Finalize Your 2009
Sales Compensation Plans
Today’s Speaker
Liz Cobb, Founder & CEO Makana Solutions
• Makana is the third compensation
management company Liz founded
• Over 20 years in sales compensation
design and process automation
• Liz is a recognized industry expert, has
consulted for hundreds of companies and
speaks frequently on effective sales
compensation
Today’s Speaker
Teanna Spence, Compensation Director,
Makana Solutions Inc.
• Teanna has 28 years' experience in
financial systems including 14 years in
incentive design, management,
automation, and best-practices
development for many companies in a
wide range of industries including DEC,
Cabletron, Kinkos, Aspect Computers,
and Staples.
About Makana Solutions
“the most innovative product I’ve seen
lately…they really understand how
people design plans and work.”
James Hollincheck Research VP“Plan design is a key element of
effective sales compensation, which
drives sales behavior. Salesforce users
can take advantage of a dedicated sales
comp planning solution via the
AppExchange with Makana Motivator.”
George Hu, CMO
“We believe CEO Cobb's significant knowledge
of and insight into the sales compensation
industry….will help land Makana Solutions a
solid position in the expanding market.”
Judy Hodges, Research Analyst
Create Great Sales Comp for 2009
• See the big picture
• Access built-in best practice
• Anticipate incentive costs
• Generate graphical plan
documents
Create Great Plans
• Create Great Plans
• Calculate payments
• Share commission statements
and management reports
Planning to Payment
Makana Solutions, Inc.
Makana
Motivator helps
companies
build brilliant
plans quickly.
Brilliant plans
energize the
team to achieve
the strategy.
Motivator Express - $19/mo
Clear, motivating plans built on top of
a strong foundation
of strategy
Make a Brilliant Plan
When does your plan need to be done?
0%
5%
10%
15%
20%
25%
30%
35%
Overdue Middle of January End of January End of February End of March
Today you will learn…
• How to create brilliant plans and
finish in TIME!
– Review the process
– Collaborate with your planning team
– Produce clear and motivating
incentive compensation plans
– Get you ready for rollout
Why is Sales Planning Important?
• Effective sales incentives:– Improve sales motivation
– Tell your team what to sell and to whom
– Reduce turnover
• What do your comp plans
communicate?– Sales reps always ‘find the money’
– Corporate strategy must be clear
– It will drive their behavior – ideally in the way
you intended
***Mismanagement Can be Costly
General Thoughts
• Sales people will follow the money
• Reward at the point of persuasion– The point at which the sales person can help
the customer make choices
– The sales person must be in control of
achieving his or her goal
• You are busy and have:
• No visibility
• No training
• No tools
• No help
Planning Now…
Establish Timeline – When is that Kickoff?
1. Analysis
2. Design
3. Documentation
4. Implementation
Traditional timeline for a $10M SW company with 10 reps
W1 W2 W3 W4 W5 W6 W7 W8
“ ”We probably reduced the process from a 2 person, 2 month
process to a one person, two week process.
Steve Balk, VP Sales
Analysis Design, model & documentApprove & rollout
www.makanasolutions.com/save
Where are you in the process
outlined above?
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Analysis Cost Modeling Design Documentation Roll out
Analysis -- Look at Last Year’s Plans
• Did you get the results you wanted?
• Did you reward for the right metrics?
• Did the team work together as
intended?
• Did you pay for performance?
– Too much?
– Too little?
Analysis Design, model & documentApprove & rollout
Assess Team Motivation
• Is your sales team pumped?
• Are you seeing unintended
consequences?
• What is your turnover?
• What is your performance distribution?
• How are they spending their time?
Confirm the Strategy
• Understand the overall company goals
– Key economic drivers
– Areas of growth
– New markets
– New channels
Design and Align – 4 Key Steps
Identify Job Roles
Define Plan Elements
Model Costs
Produce Comp Plans
Market
Strategy
1
2
4
3
AnalysisDesign, model &
documentApprove & rollout
Eligible Job Roles
Lead Generation
OutsideSales
Account Management
Customer Service
• All customer facing roles
• Measurable influence over the actions of the customer
• Willing to consider at least 15% of TTC as incentive
1 2 3
4
Define Plan Key Elements
• Summary level info for
alignment and benchmarking
• Performance measures and
goals
• Payout Components & Rates
1
2 34
Plan Summary
• Target Total Comp– Market
– Budget
– Equity across plans
– Scope of job
– Type of sale
– Level of experience
• Leverage – Mix of salary vs. incentive
– The higher the risk, the
greater the rewards
1
2 34
Base to Incentive Ratio
Current products, customers
60/40
New products, markets
40/60
Current products, customers
85/15
New products, markets
60/40
Individual
Team
NewExistingMin Incentive Mix
85%/15%
Makana
Mix
Matrix
How much comp should be variable at target?
Products/Markets
Control
Max Incentive Mix
0%/100%
1
2 34
A Good Plan Must be Measurable
• No more than 3 measures!
• Do measure:– Sales volume, margin, units sold
– Product mix, new accounts
• Don’t measure:– Management activities
• Input to CRM system
• Sales calls/week
– The past
• What are the goals per measure?
1
2 34
Crediting Terms Must Be Clear
• What is measured
– What’s the value? Net? Margin? Gross?
• Who gets credit
– Multiple roles can erode margins
• When they are eligible
– Booking, invoice, cash receipt
• How exceptions are managed
– Person starts late, leaves early, goes on LOA
– Be careful of precedence
– What happens if there is a customer problem
Be specific about:
1
2 34
Identify Key Payout Components
• 3-5 at most
• Make sure focus is
clear
• No component should
be less than 20% of TIC
1
2 34
Review Across Roles for Alignment
• Examine:
– Mix and leverage according to level of personal
influence
– Common measurements for team alignment
– Strategic alignment of measures to company goals
– Equity within company
– Competitiveness of pay
1
2 34
Model Costs
• Know overall budget for commissions
• Start with top down using historical
attainment
• Check for full allocation of quotas
• Know incentive cost of sales
• Review direct versus overlay
• Compare to last year– don’t surprise your top performers
12 3 4
Produce Plan Documents
• Be clear and motivating
– Easy to see rewards
– Keep top priorities in mind
– Define exceptions precisely
1
2
3 4
Produce Plan Documents
• Include T&Cs that matter:– Eligibility, effective period, crediting rules for measures
– Transition policies
• late start, LOA, termination, etc.
– Customer changes
• Dissatisfaction
• Returns
– Ramp up of new hires
• Draws/guarantees
• Be careful of committee review – don’t
lose consistency but do include legal
1
2
3 4
Rollout & Implementation
• Rollout
– Be aware of history
– Explain transitional issues
• Implementation
– Make sure you have access to the accounting data
– Automate as much as possible
– Allow time to test your automation
– Explain new plans to your Administrator
Analysis Design, model & documentApprove & rollout
Questions & Answers
Makana Motivator
• Planning
– Motivator Express
– $19/month
• Planning to Payment
– Motivator Pro
– $29/month per payee
– Request an online
demonstration
– (877) 881-0001
Additional Information• Time savings
– www.makanasolutions.com/save
• Cash Receipt Blog Post
– www.makanasolutions.com/Blog
• December 9th Posting
• More Best Practices
– Sample plans
– Sample reports
– Webinars
– Surveys
– www.makanasolutions.com/resources