Salesforce Incentive Compensation Trends - Home | MACA …€¦ · · 2018-01-22n Sales compensation a major expense ... with revenue recognition from contracts with customers

Salesforce Incentive Compensation Trends

Neil Lappley and Tim Weizer

Lappley & Associates

January 18, 2018

Agenda

n  Importance of today’s topic

n  Seven trends

n  Questions and Answers

n  Seven trends ¨  Sales process changing ¨  New Sales roles and

incentive eligibility ¨  Major change in corporate

strategy ¨  Incentive compensation

increasing ¨  ASC 606 regulation impact ¨  Increased use of software ¨  More executive

involvement © 2018, Lappley & Associates, Ltd. All Rights Reserved

Importance of Today’s Topic

n  Sales compensation a major expense

n  Plans expected to change more often

n  “Nothing positive happens until the sale is made” (1)

(1) Quote from The Wall Street Journal

© 2018, Lappley & Associates, Ltd. All Rights Reserved

Sales Process is Changing

n  Sales process continues to change with more emphasis on team selling

¨ Buyers have abundant information





¨ Buyers want a ME3 approach from sellers





¨ Buyers want a ME3 approach from sellers

¨ Customers want “Consultative/Insight” selling



How many of you have seen the movement toward team selling?


New Sales Roles and Incentive Eligibility

n  Sales Analyst Position ¨  Role: collect and analyze

sales data to improve productivity

¨  Characteristics: analytical, organized, articulate

¨  Prevalence: widespread ¨  Compensation: Base salary

and bonus eligible



n  Win-Back Specialist position ¨  Role: re-establish business

relationship with former customers and sell company products and services

¨  Characteristics: persuasive, focused, insightful

¨  Prevalence: moderate and growing

¨  Compensation: base salary and individual incentive (85/15 pay mix)



n  National Account Manager Type I ¨  Role: predominantly

individual selling ¨  Prevalence: wide ¨  Characteristics:

persuasive, ambitious, resourceful

¨  Compensation: Base salary and individual incentive (75/25 mix)

Company Account

Management NAM of Buying

Organization

Buyers

Companies with Sales Focused NAMS



n  National Account Manager Type II ¨  Role: balanced sales and

relationship ¨  Prevalence: broad and

preferred by B2B ¨  Characteristics:

persuasive, resourceful, insightful

¨  Compensation: and incentive (80/20)

Companies With Sales /Relationship Focused NAMS

Company Account Executives Executives

NAM Management of Buying Organization Buyers



n  National Account Manager Type III ¨  Role: relationship and

coordination ¨  Prevalence: broad ¨  Characteristics:

persuasive, organized, responsible

¨  Compensation: Base and incentive (85/15)

Companies With Relationship/Coordination Focused NAMS

Company Account Executives Executives

Corporate Management NAM of Buying

Organization

Business Unit NAM Buyers © 2018, Lappley & Associates, Ltd. All Rights Reserved


n  New/added Role for “Rainmakers”

¨ Role: act as a “collegial” mentor to new hires. Take them through a 3 step training process

¨ Prevalence: just starting to appear in companies with large salesforces, e.g., pharmaceutical and software

¨ Characteristics: insightful, collegial, efficient

¨ Compensation: Base and incentive (75/25) plus a 1% commission override on the mentee



n  To find out what roles may be necessary for your organization, conduct customer research:

¨ Discover any major shortfalls with today’s customer experience

¨ Determine if any of these roles would improve sales results or reduce inefficiencies

¨  If so, conduct a pilot program with a new sales position(s)



Are any of you implementing new sales roles in 2018?


Major Change in Corporate Strategy

n  Arconic made drastic changes to its incentive program ¨  Aggressive business goals

and a very challenging business environment

¨  Mandate; “Pull Every Lever to Grow”

¨  Moved from individual payouts determined by personal performance rating and manager’s input to individual goals

¨  New plans’ pay mix to 75/25 or 80/20 from 90/10


Major Change in Corporate Strategy n  Major, Midwest company made leadership and strategy

changes

¨ 3+ years of sales declines

¨ New CEO and VP Sales from outside

¨ New strategy put emphasis on new product innovations and simplifying the business

¨ Limited pay mix variation across sales positions

¨ New plan included higher weighting to individual performance (50% to 70%) and removed 3 corporate thresholds which determined incentive funding



n  Change can result in downsizing a salesforce

¨ Microsoft Corporation’s layoffs executed in order to focus more on selling its cloud computing servoices.

