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© Copyright 2015 The Sales Management Association.
Sales Management Association Webcast
18 March 2015
Presented by
Exploring New Territory – The
Geography of Compensation Planning
About The Sales Management Association
Slide 2© 2015 The Sales Management Association. All rights reserved.
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.
Learn More: www.salesmanagement.org
Today’s Panelists
Slide 3© 2015 The Sales Management Association. All rights reserved.
#SalesComp
© Copyright 2015 The Sales Management Association.
Sales Management Association Webcast
18 March 2015
Presented by
Exploring New Territory – The
Geography of Compensation Planning
Agenda
Slide 5© 2015 The Sales Management Association. All rights reserved.
Sales Planning Today
Aligning Sales Plans with Corporate Objectives
Unstoppable Sales Performance Framework
Anaplan Customer Case Study
Defining Optimal Territory Planning
Various Levels of Territory Planning Practices
How Sales Compensation Supports Territory Planning
Use of Absolute Commission vs. Quota Based Plans
Better Sales Comp (BSC) Case Studies – Where
Compensation and Territory Planning Go Wrong
$5M to $10M Lost Annual Sales Revenue.
Critical to “Get It Right” and “Keep It Right”
Slide 6© 2015 Anaplan. Used with permission by The Sales Management Association. All rights reserved.
S p e n d50% less time
7 X l e s s
e x p e n s e
S p e n d50% less time
7 X l e s s
Improved Sales Territories, Quotas
& Incentive Compensation
5% to 10%of Annual Sales as
“Lost Opportunity” that could have been
captured through
improved Sales Planning
Source: Gartner.
$100MCompany
OPERATIONS
SALES
HR
FINANCE
ITMARKETING
Limited Scale &
Collaboration
No Audit & Controls
Resource Intensive
XLS
XLS
XLS
XLS XLS
XLS
XLS
XLS
XLS
XLS XLS
XLS
XLS
XLS
XLS
XLS XLS
XLS
XLS
XLS
XLS
XLS XLS
XLS
XLS
XLS
XLS
XLS XLS
XLS
XLS
XLS
XLS
XLS XLS
XLS
Misaligned Plans
No Trust in Data
A BROKEN LANDSCAPE
Slide 7
Sales Planning Today
© 2015 Anaplan
Slide 8
REALITY & MINUTIA
© 2015 Anaplan
Improving Sales Performance is a Constant Struggle
• Manual processes and spreadsheets
• Changing priorities in corporate objectives
• Legacy systems that are not flexible
• Increasing complexity in sales processes
• Inability to adapt to change and disruption
• No modeling & planning solutions (What-If Scenarios)
• Data stored in disparate systems (CRM, ERP, HR)
• Lack of collaboration across the enterprise/stakeholders
• Visibility of accurate sales data (i.e. forecasts, historical)
• Many other challenges…
SALES
XLS
XLS
XLS
XLS XLS
XLS
Slide 9
REALITY & MINUTIA
© 2015 Anaplan
Improving Sales Performance is a Constant Struggle
NEW CUSTOMERS
ACQUISITIONS
Corporate Objectives & AlignmentCROSS-SELL &
UP-SELL
OPPORTUNITIEs
RETAIN EXISTING
CUSTOMERS
NEW PRODUCT
LAUNCH
INDUSTRY
VERTICAL
EXPANSION
GLOBAL
REACH
Slide 10
REALITY & MINUTIA
© 2015 Anaplan
Improving Sales Performance is a Constant Struggle
TERRITORY
PLANNING
INCENTIVE
COMPENSATION
PLANNING
QUOTA
PLANING
ACCOUNT
SEGMENTATION
PLANNING
SALES
CAPACITY
PLANNING
REVENUE
PLANNING
PLANNING & MODELING
CONFIGURE, PRICE
& QUOTE
TERRITORY
CREDITING
PROCESS
INCENTIVE
COMPENSATION
PROCESSING
EXECUTING
INCENTIVE
COMPENSATION
ELIGIBILITY
PROCESS
QUOTA
ATTAINMENT
PROCESS
NEW CUSTOMERS
ACQUISITIONS
Corporate Objectives & AlignmentCROSS-SELL &
UP-SELL
OPPORTUNITIEs
RETAIN EXISTING
CUSTOMERS
NEW PRODUCT
LAUNCH
INDUSTRY
VERTICAL
EXPANSION
GLOBAL
REACH
SALES FORECASTING KPI DASHBOARDS
EVALUATE
REPORTING ANALYTICS
Slide 11
SALES PLANNING & MODELING
© 2015 Anaplan
Sales Planning & Modeling to Align with Corporate Objectives
Corporate Objectives
AlignmentMisalignment
TERRITORY
PLANNING
INCENTIVE
COMPENSATION
PLANNING
QUOTA
PLANING
ACCOUNT
SEGMENTATION
PLANNING
SALES
CAPACITY
PLANNING
REVENUE
PLANNING
Account
Segmentation
UNSTOPPABLE SALES PERFORMANCE Framework
Slide 12© 2015 Anaplan. Used with permission by The Sales Management Association. All rights reserved.
