Sales Management Association Webcast Exploring New ... · Focused in providing research, case...

transcript

Presented by

SalesManagementAssociationWebcast

18March2015

Exploring New Territory – The Geography of Compensation Planning

ClintonGottPrincipalBetterSalesCompgott@bettersalescomp.com

KevinGrayDirector,ProductMarketingAnaplankevingray@anaplan.com

PerTorgersonPrincipalBetterSalesComptorgerson@bettersalescomp.com

About The Sales Management Association

Aglobal,cross-industryprofessionalassociationforsalesoperationsandsalesmanagement.

Focusedinprovidingresearch,casestudies,training,peernetworking,andprofessionaldevelopmenttoourmembership.

Fosteringacommunityofthought-leaders,serviceproviders,academics,andpractitioners.

www.salesmanagement.org

www.salesmanagementconference.com

16 – 18 OCTOBER 2017 ATLANTA

Today’s Speakers

ClintonGott

Principal

BetterSalesComp

gott@bettersalescomp

KevinGray

Director,ProductMarketing

Anaplan

kevin.gray@anaplan.com

PerTorgerson

Principal

BetterSalesComp

torgerson@bettersalescomp.com

Presented by

SalesManagementAssociationWebcast

18March2015

Exploring New Territory – The Geography of Compensation Planning

ClintonGottPrincipalBetterSalesCompgott@bettersalescomp.com

KevinGrayDirector,ProductMarketingAnaplankevingray@anaplan.com

PerTorgersonPrincipalBetterSalesComptorgerson@bettersalescomp.com

Agenda

• SalesPlanningToday• AligningSalesPlanswithCorporateObjectives• UnstoppableSalesPerformanceFramework• AnaplanCustomerCaseStudy

• DefiningOptimalTerritoryPlanning• VariousLevelsofTerritoryPlanningPractices• HowSalesCompensationSupportsTerritoryPlanning• UseofAbsoluteCommissionvs.QuotaBasedPlans• BetterSalesComp(BSC)CaseStudies– WhereCompensationandTerritoryPlanningGoWrong

$5M to $10M Lost Annual Sales Revenue.

Critical to “Get It Right” and “Keep It Right”

S p e n d50% less time7 X l e s se x p e n s e

S p e n d50% less time7 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

Sales Planning Today

OPERATIONS

FINANCE

ITMARKETING

Limited Scale &

Collaboration

No Audit & Controls

Resource Intensive

XLS XLS

Misaligned Plans

No Trust in Data

A BROKEN LANDSCAPE

Reality and Minutia

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…

XLS XLS

Reality and Minutia

NEW CUSTOMERSACQUISITIONS

Corporate Objectives & AlignmentCROSS-SELL &

UP-SELL OPPORTUNITIEs

RETAIN EXISTING CUSTOMERS

NEW PRODUCTLAUNCH

INDUSTRY VERTICAL

EXPANSION

GLOBALREACH

Reality and Minutia

TERRITORY PLANNING

INCENTIVE COMPENSATION

PLANNINGQUOTA

PLANING

ACCOUNTSEGMENTATION

PLANNING

SALES CAPACITYPLANNING

REVENUEPLANNING

PLANNING & MODELING

CONFIGURE, PRICE & QUOTE

TERRITORYCREDITINGPROCESS

PROCESSING

EXECUTING

ELIGIBILITYPROCESS

QUOTA ATTAINMENT

PROCESS

Corporate Objectives & AlignmentCROSS-SELL &

UP-SELL OPPORTUNITIEs

NEW PRODUCTLAUNCH

INDUSTRY VERTICAL

EXPANSION

GLOBALREACH

Sales Planning & Modeling

CONFIGURE, PRICE & QUOTE

TERRITORYCREDITINGPROCESS

INCENTIVE COMPENSATIONPROCESSI=NG

ELIGIBILITYPROCESS

QUOTA ATTAINMENT

PROCESS

CROSS-SELL & UP-SELL

OPPORTUNITIEs

NEW PRODUCTLAUNCH

INDUSTRY VERTICAL

EXPANSION

GLOBALREACH

Sales Planning & Modeling to Align with Corporate Objectives

Corporate Objectives

AlignmentMisalignment

TERRITORY PLANNING

PLANNINGQUOTA

PLANING

ACCOUNTSEGMENTATION

PLANNING

SALES CAPACITYPLANNING

REVENUEPLANNING

Unstoppable Sales Performance Framework

Account Segmentation

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

PaymentProcess

Planning & Modeling Execution

e Dashboard, R

eporting, Analytics

ReconciliationProcess

Get It Right. Keep It Right.

