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Building An Effective Sales Compensation Framewok<br />CIPD – London May 7 th, 2010<br />Paola Gheis<br />1<br />
CIPD Sales Compensation May 7, 2010 Paola Gheis<br />2<br />Content<br />The Sales Management System<br />Why using Sales ...
The Sales Management System<br />Why using Sales Incentive Plans (SIP)<br />SIP Eligibility and  roles’ review within the ...
CIPD Sales Compensation May 7, 2010 Paola Gheis<br />4<br />The Sales Management System<br />Sales Management System TM<br...
Territory assignment, etc.
How many?
New Markets Selling
Maintenance selling, etc.
Revenue and Profit goals
Business Growth Expectations
Global, regional
High touch, low touch
Product specialist, generalist, tele-sales
Go-to-Market Strategy
Indirect, direct, retail, etc.
Revenue
Volume
Product mix
Etc.
Plan design features
Pay mix, upside, MBO
Costs & affordability
Communication: content, planning
Payout  calculation</li></li></ul><li>CIPD Sales Compensation May 7, 2010 Paola Gheis<br />5<br />Why Companies Use Sales ...
CIPD Sales Compensation May 7, 2010 Paola Gheis<br />6<br />Eligibility to Sales Incentive Plan<br /><ul><li>The Sales Inc...
Sales Comp Design Fundamentals<br />Some SIP design fundamental and criteria for choosing them<br />CIPD Sales Compensatio...
CIPD Sales Compensation May 7, 2010 Paola Gheis<br />9<br />Sales Compensation DesignDesign Fundamentals<br />Upside Pay<b...
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Building An Effective Sales Compensation Framework

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Building An Effective Sales Compensation Framework

  1. 1. Building An Effective Sales Compensation Framewok<br />CIPD – London May 7 th, 2010<br />Paola Gheis<br />1<br />
  2. 2. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />2<br />Content<br />The Sales Management System<br />Why using Sales Incentive Plans (SIP)<br />SIP Eligibility and roles’ review within the sales strategy<br />Sales Comp Design Fundamentals<br />Some SIP design fundamental and criteria for choosing them<br />How to Ensure SIP Alignment to Sales Strategy Over Time<br />SIP stakeholders<br />SIP learning process<br />SIP Evaluation<br />How to build the tool kit for a SIP review with sales leaders<br />SIP assessment: some critical questions<br />The Communication Process<br />Some critical aspects<br />A recommended model<br />Bibliography<br />
  3. 3. The Sales Management System<br />Why using Sales Incentive Plans (SIP)<br />SIP Eligibility and roles’ review within the sales strategy<br />CIPD Sales Compensation May 7 Paola Gheis<br />3<br />
  4. 4. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />4<br />The Sales Management System<br />Sales Management System TM<br />Customer Accountability<br />Sales Coverage Strategy<br />Sales Effectiveness<br />1<br />2<br />3<br />4<br />6<br />7<br />5<br />8<br />Segment Definition & Targeting<br />Sales Strategy<br />Channel Design<br />Organization<br />Resource Deployment<br />Performance Metrics & Tools<br />Goals & Compensation<br />People Management Programs<br />& Job Design<br />& Selection<br />E N A B L I N G T E C H N O L O G I E S <br /><ul><li>Account assignment
  5. 5. Territory assignment, etc.
  6. 6. How many?
  7. 7. New Markets Selling
  8. 8. Maintenance selling, etc.
  9. 9. Revenue and Profit goals
  10. 10. Business Growth Expectations
  11. 11. Global, regional
  12. 12. High touch, low touch
  13. 13. Product specialist, generalist, tele-sales
  14. 14. Go-to-Market Strategy
  15. 15. Indirect, direct, retail, etc.
  16. 16. Revenue
  17. 17. Volume
  18. 18. Product mix
  19. 19. Etc.
