaler centric. Division Dep.% Field On-Prem Off-P Corp. Total Northeast 17% 26 2 5 1 34 North Pacific 15% 25 2 4 1 32 South Pacific 14% 20 2 12 1 35 M id-Atlantic 14% 21 2 5 1 29 Southeast 12% 17 2 8 1 28 Central 10% 22 3 7 1 33 Southwest 9% 14 5 10 1 29 Rocky M ountain 8% 18 1 4 1 23 Grand Total 100% 162 19 54 9 244 % of Total 66% 8% 22% 4% 66% of all Sales headcount is in Field Sales, focused on wholesale execution, where just 8% and 22% are focused on demand generation at On-Premise and Off-Premise, respectively 28 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  29. 29. Offices are staffed largely the same; spans of control vary little by Division (e.g. Oppty) FTE Equivalents by Division - 2009 30 29 Frontline Sales 28 27 27 Operations Mgmt Sales Mgmt 25 24 24 23 19 20 Number of FTE equivalents 15 10 5 5 5 4 4 4 4 3 4 1 1 1 1 1 1 1 1 0 Northeast North Pacific South Pacific Mid-Atlantic Southeast Central Southwest Rocky Mountain 29 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  30. 30. And, the current investment in sales resources are not aligned with volume Sales Costs (TCC & T&E), Headcount & Depletions - 2008 $4,000,000 30,000,000 34 35 Sales Costs 32 33 Depletions (Case Eqs) $3,500,000 29 25,000,000 28 28 Total Depletions (in Case Equivalents) $3,000,000 24 Total Sales Costs (TCC & T&E) 20,000,000 $2,500,000 $2,000,000 15,000,000 $1,500,000 10,000,000 $1,000,000 5,000,000 $500,000 $- 0 Northeast South Pacific North Pacific Central Southwest Southeast Mid-Atlantic Rocky Mountain 30 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  31. 31. 4. Analysis of Territory Gains 31 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  32. 32. More than half the sales force is not generating net new revenue. 32 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  33. 33. This analysis can be revealing, particularly when cut to reveal • Customer Segments • Types of Accounts/Customers • Products • Geographies/Regions 33 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  34. 34. 5. Upside Analysis 34 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  35. 35. What is Upside? % Of Target Compensation 100 60 20 10 100% 30 50 90 70 50 Upside Target Incentive Extent of Mix and Upside Potential Base Pay Low High Prominence of Sales Person 35 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  36. 36. Why is Incentive Mix Important? Incentive Proportion Impact < 10% Minimal to none 10% to 15% Performance reminder 16% to 25% Directional 26% to 40% Highly directional > 40% Independent action The higher the proportion in incentive, the greater the impact on behavior 36 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  37. 37. Setting Upside Levels 1. Understand today’s distribution of performance 2. Determine at what level to set the excellence point, typically the upper 10th percentile of performance Distribution of Performance e Incentive nc lle ce Ex Frequency Cap Target A Fixed Pay B Threshold Target Maximum Threshold Target Maximum 80% 100% 120% 80% 100% 120% Percent of Goal 37 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  38. 38. Two Ways of Providing Upside The earnings opportunity above total target compensation for outstanding performance “Progressive” Typically… Unlimited Each sale is more difficult No cap $ Additional sales are very profitable “Progressive” Pay discrimination is desired Volume “Regressive” Typically… Limited Each additional sale is easier Maximum (cap) To avoid windfalls; runaway earnings Reduced $ Excessive sales are unprofitable opportunity Similar pay treatment is desired Volume 38 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  39. 39. Upside Is Defined Differently at Times “Double” Leverage = Opportunity for an additional 1x of target incentive is available for above target performance “Triple” Leverage = Opportunity for an additional 2x of target incentive is available for above target performance Be careful: it is common for companies to have their own interpretation of what leverage means – make sure you compare apples with apples. 39 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  40. 40. Examples of Upside Target Compensation = $50,000 Double Leverage (1x) Total Target Target Target Upside Excellence Compensation Mix Base Salary Incentive Opportunity Pay $50,000 80 / 20 40,000 10,000 10,000 60,000 $50,000 70 / 30 35,000 15,000 15,000 65,000 $50,00 50 / 50 Triple Leverage (2x) Total Target Target Target Upside Excellence Compensation Mix Base Salary Incentive Opportunity Pay $50,000 80 / 20 40,000 10,000 20,000 70,000 $50,000 70 / 30 35,000 15,000 30,000 80,000 $50,000 50 / 50 40 Copyright © 2008 - 2010 The Sales Management Association. All rights reserved.
  41. 41. Discussion © 2010 The Sales Management Association

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