Customer Case Study

Optimal Territory Planning

Maximizesalesresultsfromourmarketopportunities

Allocateenoughsalestimetoappropriatelycoverourcurrentandpotentialcustomers

Ensureweprofitablycoverallofourrelevantaccounts

Youhadmeat“Optimal”butwhatdoesallthisreallymean?!

What is Territory Planning?

How we organize and evaluate our accounts

How we set expectations for those accounts

“A”

“B”

“C”Howwecoverthoseaccounts

How We Organize and Evaluate Our Accounts

“AnteUp” “Good” “NextLevel”

• Reviewcurrentaccountdatatorankandorganizeaccounts

• Groupsimilaraccountsneedingsimilarsellerskillsandcoverage

• Trytoevaluate“potentialgrowthopportunity”tomodifyaccountrankingsorgroupings

• Evaluationcanbesubjective,e.g.,A/B/Cgrowthpotentialorinformedbydata,e.g.,“productgaps”

• Useexternalmarketdatatohelpassessopportunity

• RecentBSCstudy– 35%used3rdpartydata(e.g.,D&B,IDC,Gartner,etc.)whengrowthplanningforaccountsandsettingquotas

CommonFactorstoConsider

• Geography• Companysize• Industryverticals

• Productapplicability• Existingcustomersornew

customers

• Salesprocesses/cycletimes• Relatedsalesforceskillsets

needed

How We Cover Those Accounts

• Havedefinedroles• Havesalespeoplesuitedtofillthoseroles

• Assignthemlogically(location,windshieldtime,skillset,etc.)

• Createsomelogicalgearingratios– andconsistentlytestandvalidatethem

• Matchsalestimesupplyanddemand

• Analyzeandensureenough“quality”sellingtime,e.g.,75%

• Usetime-basedcoveragemethodologies– timeneededtocovereachaccount’ssalesprocess

• Basicgearingratios,e.g.,10-20accountsor$1M-$2Minrevenue

• Typesofsalesrepsneeded• Timerequiredfromleadto

close(funnelanalysis)

• Timeavailableforqualityselling(salestimevs.admintime)

How We Set Expectation For Those Accounts

• Use“lastyearplus” • Usequantitativeorqualitativeapproachestodetermineaccountorterritorylevelgrowthpotential

• Involvebottom-upinputsandplanning

• Noreally – usesomekindofbottom-upplanning!

• Useexternaldata• Considerregressionanalysistohelpforecastreasonableexpectationsandinformthequotas

• Currentsalesresults• Degreeofaccount

penetration

• Salesfunnelanalysis• Accounttype,vertical,and

marketgrowthrates

• Fieldand/ormanagerfeedback

• Pipeline/CRMreview

For more on the recent BSC Consultants quota study, please feel free to reach out to us.

***QUOTASETTING=GROWTHPLANNING***

What Else Matters? Hmm Let Me See..

Effectiveterritoryplanningrequireseffectivesalescompensationplans

Theyshoulddriveandrewardappropriatelyfortheresultsyoujustsopainstakinglyplannedfor!

Butthereare“betterplans”andnotsogoodplans...

(Youknewwe’dsaythat!)(“BetterSalesComp”– it’sinourname!)

Where Do Sales Compensation Plans Most “Break” Good Territory Planning Details

TargetTotalCompensation

PayMix

Upside

PlanMeasures

PlanMechanicsandCrediting

PayCycles

Fromtheworldofsalescompensation,oneareastandsoutasmostproblematicforgoodterritoryplanning...

AbsoluteCommissionvs.QuotaBasedPlans

Absolute Commission vs. Quota Based Plans

Disclaimer:Notworoles,businessmodels,orcompplansarethesame,butwe’llnowsharefourissueswefindwhencompaniespayonAbsoluteCommissionplans!

AbsoluteCommission QuotaBasedPlans

• Paysaflatpercentageagainstvolumeresults,e.g.,3%

• “CostofSales”Model

• PaysaportionofTargetIncentiveforhittingaportionofQuota,e.g.,90%ofTIfor90%ofgoal

• “CostofLabor”Model

The“What”

• Startupphase• Highlyromanticized(“goodold

days”)• Simplebutnotasprecise

• Poststartupphase• Requiresgrowthplanningeffort• Note:quotasettingisnotalwaysa

comfortabletask!