  20. 20. Plan design features
  21. 21. Pay mix, upside, MBO
  22. 22. Costs & affordability
  23. 23. Communication: content, planning
  24. 24. Payout calculation</li></li></ul><li>CIPD Sales Compensation May 7, 2010 Paola Gheis<br />5<br />Why Companies Use Sales Incentive Plans and What are the Objectives?<br />Sales people drive the company’s top line (and often impact the bottom line)<br />Drivesales growth & profitability<br />Align rewards tightly to sales results for individuals and sales teams<br />Create performance differentiation and sustain a performance culture<br />Drive individual accountability (while balancing team effectiveness as necessary)<br />Drive motivation by offering (attractive) above target incentives<br />Focus employees’ behavior to sales priorities with key metrics<br />Provide flexibility to align sales behavior with market dynamics<br />Create a win-win situation for the company and employees<br />
  25. 25. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />6<br />Eligibility to Sales Incentive Plan<br /><ul><li>The Sales Incentive Plan are designed specifically for sales employees who are directly involved in selling and persuading a defined customer to buy</li></li></ul><li>CIPD Sales Compensation May 7, 2010 Paola Gheis<br />7<br />Sales Roles – Sales Strategy Matrix<br />Conversion focus<br />Conversion Selling <br />“Grow Base”<br />New Market Selling<br />“Develop Markets”<br />Prospects<br />Buyers<br />Maintenance Selling<br />“Protect Base”<br />Leverage Selling<br />“Penetrate Accounts”<br />Customers<br />Retention focus<br />Current<br />New<br />Penetration focus<br />Products<br />This is a useful tool to help clarify the primary differentiation (R,P,C) between sales roles<br />
  26. 26. Sales Comp Design Fundamentals<br />Some SIP design fundamental and criteria for choosing them<br />CIPD Sales Compensation May 7 Paola Gheis<br />8<br />
  27. 27. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />9<br />Sales Compensation DesignDesign Fundamentals<br />Upside Pay<br />Incentive Program<br />Target Incentive<br />Upside<br />Target Incentive<br />Pay Mix<br />Total Target Cash<br />Base<br />
  28. 28. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />10<br />Pay Mix and Upside<br /> Extent of Upside Potential<br />Target<br />80<br />50<br />20<br />Upside Earnings<br />100%<br />Target<br />10<br />10<br />Target Compensation<br />25<br />40<br />Base<br />90<br />75<br />60<br />0%<br />Low<br />High<br />
  29. 29. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />11<br />Sales Incentive Plan Pay Mix and Upside Criteria<br />Less Aggressive Pay Mix/Upside More Aggressive<br />Added Value Sales Focus Price<br />Many Co. Employees Customer Contact Sales Person Only<br />Many Reasons Buy Decision Seller Driven<br />Weak Line of sight Strong <br />Non-Predictable resultsForecast Ability Predictable Results<br />Emerging Market Mature<br />Country/Region Level of measure Individual<br />Companies may determine a streamlined choice of plan variations for:<br />Choice of simplicity of plan administration and communication, easiness to manage compensation in case of mobility across roles, affordability, etc.<br />
  30. 30. How to Ensure SIP Alignment to Sales Strategy Over Time<br />SIP stakeholders<br />SIP learning process<br />CIPD Sales Compensation May 7 Paola Gheis<br />12<br />
  31. 31. 13<br />Compensation Plans are Dynamic Programs<br />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.<br />Objectives and Strategies<br />Compensation Implications<br />Job Definition<br />Change Drivers<br />Customer Responsibility<br />Market Forces<br />Measures<br />Marketing Priorities<br />Weights<br />Sales Strategy<br />Competition<br />Leverage<br />Product/<br />Service <br />Mix<br />New Products<br />Funding<br />Product Responsibility<br />Process Responsibility<br />Customer Coverage Requirements<br />Measurement and Tracking<br />Technological Change<br />CIPD Sales Compensation May 7, 2010 Paola Gheis<br />
  32. 32. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />14<br />SIP Stakeholders<br />Drive sales performance<br />Provide plan feedback<br />Manage processes to translate sales outcomes into incentive payout<br />Drive sales priorities, coach sales, ensure SIP understanding within team<br />Provide leadership on sales strategy, approve performance metrics and SIP design<br />Consult on SIP affordability<br />Drive target setting process<br />Drive pay competitiveness and consistency with company pay philosophy<br />
