1© 2013
The Planning Way - Best
Practices in Effective
Variable Compensation
Budgeting & Forecasting
“The Right Tool for t...
2© 2013
TRUSTED Business Partner with
Global Commissions Experience
Nina Ostrom, Americas Field Finance & Operations, PROG...
3© 2013
Finance‟s Worst Nightmare…
4© 2013
Sales Management‟s Sleepless Nights
Frustrated Sales Rep!!! Shadow Accounting
5© 2013
SLEEP THERAPY 101
Implement the RIGHT tool, PLUS
6© 2013
Holistic Approach
Improve Incentive Compensation Plan Design
Select the ‘right’ Incentive Compensation Tool
Design...
7© 2013
Improve Incentive Plan Design
Align Plan Design with
Company Goals
Drive sales to meet and
exceed their quota
Make...
8© 2013
Select the
„Right‟ Incentive
Compensation
Tool
Why not Excel?
Flexible Design
Audit Trail for System Changes
Data ...
9© 2013
Solving the Problem Yields ROI
Invest in the „right‟ tool
Resource appropriately
Improves sales
productivity
Impro...
10© 2013
Implementation – Design Approach
REPORTING, REPORTING, REPORTING
Sales Performance – trends, quota attainment
Com...
11© 2013
Implementation – System Integration
INTEGRATE, INTEGRATE, INTEGRATE with
existing applications
Data Integrity – „...
12© 2013
The „Secret Sauce‟
Reporting
Year Region Revenue Quota Attain % Tier 1 Tier 2 Tier 3
Total
Commissions
Target
Inc...
13© 2013
The „Secret Sauce‟
Ad-Hoc Modeling
0
10
20
30
40
50
70% 80% 90% 100% 110% 120% 150%
Scenario 1 Scenario 2 Scenari...
14© 2013
Governance Framework
Closed Loop Process
Data Integrity – „System of Record‟ checks &
balances
Audit trail for al...
15© 2013
Budget & Forecasting
XACTLY Incent is the „System of Record‟
16© 2013
Planning Assumptions
As the „System of Record‟ it provides real-time
sales management visibility – vital info, pl...
17© 2013
Planning Assumptions
Prior year‟s performance becomes instrumental in
budget/forecast modeling
18© 2013
Budget Fundamentals
ALIGN quotas and target incentives to meet
Bookings/Revenue and COS% goals
Model compensation...
19© 2013
Forecasting
Forecast variability due to quota attainment
distribution curve and individual rep achievement
17%
20...
20© 2013
Improve Actual/Forecast Variance %
Predict QTR/FY Quota Attainment by rep
Estimate bookings based on a weighted f...
21© 2013
To Sleep Well…
Be INVOLVED during Compensation Plan Design
INVEST in an Incentive Compensation Tool
Define REPORT...
22© 2013
This is what SUCCESS looks like
For Sales Management, Sales Reps, and yes EVEN for Finance Executives!
23© 2013
Thank You!
24© 2013
Thank You Sponsors!
PLATINUM
GOLD
SILVER
DIAMOND
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The Planning Way - Best Practices in Effective Variable Compensation Budgeting & Forecasting

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Video/Presentation: http://www.proformative.com/events/planning-way-best-practices-effective-variable-compensation-budgeting-forecasting

The concept behind variable compensation isn’t difficult — people are motivated by rewards, and organizations use monetary and other incentives (gift cards, trips, etc.) to shape behavior that improve business performance. Yet variable compensation can be an expensive proposition, in lost dollars, risk and performance potential, if managed incorrectly. Manual spreadsheet-based sales compensation management limit visibility into variable compensation expenses, sales and rep performance, as well as the ability to make necessary plan changes that could drive improved business results. In this session, Nina Ostrom, head of Americas field finance and operations with Progress Software will explore how a systemic and operational approach provides the necessary insight for effective budgeting and improved forecast predictability.

Speaker:
Nina Ostrom, Head of Americas Field Finance & Operations, Progress Software

Presentation delivered at CFO Dimensions 2013 - http://www.cfodimensions.com
Track: Operational Effectiveness | Session: 1

Published in: Business, Technology
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The Planning Way - Best Practices in Effective Variable Compensation Budgeting & Forecasting

