Anaplan SPM webinar series, part 5: Aligning Sales, HR, and Finance with Effective Sales Targets

Presented by
© Copyright 2017 The Sales Management Association. All rights reserved.
Sales Management Association Webcast
19 January 2017
Sales Performance Management Series
Webcast 5: Aligning Sales, HR, and
Finance with Effective Sales Targets
Scott Sands
Partner, Sales Force Effectiveness
Aon Hewitt
scott.sands@aonhewitt.com
Rowan Tonkin
Head of Sales and Marketing Solutions
Anaplan
rowan.tonkin@anaplan.com

About The Sales Management Association
A global, cross-industry professional association for
sales operations and sales management.
Focused in providing research, case studies, training,
peer networking, and professional development to
our membership.
Fostering a community of thought-leaders, service
providers, academics, and practitioners.
www.salesmanagement.org
www.salesmanagementconference.com
2
16 – 18 OCTOBER 2017 ATLANTA

Today’s Speakers
3
Scott Sands
Partner, Sales Force Effectiveness
Aon Hewitt
Rowan Tonkin
Head of Sales & Marketing Solutions
Anaplan

The traditional planning to performance pathway
Capacity Planning
and Management
Deal Desk

The connected pathway to smart sales performance
Account
Segmentation
and Scoring
Capacity Planning
and Management
Marketing Budget
Allocation
Marketing
Campaign
Planning
Compensation
Planning
Deal Desk
Commissions
Marketing
Attribution
Territory
Planning and
Management
Quota Planning
and Management
Forecasting
Crediting
Campaign
Performance
Management
Marketing Spend
Management
Account Planning

Topics for today
o What do we mean by sales targets?
o Why are sales targets valuable?
o What are common issues with sales targets?
o How do many companies approach sales targets?
o Who should own sales goal-setting?
o What does a best practice process look like?
o What information and inputs are required?
o How can we improve incrementally in the next few weeks and
strategically in the next 12 months?
o Q&A

o Double in size over the next five years
o Deliver $1 billion of revenue next year
o Secure orders for 10,000 units of the
new product
o Achieve gross margins of 55%
o Contribute gross profit of $550 million
o Increase net promoter score to 32%
o Reduce cost of sales to 5.0%
o Reduce days of sales outstanding to 38
o Improve solution selling capability
o And many others…
There are several types of sales targets (or goals or quotas) that can result
from long- or short-term strategies and objectives, for example:
What do you mean by sales targets?

Studies have shown that a sales person with a goal who understands how that goal was set and believes
that there is sufficient opportunity in his or her territory will perform 5-15% higher than a comparable
sales person with no explicit goal.
This doesn’t appear to be a massive difference… but if you can keep 100 or 1,000 sales reps pushing
through the end of the year rather than coasting once they have made enough money to sustain their
lifestyles, you can move the needle on organic revenue growth significantly.
Why are sales targets valuable?
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
1/9/2016 2/9/2016 3/9/2016 4/9/2016 5/9/2016 6/9/2016 7/9/2016 8/9/2016 9/9/2016 10/9/2016 11/9/2016 12/9/2016
Weekly Cumulative Sales FY16
With Goal Without
GOAL

What are common issues sales targets?
o Lack of visibility into future
market growth
o Over-burdening top performers
with higher quotas
o Sandbagging by reps (and
management)
o Negotiation of quotas favors
more senior reps
o Failure to communicate quotas
in a timely fashion
o Failure to communicate
quota-setting methodology
o Unclear ownership of quotas
o Mid-year changes create perception
of gaming
o Change management from
commissions to quotas
o Meaningless quotas with no impact
on pay, promotion or recognition
o Inaccurate quotas driving
up sales force cost

Earnings may be up at an all-time high…
Current market situation
S&P 500 Earnings
$ inflation-adjusted earnings per share

…but revenue growth has been flat, and recently declining. How is this possible?
Current market situation
S&P 500 Real Sales Growth
Earnings are being made on the back
of cost and operating efficiency –
rather than growing revenue.

Let’s take some of the prevailing dynamics in the market today and show how they can impact quota achievement:
o Last year, Acme Corporation delivered $1 billion of revenue with 200 field sales representatives delivering on
average $5 million each. Growth in the industry is slowing a bit, from 6% to 4%. Gross margins have been 48%
and are being pressured by commoditization of the core product lines. Compensation Cost of Sales is about 5%.
o The CFO would like to grow by 10% and improve operating margins from 15% to 16%, and has asked the business
not to replace any employees who resign from the company. Turnover in the sales force runs 15% annually. Sales
management has been able to fight for replacement of key resources in some cases (strategic account coverage,
key managers, etc.) but not all.
Quota achievement is down 10-15% below best practices over
the past couple of years… why?
100%
Avg. Quota: $5.0M
Avg. Achievement: 104%
Percent Achieving: 63%

