Best Practices for Sales Compensation Management


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Best Practices for Sales Compensation Management

  1. 1. Best Practices for Sales Compensation Management Christopher W. Cabrera, Xactly Corporation Jeff Williams, IronPort Systems Track: Sales Operations
  2. 2. Safe Harbor Statement <ul><li>“ Safe harbor” statement under the Private Securities Litigation Reform Act of 1995: This presentation may contain forward-looking statements the achievement of which involves risks, uncertainties and assumptions. If any such risks or uncertainties materialize or if any of the assumptions proves incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make.  All statements other than statements of historical fact could be deemed forward-looking, including any projections of subscriber growth, earnings, revenues, or other financial items and any statements regarding strategies or plans of management for future operations, statements of belief, any statements concerning new, planned, or upgraded services or technology developments and customer contracts or use of our services. </li></ul><ul><li>The risks and uncertainties referred to above include - but are not limited to - risks associated with the integration of Sendia Corporation’s technology, operations, infrastructure and personnel with ours; unexpected costs or delays incurred in integrating Sendia with, which could adversely affect our operating results and rate of growth; any unknown errors or limitations in the Sendia technology; any third party intellectual property claims arising from the Sendia technology; customer and partner acceptance and deployment of the AppExchange and AppExchange Mobile platforms; interruptions or delays in our service or our Web hosting; our new business model; breach of our security measures; possible fluctuations in our operating results and rate of growth; the emerging market in which we operate; our relatively limited operating history; our ability to hire, retain and motivate our employees and manage our growth; competition; our ability to continue to release and gain customer acceptance of new and improved versions of our CRM service; unanticipated changes in our effective tax rate; fluctuations in the number of shares outstanding; the price of such shares; foreign currency exchange rates and interest rates. </li></ul><ul><li>Further information on these and other factors that could affect our financial results is included in the reports on Forms 10-K, 10-Q and 8-K and in other filings we make with the Securities and Exchange Commission from time to time, including our Form 10-K for the fiscal year ended January 31, 2006. These documents are available on the SEC Filings section of the Investor Information section of our website at /investor . </li></ul><ul><li>Any unreleased services or features referenced in this or other press releases or public statements are not currently available and may not be delivered on time or at all.  Customers who purchase our services should make purchase decisions based upon features that are currently available., inc. assumes no obligation and does not intend to update these forward-looking statements, except as required by law. </li></ul>
  3. 3. Christopher W. Cabrera Founder, President and CEO Xactly Corporation [email_address]
  4. 4. Xactly Corporation <ul><li>The leader in automated on-demand sales compensation management </li></ul><ul><li>100% pure-play on-demand </li></ul><ul><li>Multi-tenant application/multi-tenant database </li></ul><ul><li>Services Oriented Architecture (SOA) </li></ul><ul><li>Flexible, rules-based compensation engine </li></ul><ul><li>Hosting facility – MCI’s MAE – West, SAS 70, Type II </li></ul><ul><li>Headquartered in San Jose, CA </li></ul><ul><li>Executive staff – 30+ years of combined sales compensation domain experience </li></ul>“ A new paradigm in automating sales compensation”
  5. 5. Xactly Corporation <ul><li>Benefits to Sales and Finance </li></ul>Automate manual tasks - SOX Align payments to performance Improve sales rep behavior Create competitive advantage
  6. 6. Xactly Corporation <ul><li>Benefits to Sales </li></ul><ul><ul><li>Drive better performance </li></ul></ul><ul><ul><li>Increase revenue </li></ul></ul><ul><ul><li>On-line commission statements </li></ul></ul><ul><ul><li>Contests, SPIFs </li></ul></ul><ul><ul><li>Model future commissions </li></ul></ul><ul><ul><li>On-line comp plans with electronic signature </li></ul></ul>Enhance Performance Legally
  7. 7. Xactly Corporation <ul><li>Benefits to Finance </li></ul><ul><ul><li>SOX compliance - According to recent study – 91% of spreadsheets have errors </li></ul></ul><ul><ul><li>Companies typically spend between 8-10% of gross revenues in compensation (ex. 150 sales people x $80,000=$12M) </li></ul></ul><ul><ul><li>Reduce error rates </li></ul></ul><ul><ul><li>Model plans, organizations, SPIFs, scenarios </li></ul></ul><ul><ul><li>Revenue analysis </li></ul></ul><ul><ul><li>Maximize profitability </li></ul></ul>Being a non-conformist is fun… except when it comes to SOX!