  33. 33. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />15<br />Sales Incentive Plan Learning Process<br />Process Start<br />
  34. 34. SIP Evaluation<br />How to build the tool kit for a SIP review with sales leaders<br />SIP assessment: some critical questions<br />CIPD Sales Compensation May 7 Paola Gheis<br />16<br />
  35. 35. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />17<br />Building a Tool Kit to Evaluate & Review SIP with Sales Leaders<br />Key question<br />Data Source<br />
  36. 36. Is SIP Driving the Desired Behavior?<br />Periodic interviews and surveys in the field needed to support the assessment:<br />Define relevant population segment depending on organization size and model:<br />GMs<br />District Mgr (first line sales mgrs)<br />Field Sales Employees<br />Etc.<br />Design questions for managers around sales priorities and assess SIP is not driving disruptive behaviors:<br />Is the sales force spending time on pushing product X (performance data analysis also provides insights to this question)<br />Is SIP ensuring the necessary collaboration among your sales reps<br />Etc.<br />Ask Sales Employees if:<br />They understand the plan<br />Is SIP supporting the objective of the job and if not why<br />Etc.<br />CIPD Sales Compensation May 7, 2010 Paola Gheis<br />18<br />
  37. 37. Are We Getting What We Are Paying For?<br />Acquire intelligence on plan costing and its relation to the revenue achieved<br />Target Incentive Paid % vs. Total Net Revenue Achieved <br />This basic metric should be broken down by the relevant organization segments<br />Global, regional, country, district, etc.<br />Correlate % of incentive paid for each plan metric to the results achieved for that particular metric goal. Example:<br />A few questions to interpret the data in the example table:<br /><ul><li>What is each product maturity and strategic relevance?
  38. 38. Is the field force trained to sell product Z?
  39. 39. Is 10% weight relevant enough to focus sales to Product Z or are sales employees shopping the plan?
  40. 40. How is the quota set for Product Y</li></ul>CIPD Sales Compensation May 7, 2010 Paola Gheis<br />19<br />
  41. 41. Is SIP Attractive (or too attractive) Relative to Competition?<br />Salary surveys provide compensation data on base, target and actual cash<br />Helpful to set compensation levels by role and to design certain element of the plan mechanics (e.g. pay mix)<br />Sales practices surveys is another source to enhance intelligence on plan design<br />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<br />All of the above help to assess how to position your plan design payout potential relative to the market of reference<br />CIPD Sales Compensation May 7, 2010 Paola Gheis<br />20<br />
  42. 42. The Communication Process<br />Some critical aspects<br />A recommended model<br />CIPD Sales Compensation May 7 Paola Gheis<br />21<br />
  43. 43. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />22<br />Critical Elements of Communication<br />
  44. 44. CIPD Sales Compensation May 7, 2010 Paola Gheis<br />23<br />A Recommended Communication Process<br />
  45. 45. Bibliography<br />A few good books to get started on Sales Comp<br />24<br />CIPD Sales Compensation May 7, 2010 Paola Gheis<br />
  46. 46. A Few Good Books to Get Started on Sales Comp<br />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<br />Compensation the Sales Force. David J. Cichelli. Mc Graw Hill. 2004<br />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<br />Compensating New Sales Roles. How to Design Rewards That Work in Today’s Selling Environment. Jerome A. Colletti, Mary S. Fiss. AMACOM. 2001<br />
  47. 47. Paola Gheis’ Bio and Contact Details<br />CIPD Sales Compensation May 7, 2010 Paola Gheis<br />26<br />
  48. 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.<br />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. <br />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.<br />Paola currently lives in Barcelona, Spain, and can be reached at:<br />Email: paolagheis@gmail.com<br />Cell.: +34 648 01 3914<br />Linkedin profile: http://es.linkedin.com/in/paolagheis<br />CIPD Sales Compensation May 7 Paola Gheis<br />27<br />

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