So let’s imagine we are the head of sales for Acme and we choose to attack the year’s goals within the CFO’s parameters:
o In this scenario, Acme goes into the next fiscal year with 180 field sales representatives and because there are no productivity improvement
initiatives planned, market lift will only produce $5.2 million of revenue on average. To address the CFO’s 10% growth goal and the
traditional 10% buffer applied to the business plan by sales management, each rep would need to carry a $6.7 million goal.
o Through long hours and diligent performance management, let’s say the sales force produces $5.8 million on average. This still drops
the percent of reps achieving goal from over 60% to about 40%.
o The company achieved less than half the CFO’s revenue growth plan. But because of the operating margin improvements, the company
grows operating profit by $17 million. Finance views that as a win in terms of employee productivity, and may be willing to try the same
thing next year.
This logical chain of decisions creates a dynamic that puts tremendous
pressure on front-line sales, and it is a hard habit to break
100%
Avg. Quota: $6.7M
Avg. Achievement: 87%
Percent Achieving: 41%

Poll Question: What is your growth target for 2017?
A. Negative to Flat
B. Flat to 5% Growth
C. 5-10% Growth
D. 10-15% Growth
E. Greater than 15% Growth

Poll Question: How much buffer do you add to the business plan?
A. None
B. 0%-3%
C. 3-6%
D. 6-9%
E. Greater than 9%

Best practice is to balance the insight and
skill-sets of four different functions:
Top-down approach
allocates the business
plan to all participating
employees
Bottom-up approach
identifies areas
of opportunity and
market share

How are companies approaching quota-setting?
o Top-Down Simple Increase—Exclusively top down
methodology where everyone gets the same growth
goal (like 5%) over prior year
final results or quota
o Individual Last Year Plus—Exclusively top down
methodology where management gives everyone
different growth goals
o Bottom-Up Sales Potential—Exclusively bottom up
methodology based on cumulative sales input about
client opportunity
o Fair Share—Combination of top-down and bottom-up
where each rep gets allocated the gap based on
market share
o Hybrid/Combination/Other
QUOTA SETTING METHODOLOGY

The degree to which internal and external factors drive quota setting
What data and inputs are typically used to
set sales targets?
0%
20%
40%
60%
80%
100%
PercentofRespondents
Not Used
Minor
Consideration
Secondary
Consideration
Primary
Drivers (s)
Factors/Data Sources

Quota Setting Methodology by Primary Owner
Who owns quota-setting?
Primary Owner of Quota Setting
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Sales Sales
Operation
Finance Human
Resources
Other No Primary
Owner Identified
PercentofRespondents
Top-Down
Simple Increase
Individual Last
Year Plus
Bottom-Up
Sales Potential
Primary Fair
Share Allocation
Hybrid/Combo

The quota allocation process is interconnected with the business
planning, sales coverage, and compensation design processes
Coverage CompHC BudgetLRP
Finance
HR
Sales Ops
Sales Mgmt
Sales
No
May Jan
Confirm
Budget
Confirm
FTEs
Calculate
Potential
Yes
Calculate
Share
Confirm
Territories
Forecast
Sales
Gap
?
Sum
Forecast
Allocate
Gap
Assess
Impact
Review
Final Model
Develop
Comms
Account
Planning

Poll Question: When do you start planning/calculating targets?
A. Q1– early, immediately after start of year
B. Q2
C. Q3
D. Q4
E. Q1– late, after everything else is rolled out

Ideal Proposed Territory & Quota Process (Moderate Detail)
Step
Short Term/
Long Term
Territory/
Quota/Both
Category Activity Driver Ideal Timing
1 ST Both Business Planning Assess Market Marketing/Sales -26 weeks
2 ST Both Business Planning Develop Growth Goals Finance -25 weeks
3 ST Both Business Planning Confirm LTV/CAC Ratio Finance -25 weeks
4 ST Both Business Planning Assess Product Plan and Impact Marketing -25 weeks
5 ST Both Business Planning Headcount Planning Sales/HR -24 weeks
6 ST Both Territory and Quota Principles Refine Territory and Quota Principles Sales/Finance -23 weeks
7 ST Both Territory and Quota Principles Initial Principle Compliance Check Sales Operations -22 weeks
8 ST Both Assess Sales Potential Clean Internal Data IAMs/BDMs -21 weeks
9 ST Both Assess Sales Potential Obtain External Data Sales Operations -19 weeks
10 ST Both Assess Sales Potential Clean Combined Data Sales Operations -18 weeks
11 ST Both Assess Sales Potential Calculate Total Potential Sales Operations -17 weeks
12 ST Both Assess Sales Potential Calculate Untapped Potential Sales Operations -17 weeks
13 ST Both Assess Sales Potential Sum Untapped Potential for Existing Territories Sales Operations -17 weeks
14 ST Both Customer Segmentation Refine Criteria for Dividing Accounts Sales/Marketing -16 weeks
15 ST Territory Draft Initial Territories Determine Where New Headcount Will Reside Sales -15 weeks
16 ST Territory Draft Initial Territories Balance Territory Potential Sales Operations -14 weeks
17 ST Territory Profile/Target Profile Accounting Firms and Qualify Targets Sales -13 weeks
18 ST Territory Finalize Territories Finalize Sales Territories Sales -12 weeks