  1. 1. 1© 2013 The Planning Way - Best Practices in Effective Variable Compensation Budgeting & Forecasting “The Right Tool for the Job”
  2. 2. 2© 2013 TRUSTED Business Partner with Global Commissions Experience Nina Ostrom, Americas Field Finance & Operations, PROGRESS SOFTWARE
  3. 3. 3© 2013 Finance‟s Worst Nightmare…
  4. 4. 4© 2013 Sales Management‟s Sleepless Nights Frustrated Sales Rep!!! Shadow Accounting
  5. 5. 5© 2013 SLEEP THERAPY 101 Implement the RIGHT tool, PLUS
  6. 6. 6© 2013 Holistic Approach Improve Incentive Compensation Plan Design Select the ‘right’ Incentive Compensation Tool Design and System Integration are key to a successful implementation Reporting and Ad-Hoc Modeling are the „secret sauce‟ Implement a Governance Framework
  7. 7. 7© 2013 Improve Incentive Plan Design Align Plan Design with Company Goals Drive sales to meet and exceed their quota Make administration simple and easy to understand Ensure plan components FOCUS on Strategic Objectives ALIGN quotas and target incentives to meet COS% goals Ensure top performers (top 10%) EARN competitive market rates Streamlined, transparent process with Sales Mgmt involvement Timely and accurate payments
  8. 8. 8© 2013 Select the „Right‟ Incentive Compensation Tool Why not Excel? Flexible Design Audit Trail for System Changes Data Transformation Capability Integration w/ Existing Applications Robust Reporting Easy to Administer Cost Effective Solution
  9. 9. 9© 2013 Solving the Problem Yields ROI Invest in the „right‟ tool Resource appropriately Improves sales productivity Improves predictability Investment Returns Implement Tool $50K Annual Fee $75K Staffing <$75K> Sales/Profit $300K
  10. 10. 10© 2013 Implementation – Design Approach REPORTING, REPORTING, REPORTING Sales Performance – trends, quota attainment Compensation Plan Effectiveness Commission Cost Drivers – Rate Tiers (cost of accelerators) Design for the lowest level of information needed – consolidation is easy Create custom fields to ensure all management reporting requirements are met
  11. 11. 11© 2013 Implementation – System Integration INTEGRATE, INTEGRATE, INTEGRATE with existing applications Data Integrity – „System of Record’ Bookings, Account Assignment, Finance/HR info
  12. 12. 12© 2013 The „Secret Sauce‟ Reporting Year Region Revenue Quota Attain % Tier 1 Tier 2 Tier 3 Total Commissions Target Incentive % of TI Comm Rate US 45,000,000 50,000,000 90% 875,000 1,082,500 217,500 2,175,000 2,500,000 87% 5% EUROPE 32,000,000 40,000,000 80% 700,000 780,000 1,480,000 2,000,000 74% 5% ASIA 38,000,000 40,000,000 95% 700,000 1,076,500 323,500 2,100,000 2,000,000 105% 6% YEAR-2012 TOTAL 115,000,000 130,000,000 88% 2,275,000 2,939,000 541,000 5,755,000 6,500,000 89% 5% YEAR-2012
  13. 13. 13© 2013 The „Secret Sauce‟ Ad-Hoc Modeling 0 10 20 30 40 50 70% 80% 90% 100% 110% 120% 150% Scenario 1 Scenario 2 Scenario 3 % of Payees Quota Attainment
  14. 14. 14© 2013 Governance Framework Closed Loop Process Data Integrity – „System of Record‟ checks & balances Audit trail for all systemic changes Detail reports supporting performance, associated commissions expense, and payroll Line Management & Finance partnership – complete transparency, review and exception approvals
  15. 15. 15© 2013 Budget & Forecasting XACTLY Incent is the „System of Record‟
  16. 16. 16© 2013 Planning Assumptions As the „System of Record‟ it provides real-time sales management visibility – vital info, plan and quota assignment Name: Region Mgr Currency: USD Annual Base: 75,000 Manager: GEO Director Title: Sales Director Annual Variable: 75,000 in 000s QTR-1-2013 QTR-2-2013 QTR-3-2013 QTR-4-2013 YEAR-2013 Component Split - MBO 10% 10% 10% 10% 10% Component Split - GEO Revenue 50% 50% 50% 50% 50% Component Split - GEO Margin 40% 40% 40% 40% 40% GEO Revenue 18,750 15,750 16,500 24,000 75,000 GEO Margin 1,875 1,575 1,650 2,400 7,500 Plan Summary: YEAR-2013 Plan Quotas
  17. 17. 17© 2013 Planning Assumptions Prior year‟s performance becomes instrumental in budget/forecast modeling
  18. 18. 18© 2013 Budget Fundamentals ALIGN quotas and target incentives to meet Bookings/Revenue and COS% goals Model compensation plan payout schedule Confirm sales roster Quota assignment – Sum of reps‟ quotas > manager‟s quota > Region Bookings/Revenue Target YOY growth and Sales Productivity targets Review reps‟ quotas as % of fixed and variable compensation to ensure COS% goals are met Ensure quarterly trend based on commissions payout model
  19. 19. 19© 2013 Forecasting Forecast variability due to quota attainment distribution curve and individual rep achievement 17% 20% 20% 23% 10% 5% 5% 0% 5% 10% 15% 20% 25% 70% 80% 90% 95% 100% 110% 120% 130% 150% 200% Quota Attainment Distribution QuotaAttainment %Payees Rep 1 Rep 2 Var Comp $ 60 $ 60 YTD Sales $ 400 $ 1,000 Quota $ 1,000 $ 1,000 Attain % 40.0% 100.0% Commission $ 16.8 $ 60.0 New Deal $ 100 $ 100 Attain % 50% 110% Commission $ 4.2 $ 12.0
  20. 20. 20© 2013 Improve Actual/Forecast Variance % Predict QTR/FY Quota Attainment by rep Estimate bookings based on a weighted factor of rep‟s opportunity pipeline in salesforce.com to meet overall regions‟ booking forecast Quota Coverage re: Rep Attrition/New Hires Input estimated future quarter bookings by rep into Xactly Sandbox environment System calculates YTD quota attainment by rep/manager and associated commissions expense Review estimated quota attainment with Sales Management
  21. 21. 21© 2013 To Sleep Well… Be INVOLVED during Compensation Plan Design INVEST in an Incentive Compensation Tool Define REPORTING requirements during System Implementation ALIGN Quotas and Target Incentives to meet Sales/Revenue and COS% goals LEVERAGE „System of Record‟ to provide modeling capabilities for Budgeting and Forecasting
  22. 22. 22© 2013 This is what SUCCESS looks like For Sales Management, Sales Reps, and yes EVEN for Finance Executives!
  23. 23. 23© 2013 Thank You!
  24. 24. 24© 2013 Thank You Sponsors! PLATINUM GOLD SILVER DIAMOND

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