Application

• Territoriesoftencreatedtoensure“rightvolumesize”todeliver“theneededpay”

• Lessoptimalterritories

• Territoriesbuiltonoptimalworkloadmorethanjustvolumeoraccountbasedgearingratios

• Moreoptimalterritories

ImpactonTerritoryPlanning

“StartupPlansina

NonStartupWorld”

1. Territoryvolumegrows=paygrows(oftenabovemarket)

2. Repcanlivehappilyonrunraterevenue=growthstalls

3. Newhiresgetweakterritories=nopay,noretention,nobenchstrength

4. “FatCat”reps=untouchable5. Overall=resultsstagnate

HowQuotaBasedPlansCanHelp

• “FatCats”stillwell-paid butrewardedforin-yeargrowth,e.g.,• Commission– $500Kfor$5Mundercommission• Quota– still$500K+butfor20%growth($6Mtotalresults)

• Newrepsstartwithsmallerquotas forentryleveltargetpay–affordstimetorampupandbecomeyoursalesstarsoftomorrow

We all love high performing reps but “performance” should be in the current period.

Absolute Commission Issue 1: “The Sacred Territories of the Sales Fat Cats”

Fat? I’m just big boned!

“HavingMore

AccountsIsAlways

BetterThanLess,Right?”

1. Rep’spatch=manyaccountsandmaywaystomatchlastyear’sresultsandcompensation

2. Mayonlybe“covering”aportionofaccounts=mostaccountsgetno“touch”

3. Repstendtohoardaccounts=nodownsideiffailto“maximizeresults”

• First,accountplanningcanidentifypoorcoverageandresults• Youcanthendividetheterritories (“prunethebush”)andadda

salesperson– legacyrepandnewrepeachgetappropriatequotasandgrowthtargets

• Youcancreatemorecustomgrowthexpectations, andbyspecifyingrepfocus,drivebetteroverallresults

Absolute Commission Issue 2: “Tip of the Iceberg Territories” (aka “Prune the Bush”

“ControllingPayThroughTerritoryCuts”

1. Badpruning=toofar/wrongreasons2. Growingresultsundercommissionplan

=somesay“toomuchpay”3. Companiesslashterritories=controlpay

ornormalizepayacrosssalesforce4. Reps“figureitout”=onlygrow

territoriestoapointjustbelowgettingcut!

v Paydoesn’tgoupordowninlockstep justbecauseabsolutevolumegoesupordown

v Providingtargetincentiveforhittingtargetperformance(quota)canavoidexcessivepruning reactions

v Territoryassignmentsandchangesaremadetocreateoptimalworkload anddrivegrowth eachandeveryyear

Absolute Commission Issue 3: “Excessive-Bonsai-Tree-Pruning”

“HowNottoDriveGoodTeamSelling”

1. Somesalesmodelsarecomplex=can“takeavillage”(cross-geosales,productspecialists,salesengineers,etc.)

2. Commissionplansoftenrequiresplitcrediting=“noonepaidonsamedollar”

3. Splitcredit=reducedcommission=lesswillingtobringintherightresourcesattherighttime

• Canassignquotastorespectivesaleteammembers – worksbestwithproactiveaccountcoverage

• Effectiveterritoryplanningmeansyou’llhaveabetterhandleonwhichaccountswillneedwhichsalespeople

• Territoryplanningalsoallowsmoregranulardeployment sooverlaysaren’tpaidforaccountstheylikelywon’ttouch

Absolute Commission Issue 4GOTEAM!(UnlessIhaveto

giveyousomeofmycommission$$$)

How Do We Move From Commission to Quota Plans?

1. IdentifyTargetIncentiveforeachperson• Canbeinformedbypastpayoutsaswellasmarketdata

2. Ensureclarityofaccountassignments(i.e.,territoryplanning!)

3. Developgoal-settingmethodologyandsetquotasfortheassignedaccountsand/orterritorypatch

4. Decideonquotaplanmechanicsdetails• Thresholdusage?• Accelerationmodel?

5. Createappropriaterolloutmaterialstoexplainthechange–thewhat,how,andwhy

6. Communicate,communicate,communicateWIIFM?

Territory Planning and Sales Compensation

Optimalterritoryplanningrequires...• Greatdiligence• Awell-reasonedprocessandmethodology• Ideally,agoodtooltohelpenablethatprocess

Butterritoryplanningwithouttherightsalescompensationdesignscannottrulybeoptimal

So we have what you call the Fat Cat problem. We are worried about turnover risks. What can we do?

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?

Where do ICR plans fit in the structural debate?

Thank You

ThankYou

Sales Management Association Webcast Exploring New ... · Focused in providing research, case...

Documents