Ideal Proposed Territory & Quota Process (Moderate Detail)
Step
Short Term/
Long Term
Territory/
Quota/Both
Category Activity Driver Ideal Timing
19 ST Quota Draft Top-Down Quotas Pro-Rate Quotas Based on Untapped Potential Sales Operations -12 weeks
20 ST Quota Draft Top-Down Quotas Calculate Initial "Fair Share" Quota Sales Operations -12 weeks
21 LT Quota Bottom-Up Forecast Bottom-Up Forecast Sales -12 weeks
22 LT Quota Roll-Up and Gap Assessment Roll-Up and Gap Assessment Finance/Sales -10 weeks
23 LT Quota Gap Allocation Gap Allocation Finance/Sales -8 weeks
24 ST Quota Draft Quotas Apply Quota "Sanity Check" Rules, Adjust Finance/Sales -7 weeks
25 ST Quota Draft Quotas Finalize Quotas Finance/Sales -6 weeks
26 ST Quota Draft Quotas Calculate Overlay Finance/Sales -5 weeks
27 ST Quota Draft Quotas Apply Seasonality Finance/Sales -4 weeks
28 ST Quota Quota Approval Management Review Sales -4 weeks
29 ST Both Communication Roll-out Sales +/-2 weeks
30 ST Both Administration Systems Load Finance Ongoing
31 ST Territory In-Period Adjustment Assign "Hot" New Accounts Sales Ongoing
32 ST Both In-Period Adjustment Collect/File Proposed Adjustments Commissions/Sales Ops Ongoing
33 ST Both In-Period Adjustment Quarterly Adjustments Commissions/Sales Ops Quarterly
34 ST Both In-Period Adjustment Review/Approve Adjustments Finance Quarterly
35 ST Both In-Period Adjustment Exception/Appeal Adjustments Commissions/Sales Ops Quarterly
36 ST Both Performance Assessment Review Performance Commissions/Sales Ops +26 weeks

Knowing the RUN characteristic of a business can provide better insight into
the sub-components for goal-setting and productivity improvement
2013-14 U.S. Product & Service RUN Analysis
(Retention, Upsell, New Business Acquisition)
$’000, %
$45,661
$56,020
2013
Revenue
Retention Penetration Acquisition 2014
Revenue
-34% +39%
+17%
$27,592
Observations
o Retention is out of line with market practices
o Upsell (penetration) is over-performing and new business
acquisition is in range with best practices for a business of
similar type and size
o For B2B sales forces appx. 25-75% of the companies
usually fall within the following RUN ranges:
o Retention = 80-90%
o Upsell = 15-25%
o New = 5-15%
2013 US
Product
Revenue
Retention Penetration Acquisition 2014 US
Product
Revenue
$39,503
-10% +38%
+15%
2013 US Service
Revenue
Retention Penetration Acquisition 2014 US Service
Revenue
$16,517
-70% +41%
+20%
$18,069
U.S. Product
U.S. Service
Further examination is
required to assess if low
retention is due to actual
loss of customers or change
of channel
Upsell NewRetention
Upsell New

Considering hiring practices, onboarding techniques and typical ramp-up
may push companies to use ramped goals in the first year
0
50
100
150
200
250
300
350
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22
Month After Hire
ASP
Avg - New Hire Avg - All DMs Low 1/3 Mid 1/3 Top 1/3
Top 1/3 of New Hires
Bottom 1/3 of New Hires
Middle 1/3 of New Hires
Average of All New Hires
Average of All AMs
Month After Hire
$K

In the next few 4 weeks:
o Revisit headcount plan
o Remove excess buffer from the goals
o Confirm top reps aren’t punished or
given a pass
o Speed up the process
o Improve the communications
What can you do next to improve your sales targets?
In the next 4 quarters:
o Re-evaluate sales territories for potential
o Acquire more/better external data
o Designate a total process owner
o Ensure both top-down and bottom-up elements
are in the process
o Acquire/develop enhanced planning tools
Add External Data Listen to Bottom-Up
Forecast
Close Gaps Engage Sales Force

Poll Question: What improvements will you make in 2017?
A. Improve internal data collected
B. Improve external data used
C. Designate clear owner of the process
D. Start earlier
E. Purchase/deploy systems and tools to support goal-setting

The sales performance management webinar series
ANAPLAN.COM/SPM-SERIES

Your Questions
30
Scott Sands
Partner
Aon Hewitt
Rowan Tonkin
Head of Sales & Marketing Solutions
Anaplan

Did we run out of time before we got
to your question?
Presenters can follow-up with you via
email. Feel free to submit more questions
if you’d like an offline response.
31

Thank You
Thank You

Anaplan SPM webinar series, part 5: Aligning Sales, HR, and Finance with Effective Sales Targets

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Viewers also liked

Viewers also liked (16)

Similar to Anaplan SPM webinar series, part 5: Aligning Sales, HR, and Finance with Effective Sales Targets

Similar to Anaplan SPM webinar series, part 5: Aligning Sales, HR, and Finance with Effective Sales Targets (20)

More from Anaplan

More from Anaplan (20)

Recently uploaded

Recently uploaded (20)

Anaplan SPM webinar series, part 5: Aligning Sales, HR, and Finance with Effective Sales Targets

Editor's Notes