Revenue
Planning
Territory
Planning
Sales Capacity
Planning
Quota
Planning
Incentive Comp
Planning
Corporate Objectives & Goals
Territory Crediting
Process
Quota Attainment
Process
Incentive Comp
Eligibility Process
Incentive Comp
Process
Payment
Process
Planning & Modeling Execution
Evalu
ating, A
dap
ting to C
hange D
ashboard
, Reportin
g, A
naly
tics
Reconciliation
Process
Get It Right. Keep It Right.
Customer Case Study
Slide 13© 2015 Anaplan. Used with permission by The Sales Management Association. All rights reserved.
Customer Case Study
Slide 14© 2015 Anaplan. Used with permission by The Sales Management Association. All rights reserved.
Optimal Territory Planning
15
Maximize sales results from our market opportunities
Allocate enough sales time to appropriately cover our current and potential customers
Ensure we profitably cover all of our relevant accounts
You had me at “Optimal” but what does all this really mean?!
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
What is Territory Planning?
16
How we organize and evaluate our accounts
How we set expectations for those accounts
“A”
“B”
“C”
How we cover those accounts
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
How We Organize and Evaluate Our Accounts
Identify and group our accounts into logical coverage segments
17
“Ante Up” “Good” “Next Level”
• Review current account data to rank and organize accounts
• Group similar accounts needing similar seller skills and coverage
• Try to evaluate “potential growth opportunity” to modify account rankings or groupings
• Evaluation can be subjective, e.g., A/B/C growth potential or informed by data, e.g., “product gaps”
• Use external market data to help assess opportunity
• Recent BSC study – 35% used 3rd party data (e.g., D&B, IDC, Gartner, etc.) when growth planning for accounts and setting quotas
Common Factors to Consider
• Geography• Company size• Industry verticals
• Product applicability• Existing customers or new
customers
• Sales processes/cycle times• Related sales force skill sets
needed
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
How We Cover Those Accounts
Define deployment approach – which reps to what accounts; how many
18
“Ante Up” “Good” “Next Level”
• Have defined roles• Have salespeople suited to
fill those roles• Assign them logically
(location, windshield time, skill set, etc.)
• Create some logical gearing ratios – and consistently test and validate them
• Match sales time supply and demand
• Analyze and ensure enough “quality” selling time, e.g., 75%
• Use time-based coverage methodologies – time needed to cover each account’s sales process
Common Factors to Consider
• Basic gearing ratios, e.g., 10-20 accounts or $1M-$2M in revenue
• Types of sales reps needed• Time required from lead to
close (funnel analysis)
• Time available for quality selling (sales time vs. admin time)
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
How We Set Expectations for Those Accounts
* * * QUOTA SETTING = GROWTH PLANNING * * *
19
“Ante Up” “Good” “Next Level”
• Use “last year plus” • Use quantitative or qualitative approaches to determine account or territory level growth potential
• Involve bottom-up inputs and planning
• No really – use some kind of bottom-up planning!
• Use external data• Consider regression
analysis to help forecast reasonable expectations and inform the quotas
Common Factors to Consider
• Current sales results • Degree of account
penetration
• Sales funnel analysis• Account type, vertical, and
market growth rates
• Field and/or manager feedback
• Pipeline/CRM review
For more on the recent BSC Consultants quota study, please feel free to reach out to us.
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
What else matters? Hmm, let me see...
20
(You knew we’d say that!)(“Better Sales Comp” – it’s in our name!)
Effective territory planning requires effective sales compensation plans
They should drive and reward appropriately for the results you just so painstakingly planned for!
But there are “better plans” and not so good plans...
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
Where do sales compensation plans most “break”
good territory planning efforts?
21
Target Total Compensation
Pay Mix
Upside
Plan Measures
Plan Mechanics and Crediting
Pay Cycles
From the world of sales compensation, one area stands out as most problematic for good territory planning...
Absolute Commission vs. Quota Based Plans
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
Absolute Commission vs. Quota Based Plans
22
Disclaimer: No two roles, business models, or comp plans are the same, but we’ll now
share four issues we find when companies pay on Absolute Commission plans!
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
Absolute Commission Quota Based Plans
• Pays a flat percentage against
volume results, e.g., 3%
• “Cost of Sales” Model
• Pays a portion of Target Incentive
for hitting a portion of Quota, e.g.,
90% of TI for 90% of goal
• “Cost of Labor” Model
The “What”
• Startup phase
• Highly romanticized (“good old
days”)
• Simple but not as precise
• Post startup phase
• Requires growth planning effort
• Note: quota setting is not always a
comfortable task!