¨ Merck & Co. laid off 1800 U.S. sales people in order to cut costs and shift focus to products with solid growth potential.



n  With ever increasing competition, more demanding customers, and tighter profit margins, get prepared for major changes to the salesforce’s size and compensation plan

¨ Review the current territory design to determine if it properly fits current sales projections

¨ Determine if some current customers should be turned over to a new or expanded inside sales group

¨ Avoid complexity in the new incentive plan



How many of you have changed your incentive plan after a change in corporate strategy?


Incentive Compensation is Increasing

n  Continuing trend toward a more leveraged pay mix

¨ From an 80/20 pay mix to 70/30



n  Continuing trend toward a more leveraged pay mix

¨ From a 80/20 pay mix to 70/30

n  Noticeable increase in max payout opportunity

¨ 200% of target incentive at 125% of quota

¨ Desire to push top performers to excel


Incentive Compensation is Increasing n  Continuing trend toward a more leveraged pay mix

¨ From a 80/20 pay mix to 70/30

n  Noticeable increase in max payout opportunity

¨ 200% of target incentive at 125% of quota

¨ Desire to push top performers to excel

n  More use of modifiers to incent key objectives

¨ Margin (23%)

¨ Product Mix (26%), Customer Relationship (12%) © 2018, Lappley & Associates, Ltd. All Rights Reserved


Have you increased your incentive leverage recently?


ASC 606 Regulation and Its Impact

n  ASC 606 is a new FASB and IASB joint standard dealing with revenue recognition from contracts with customers

¨ Previously both boards had their own, separate standards creating confusion and complexity.

¨ New standard increases financial comparability across companies and industries.

¨  Implementation must occur no later than 1/1/2018 for public companies and 12/31/2019 for private companies.



n  ASC 606 may have major impact on salesforce compensation

¨ Plan design: May require rework

¨ Plan execution: Incentive payment amounts and timing



n  Here’s what Human Resources should do:

¨ Sit down with the CFO to discuss what salesforce compensation data the CFO needs

¨ Be prepared to conduct a review of the 2018 salesforce compensation plans. For example,

n The timing of incentive payments to recognize the new revenue recognition standard

n The potential for “holdbacks” to ensure compliance



Have you had this discussion already?


Increased Use of Software

n  Many software programs now exist to automate and organize the sales compensation plan

n  Useful for complex plans or fine-tune any plan

n  Primary benefits include ¨  Improved accuracy ¨  Efficiency ¨  Clarity ¨  Added control


More Executive Involvement

n  Today there’s more involvement by executives in the process steps

n  There are generally five steps ¨  Initial design options ¨  Preliminary incentive plan

design ¨  Financial modeling and

impact analysis ¨  Final incentive plan design ¨  Detailed communication

and implementation plans



n  Vice President of Sales

¨ Role: Promoter of Sales as wealth producers

¨  Involvement: In all five steps



n  Chief Human Resources Officer

¨ Role: Process facilitator and overseer of company’s compensation prpgrams. Engender collaboration across functions.

¨  Involvement: In all steps of the process. Helps strike meaningful balance of sales motivation and sales cost



n  Chief Financial Officer

¨ Role: Controller of sales compensation as a cost center and variable budget line item

¨  Involvement: Primarily in steps 3 and 4



n  Chief Marketing Officer

¨ Role: Advocate for an incentive or spiff for “push” products

¨  Involvement: In most instances, primarily in steps 1 and 2


Summary

n  These trends will present the CHRO with challenges

¨ Manage complexity

¨ Balance salesforce motivation and cost

¨ Manage time and resource commitments

¨ Ensure compliance with ASC 606


Summary

Have you seen any other changes we haven’t touched on?


Q

A © 2018, Lappley & Associates, Ltd. All Rights Reserved

Documents

Salesforce Incentive Compensation Trends - Home | MACA …€¦ · · 2018-01-22n Sales compensation a major expense ... with revenue recognition from contracts with customers