  8. 8. Xactly Corporation <ul><li>Who is Being Paid Variably? </li></ul><ul><ul><li>Direct sales reps/managers </li></ul></ul><ul><ul><li>Indirect sales reps/managers </li></ul></ul><ul><ul><li>Telesales reps/managers </li></ul></ul><ul><ul><li>Channel reps/managers </li></ul></ul><ul><ul><li>OEM reps/managers </li></ul></ul><ul><ul><li>Marketing reps/managers </li></ul></ul><ul><ul><li>Systems engineers/managers </li></ul></ul>
  9. 9. Xactly Corporation <ul><li>Who is Managing the Headache? </li></ul><ul><ul><li>Compensation administrator </li></ul></ul><ul><ul><li>Financial analyst </li></ul></ul><ul><ul><li>Sales operations </li></ul></ul><ul><ul><li>Finance operations </li></ul></ul>
  10. 10. Xactly Corporation <ul><li>How Is It Managed Today? </li></ul><ul><ul><li>Predominantly calculated using Excel </li></ul></ul><ul><ul><li>Most companies pay 30 days in arrears </li></ul></ul><ul><ul><li>Usually provide an Excel spreadsheet statement with payment </li></ul></ul><ul><ul><li>Rarely provide web-based reporting during the month </li></ul></ul><ul><ul><li>Companies tend to “dumb down” their compensation plans </li></ul></ul><ul><ul><li>Some companies over complicate their plans </li></ul></ul>
  11. 11. <ul><li>Inexpensive </li></ul><ul><li>Error Prone </li></ul><ul><li>Poor Reporting </li></ul><ul><li>Limited web-based visibility </li></ul>Leapfrog the On-Premise Paradigm Manual On-Premise On-demand <ul><li>Rich functionality </li></ul><ul><li>Web-based reporting </li></ul><ul><li>SOX Compliance </li></ul><ul><li>Expensive: </li></ul><ul><ul><li>License </li></ul></ul><ul><ul><li>HW </li></ul></ul><ul><ul><li>9-12 mos install </li></ul></ul><ul><ul><li>Upgrades </li></ul></ul><ul><li>Rich functionality </li></ul><ul><li>Web-based reporting </li></ul><ul><li>SOX Compliance </li></ul><ul><li>No software license </li></ul><ul><li>No hardware </li></ul><ul><li>Rapid Installations </li></ul><ul><li>No Upgrades </li></ul>
  12. 12. <ul><li>Incent on discount percent </li></ul>Don’t just pave the cow paths
  13. 13. “I pay commissions on the NET revenue- So I am discouraging discounting” <ul><li>You decide to sell your $1M home </li></ul><ul><li>Sign a real estate agent to represent you – 3% </li></ul><ul><li>Your real estate “sales” person is excited </li></ul><ul><li>Because when they sell your house they get </li></ul><ul><li>$30,000. </li></ul><ul><li>First day on market you get an offer for $900k </li></ul><ul><li>What is your agent incented to do? </li></ul><ul><li>There is a better way? </li></ul>
  14. 14. <ul><li>Incent on discount percent </li></ul><ul><li>Vary commission rates by product </li></ul><ul><li>Pay on margin </li></ul>Don’t just pave the cow paths
  15. 15. “ I pay commissions on ALL products so I am incenting my reps to sell ALL the products ALL the time” <ul><li>Not all products are created equal </li></ul><ul><li>Reps WILL take the path of least resistance </li></ul><ul><li>Reps WILL gravitate to the higher value products </li></ul>Low margin – high revenue High margin – low revenue
  16. 16. <ul><li>Incent on discount percent </li></ul><ul><li>Vary commission rates by product </li></ul><ul><li>Pay on margin </li></ul><ul><li>Create SPIF’s or contests </li></ul>Don’t just pave the cow paths
  17. 17. “ I pay commissions on ALL products ALL the time, so I don’t need to use SPIF’s” <ul><li>SPIF’s can move obsolete products </li></ul><ul><li>SPIF’s can encourage learning about new products </li></ul><ul><li>SPIF’s can allow for quick competitive responses </li></ul><ul><li>SPIF’s can be FUN! </li></ul><ul><li>SPIF’s work. </li></ul>
  18. 18. Jeff Williams Vice President of North American Sales IronPort Systems [email_address]
  19. 19. IronPort Systems <ul><li>Leading gateway security provider for organizations ranging from small businesses to the Global 2000 </li></ul><ul><li>100 sales reps in 35 countries </li></ul>INDUSTRY: Email/web security EMPLOYEES: 400+ GEOGRAPHY: Global PRODUCT(S) USED: SFA, Service & Support # USERS: 100+
  20. 20. IronPort Systems – Key Challenges <ul><li>Business Challenges </li></ul><ul><ul><li>Excel-based system for managing sales compensation was no longer meeting the company’s needs adequately </li></ul></ul><ul><ul><li>Changing/working with large amounts of data (100+ sales professionals) in a spreadsheet was a nightmare </li></ul></ul><ul><ul><li>Sales reps “flying blind” – no real time visibility </li></ul></ul><ul><li>Technology Challenges </li></ul><ul><ul><li>Separate CRM and sales compensation systems </li></ul></ul><ul><ul><li>Desire to leverage and extend Salesforce investment </li></ul></ul>
  21. 21. IronPort Systems – The Solution <ul><li>Solution Criteria </li></ul><ul><ul><li>Leveraged existing Salesforce investment </li></ul></ul><ul><ul><li>Reduce TCO of compensation management </li></ul></ul><ul><ul><li>Capex </li></ul></ul><ul><ul><li>Opex </li></ul></ul><ul><ul><li>Data security and SOX compliance </li></ul></ul><ul><ul><li>Seamless integration </li></ul></ul>
  22. 22. IronPort Systems – Results <ul><li>What were the results? </li></ul><ul><ul><li>Improved margins </li></ul></ul><ul><ul><li>Rapid deployment </li></ul></ul><ul><ul><li>Improved compliance and reporting operations </li></ul></ul><ul><ul><li>Increased trust and efficiencies from a sales perspective </li></ul></ul><ul><ul><li>Ultimately increased sales productivity </li></ul></ul>
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  24. 29. Christopher W. Cabrera Founder, President and CEO Jeff Williams Vice President, North American Sales QUESTION & ANSWER SESSION