This document provides an overview of building an effective sales compensation framework. It discusses why companies use sales incentive plans and reviews key considerations for plan design like pay mix, eligibility, and alignment with sales strategy. The presentation emphasizes the importance of evaluating plans regularly using metrics like incentive costs and market competitiveness. It also stresses communicating plans clearly to ensure the desired sales behaviors are motivated.

1. Building An Effective Sales Compensation Framewok CIPD – London May 7 th, 2010 Paola Gheis 1

2. CIPD Sales Compensation May 7, 2010 Paola Gheis 2 Content The Sales Management System Why using Sales Incentive Plans (SIP) SIP Eligibility and roles’ review within the sales strategy Sales Comp Design Fundamentals Some SIP design fundamental and criteria for choosing them How to Ensure SIP Alignment to Sales Strategy Over Time SIP stakeholders SIP learning process SIP Evaluation How to build the tool kit for a SIP review with sales leaders SIP assessment: some critical questions The Communication Process Some critical aspects A recommended model Bibliography

3. The Sales Management System Why using Sales Incentive Plans (SIP) SIP Eligibility and roles’ review within the sales strategy CIPD Sales Compensation May 7 Paola Gheis 3

5. Territory assignment, etc.

6. How many?

7. New Markets Selling

8. Maintenance selling, etc.

9. Revenue and Profit goals

10. Business Growth Expectations

11. Global, regional

12. High touch, low touch

13. Product specialist, generalist, tele-sales

14. Go-to-Market Strategy

15. Indirect, direct, retail, etc.

16. Revenue

17. Volume

18. Product mix

19. Etc.

20. Plan design features

21. Pay mix, upside, MBO

22. Costs & affordability

23. Communication: content, planning

26. Sales Comp Design Fundamentals Some SIP design fundamental and criteria for choosing them CIPD Sales Compensation May 7 Paola Gheis 8

27. CIPD Sales Compensation May 7, 2010 Paola Gheis 9 Sales Compensation DesignDesign Fundamentals Upside Pay Incentive Program Target Incentive Upside Target Incentive Pay Mix Total Target Cash Base

28. CIPD Sales Compensation May 7, 2010 Paola Gheis 10 Pay Mix and Upside Extent of Upside Potential Target 80 50 20 Upside Earnings 100% Target 10 10 Target Compensation 25 40 Base 90 75 60 0% Low High

29. CIPD Sales Compensation May 7, 2010 Paola Gheis 11 Sales Incentive Plan Pay Mix and Upside Criteria Less Aggressive Pay Mix/Upside More Aggressive Added Value Sales Focus Price Many Co. Employees Customer Contact Sales Person Only Many Reasons Buy Decision Seller Driven Weak Line of sight Strong Non-Predictable resultsForecast Ability Predictable Results Emerging Market Mature Country/Region Level of measure Individual Companies may determine a streamlined choice of plan variations for: Choice of simplicity of plan administration and communication, easiness to manage compensation in case of mobility across roles, affordability, etc.

30. How to Ensure SIP Alignment to Sales Strategy Over Time SIP stakeholders SIP learning process CIPD Sales Compensation May 7 Paola Gheis 12

31. 13 Compensation Plans are Dynamic Programs 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. Objectives and Strategies Compensation Implications Job Definition Change Drivers Customer Responsibility Market Forces Measures Marketing Priorities Weights Sales Strategy Competition Leverage Product/ Service Mix New Products Funding Product Responsibility Process Responsibility Customer Coverage Requirements Measurement and Tracking Technological Change CIPD Sales Compensation May 7, 2010 Paola Gheis

32. CIPD Sales Compensation May 7, 2010 Paola Gheis 14 SIP Stakeholders Drive sales performance Provide plan feedback Manage processes to translate sales outcomes into incentive payout Drive sales priorities, coach sales, ensure SIP understanding within team Provide leadership on sales strategy, approve performance metrics and SIP design Consult on SIP affordability Drive target setting process Drive pay competitiveness and consistency with company pay philosophy

33. CIPD Sales Compensation May 7, 2010 Paola Gheis 15 Sales Incentive Plan Learning Process Process Start

34. SIP Evaluation How to build the tool kit for a SIP review with sales leaders SIP assessment: some critical questions CIPD Sales Compensation May 7 Paola Gheis 16

35. CIPD Sales Compensation May 7, 2010 Paola Gheis 17 Building a Tool Kit to Evaluate & Review SIP with Sales Leaders Key question Data Source

36. Is SIP Driving the Desired Behavior? Periodic interviews and surveys in the field needed to support the assessment: Define relevant population segment depending on organization size and model: GMs District Mgr (first line sales mgrs) Field Sales Employees Etc. Design questions for managers around sales priorities and assess SIP is not driving disruptive behaviors: Is the sales force spending time on pushing product X (performance data analysis also provides insights to this question) Is SIP ensuring the necessary collaboration among your sales reps Etc. Ask Sales Employees if: They understand the plan Is SIP supporting the objective of the job and if not why Etc. CIPD Sales Compensation May 7, 2010 Paola Gheis 18

38. Is the field force trained to sell product Z?

39. Is 10% weight relevant enough to focus sales to Product Z or are sales employees shopping the plan?

40. How is the quota set for Product YCIPD Sales Compensation May 7, 2010 Paola Gheis 19

41. Is SIP Attractive (or too attractive) Relative to Competition? Salary surveys provide compensation data on base, target and actual cash Helpful to set compensation levels by role and to design certain element of the plan mechanics (e.g. pay mix) Sales practices surveys is another source to enhance intelligence on plan design 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 All of the above help to assess how to position your plan design payout potential relative to the market of reference CIPD Sales Compensation May 7, 2010 Paola Gheis 20

42. The Communication Process Some critical aspects A recommended model CIPD Sales Compensation May 7 Paola Gheis 21

43. CIPD Sales Compensation May 7, 2010 Paola Gheis 22 Critical Elements of Communication

44. CIPD Sales Compensation May 7, 2010 Paola Gheis 23 A Recommended Communication Process

45. Bibliography A few good books to get started on Sales Comp 24 CIPD Sales Compensation May 7, 2010 Paola Gheis

46. A Few Good Books to Get Started on Sales Comp 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 Compensation the Sales Force. David J. Cichelli. Mc Graw Hill. 2004 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 Compensating New Sales Roles. How to Design Rewards That Work in Today’s Selling Environment. Jerome A. Colletti, Mary S. Fiss. AMACOM. 2001

47. Paola Gheis’ Bio and Contact Details CIPD Sales Compensation May 7, 2010 Paola Gheis 26

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. 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. 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. Paola currently lives in Barcelona, Spain, and can be reached at: Email: paolagheis@gmail.com Cell.: +34 648 01 3914 Linkedin profile: http://es.linkedin.com/in/paolagheis CIPD Sales Compensation May 7 Paola Gheis 27