Application
• Territories often created to
ensure “right volume size” to
deliver “the needed pay”
• Less optimal territories
• Territories built on optimal
workload more than just volume or
account based gearing ratios
• More optimal territories
Impact on Territory Planning
Absolute Commission Issue 1:
“The Sacred Territories of the Sales Fat Cats”
23
“Startup Plans in a
Non Startup World”
1. Territory volume grows = pay grows (often above market)
2. Rep can live happily on run rate revenue = growth stalls
3. New hires get weak territories = no pay, no retention, no bench strength
4. “Fat Cat” reps = untouchable5. Overall = results stagnate
How Quota Based Plans
Can Help
“Fat Cats” still well-paid but rewarded for in-year growth, e.g.,• Commission – $500K for $5M under commission• Quota – still $500K+ but for 20% growth ($6M total results)
New reps start with smaller quotas for entry level target pay –affords time to ramp up and become your sales stars of tomorrow
Fat? I’m just big boned!
We all love high performing reps but “performance” should be in the current period.
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
Absolute Commission Issue 2:
“Tip of the Iceberg Territories” (aka “Prune the Bush”)
24
“Having More
Accounts Is Always
Better Than Less, Right?”
1. Rep’s patch = many accounts and may ways to match last year’s results and compensation
2. May only be “covering” a portion of accounts = most accounts get no “touch”
3. Reps tend to hoard accounts = no downside if fail to “maximize results”
How Quota Based Plans
Can Help
First, account planning can identify poor coverage and results You can then divide the territories (“prune the bush”) and add a
salesperson – legacy rep and new rep each get appropriate quotas and growth targets
You can create more custom growth expectations, and by specifying rep focus, drive better overall results
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
Absolute Commission Issue 3:
“Excessive-Bonsai-Tree-Pruning”
25
“Controlling Pay Through
Territory Cuts”
1. Bad pruning = too far/wrong reasons2. Growing results under commission plan
= some say “too much pay”3. Companies slash territories = control
pay or normalize pay across sales force4. Reps “figure it out” = only grow
territories to a point just below getting cut!
How Quota Based Plans
Can Help
Pay doesn’t go up or down in lock step just because absolute volume goes up or down
Providing target incentive for hitting target performance (quota) can avoid excessive pruning reactions
Territory assignments and changes are made to create optimal workload and drive growth each and every year
Please put down the
shears!
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
Absolute Commission Issue 4:
“There is No ‘Team’ in Team Selling”
26
“How Not to Drive Good
Team Selling”
1. Some sales models are complex = can “take a village” (cross-geo sales, product specialists, sales engineers, etc.)
2. Commission plans often require split crediting = “no one paid onsame dollar”
3. Split credit = reduced commission = less willing to bring in the right resources at the right time
How Quota Based Plans
Can Help
Can assign quotas to respective sale team members – works best with proactive account coverage
Effective territory planning means you’ll have a better handle on which accounts will need which salespeople
Territory planning also allows more granular deployment so overlays aren’t paid for accounts they likely won’t touch
GO TEAM! (Unless I have to give you some of my
commission $$$)
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
How Do We Move From Commission to Quota Plans?
1. Identify Target Incentive for each person
– Can be informed by past payouts as well as market data
2. Ensure clarity of account assignments (i.e., territory planning!)
3. Develop goal-setting methodology and set quotas for the assigned accounts and/or territory patch
4. Decide on quota plan mechanics details
– Threshold usage?
– Acceleration model?
5. Create appropriate rollout materials to explain the change –the what, how, and why
6. Communicate, communicate, communicate
27© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
– Goal period?
– Payout timing?
WIIFM?
Territory Planning and Sales Compensation
28
Optimal territory planning requires...• Great diligence• A well-reasoned process and methodology• Ideally, a good tool to help enable that process
But territory planning without the right sales compensation designs cannot truly be optimal
© 2015 Better Sales Comp Consultants. www.bettersalescomp.com
Questions and Discussion
Slide 29© 2015 The Sales Management Association. All rights reserved.
Enter your questions in the
“Questions” box on the right
hand side of the webinar
application window.
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.
#SalesComp
Questions and Discussion
Slide 30© 2015 The Sales Management Association. All rights reserved.
#SalesComp
So we have what you call the Fat Cat
problem. We are worried about
turnover risks. What can we do?
Questions and Discussion
Slide 31© 2015 The Sales Management Association. All rights reserved.
#SalesComp
You mentioned ’Sales Capacity Planning’ as
part of the Sales Performance framework. This
seems like an HR function (I.e. Recruitment
and Hiring). Why is this part of your
framework?
Questions and Discussion
Slide 32© 2015 The Sales Management Association. All rights reserved.
#SalesComp
Where do ICR plans fit in the
structural debate?
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