Aligning Diverse Sales Management Cultures through a Common Sales Compensation PhilosophyJerome A. (“Jerry”) Colletti, Managing Partner, Colletti-Fiss, LLCKatie Donohue, Sr. Director, Global Compensation & Sales Compensation

Strategy, Medtronic, Inc.Kerry Heiss, Director, Sales Operations, StandardAeroLisa Soderquist, VP, Human Resources, Allergan, Inc.

September 10, 2013

Welcome to Our Panel Presentation and Discussion:Session Format

Session objectives

Introductions – panel members

Context for our topic; why important and best practices

Discussion topics and initial questions

Your interests and perspectives

Wrap-up

Session Objectives Identify some of the common

problems associated with not having a global sales compensation philosophy

Share best practices – how to conceptually think about it; experiences of our panel members in executing to it

Address/discuss your questions; hear about your experiences

Sales leaders often have different views about how to pay sales people who are doing the same job…

…which can lead to defensive behavior and contributes to ineffectiveness and inefficiency.

Our Panel of Practitioners

Katie Donohue The largest global medical device company; founded in 1949 Annual revenue of $16.6 Billion; 45% outside the US Comprised of 45,000 employees doing business in 120 countries in the

CRDM, Coronary, Endovascular, Structural Heart, Diabetes, Spine, Neuromodulation and Surgical Technologies sectors

Role/involvement with sales

compensation

Led the sales compensation integration design for Cardiac and Vascular Group with 7 different work streams and over 80 different plans

Designed and implemented the Global Sales compensation strategy and on-going consulting with Strategic Business Unit leaders on innovative plan design, metrics, administration and competitiveness

Business owner of new Sales Commission System implementation

Professional Credentials

Researcher on "Perquisites: Are They a Business Necessity?" by Julie and "The Flattening of the Organization" by Julie Wulf, University of Pennsylvania.

• Published "The Impact of Performance Management on Organization Success," Harvard Business Review, Sept.-Oct. 1996 with Abbie Smith University of Chicago

Previously at Aon Hewitt for 17 years consulting on benefits, sales compensation, broad based compensation, M&A, and executive compensation

Kerry Heiss A $1.6B aviation services company focused primarily on the

Maintenance, Repair, and Overhaul market. Comprised of 3,700 employees working in six business sectors.

Major business units are focused on Airline, Business Aviation, Helicopter, Industrial Power, Component Repair, Military, and VIP Aircraft Completion markets.

SA traces its roots back to 1911.

Role/involvement with sales

compensation

Led several iterations of incentive compensation plan design. Engaged with business leaders to develop comp plan philosophy. Oversee administration of all sales incentive comp plans. Ongoing project work to better align sales compensation with

desired behaviors, and to ensure comp is appropriately competitive.

Professional Credentials

5 years of experience in Sales Operations, 8 years with StandardAero. Current role focused on sales methodology, sales compensation, and sales force effectiveness.

Certified Miller Heiman Sales Methodology Client Associate (deliver and coach methodology).

Previously spent 4 years with GE Healthcare and GE Aviation. Certified as a Six Sigma Black Belt.

6 years service as an officer in the U.S. Navy, focused on logistics.

Lisa Soderquist

A multi-specialty health care company established 60+ years Commitment: uncover the best of science; develop, deliver innovative

treatments to help people reach their life’s potential Approximately 11,000 highly dedicated and talented employees Presence 100+ countries with a rich portfolio of pharmaceuticals,

biologics, medical devices and over-the-counter consumer products In 2012, total product net sales reached $5.7 Billion

Role/involvement with sales compensation

Led global framework project Liaison among regions for roll out Advisor link for North America’s Commercial businesses -- Corporate

Compensation and Commercial Sales OpsProfessional Credentials Extensive experience in large and specialty pharma, semi-conductor, hi-

tech and hospitality organizations in global and U.S. markets Concentration in talent acquisition, succession planning, employee

engagement, compensation 2013 Susan G. Komen Grant Committee 2013 Active Member, National Association of Professional Woman Resided and worked in Canada, Europe, Singapore, and the United States

Why Important and Best Practices

… building collaboration across businesses and global regions…

Framing Our Session Discussion

How diverse sales management cultures impact sales compensation planning and pay practices

Characteristics of a common sales compensation philosophy

Challenges/common problems addressed when there is alignment between sales leadership and sales compensation philosophy

Diverse Sales Management Cultures:One Global Company’s Experience

“…there is no consistent process for how to design plans; some BUs do not appear to have a defined process…”

“…performance measures are all over the board and approval authorities are inconsistent – few plans are actually approved by the BU President…”

“…there’s no consistent format to our plans…no look, feel or “brand” associated with our company…no consistent approach to communication…”

“…wide variance in salary/incentive ratios for same jobs doing the same work across global regions…some variance not explained by country labor market practices…”

“…significant inconsistency in rules pertaining to employee relations terms and conditions……no consistent governance”

“…no company-wide tool set or reports available to assess effectiveness..”

What is a Sales Compensation Philosophy?

SalesCompensationPhilosophy

…a company’s commitment to link sales employee compensation to competitive labor market levels/practices and business goal achievement

Guiding Principles

…a set of prescriptions that define how the compensation plan is designed and managed consistent with the company’s philosophy

PlanObjectives

…two or three key objectives that a particular plan supports for a fiscal year

Strategic, long term perspective Tactical, annual perspective

Four Elements of a Complete Sales Compensation Philosophy

Element Thumb Nail Description

Labor market position Market percentile Peer or comparator companies

Performance orientation

Expected performance for pay Basis for salary; salary/incentive ratio Performance measures and goals Overachievement opportunity

Administration

Clear governance rules, including approval authority

Commitment to fair and equitable administration

Articulated appeal and review process

Communication Clarity of plan description Focus on self-calculating tools

Guiding Principles That Follow From a Sales Compensation Philosophy

Four Elements of Philosophy

Typical Factors Worthy of Guiding Principles

Labor market position

Number and quality of survey sources Job charters and accountabilities Job scope and required talent profile TCC market percentile position based on business

phase Compensation mix determination; role of salary

Performance orientation

Target incentive pay related to performance Number and types of measures Performance range; standards/quota Performance distribution OA (overachievement) guidelines

Administration Approvals; governance; implementation process

Communication Timing and roles involved

Some Benefits Addresses ineffective and inefficient practices relative to

how sales people are paid

Creates opportunity to share internal best practices

Increases the organization’s ability to bring on line an automated sales compensation system

Improves ability to assess sales compensation ROI

Increases senior management confidence that sales forces are being paid to drive the right behavior and performance

Mitigates against potential legal liabilities

Panel Discussion

Discussion Questions for Our PanelFour Initial Areas of Focus Sales compensation philosophy: formal vs. informal –

pro’s and con’s

Flexibility allowed to BUs or global regions’ local management – areas of uniformity vs. tailoring to local markets

Common problems associated with sales compensation and how philosophy/guiding principles make a difference

Advice on do’s and don’ts

Summing Up

…Key Learnings…