Date post: | 14-Jan-2015 |
Category: |
Business |
Upload: | evergreen-growth-advisors |
View: | 1,608 times |
Download: | 1 times |
© 2010 The Sales Management Association. All Rights Reserved.
Analyses that Enable GrowthJune 24, 2010
Tom Knight
Partner
Evergreen Growth Advisors
Chicago, IL
Managers’ Analytics Workbench
Session Overview
2 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
• What’s Required to Grow more, predictably?
• Key Analyses in Detail
• Questions and Answers
What’s Required to Drive Growth?
Our experience indicates that sustained growth requires alignment of
Strategy, Organization, and Execution.
� Which markets?
� Which customers?
� How much sales potential exists?
� What products and services?
� What value proposition(s)?
� Optimal sales organization structure and roles?
� Complete market coverage?
� Ideal channel network & partner ecosystem?
� Most efficient sales processes?
� Most effective sales tools?
� Sales Management Processes?
� Sales Skills and Capability?
� Data Driven Planning and Analysis?
� Performance Measurement Systems?
� Sales Force Enablement?
� Compensation Plans?
� Which markets?
� Which customers?
� How much sales potential exists?
� What products and services?
� What value proposition(s)?
� Optimal sales organization structure and roles?
� Complete market coverage?
� Ideal channel network & partner ecosystem?
� Most efficient sales processes?
� Most effective sales tools?
� Sales Management Processes?
� Sales Skills and Capability?
� Data Driven Planning and Analysis?
� Performance Measurement Systems?
� Sales Force Enablement?
� Compensation Plans?
Actionable Growth Plan
Optimized Revenue Engine
Operating Platform for Revenue Growth
3 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
What’s Required to Drive Growth?
While all questions are important, some are more critical than others…
� Which markets?
� Which customers?
� How much sales potential exists?
� What products and services?
� What value proposition(s)?
� Optimal sales organization structure and roles?
� Complete market coverage?
� Ideal channel network & partner ecosystem?
� Most efficient sales processes?
� Most effective sales tools?
� Sales Management Processes?
� Sales Skills and Capability?
� Data Driven Planning and Analysis?
� Performance Measurement Systems?
� Sales Force Enablement?
� Compensation Plans?
� Which markets?
� Which customers?
� How much sales potential exists?
� What products and services?
� What value proposition(s)?
� Optimal sales organization structure and roles?
� Complete market coverage?
� Ideal channel network & partner ecosystem?
� Most efficient sales processes?
� Most effective sales tools?
� Sales Management Processes?
� Sales Skills and Capability?
� Data Driven Planning and Analysis?
� Performance Measurement Systems?
� Sales Force Enablement?
� Compensation Plans?
Actionable Growth Plan
Optimized Revenue Engine
Operating Platform for Revenue Growth
4 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
What Analyses Help Us Drive Growth?
..answering these questions requires strong analytical capability.
Sales Strategy Organization Execution
1. MAP Analysis
(Maintained,
Acquired,
Penetrated)
2. Capacity vs.
Opportunity
3. Cost of Sales and
Spans of Control
4. Territory Gains vs.
Losses
5. Upside Analysis
5 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
1. MAP Analysis – Are We
Growing Where We Should Be?
6 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
A growth MAP is a critical first step in
understanding whether growth is occurring where
and how you planned.
$10,000
$3,407
Last Year’s
Sales
$10,720
This Year’s
Sales
Churn
$(7,650)
Maintenance
M
$2,450
Acquisition
A
$620
Penetration
P
Calculation detail:$7,650 Maintenance sales ÷ baseline period sales of $10,000 = 76.5% Maintenance$ 620 Acquisition sales ÷ baseline period sales of $10,000 = 6.2% Acquisition growth$2,450 Penetration sales ÷ baseline period sales of $10,000 = 24.5% Penetration growth
107.2% total sales growth
A Sales Growth MAPS
AL
ES
($
00
0)
7 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Building A growth MAP requires customer level
performance data.
8 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
MAP can provide some meaningful insights…
9 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
…and can be useful for benchmarking and decision
making about how to adjust one’s sales model.
10 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Incorporating profitability provides an added level
of insight far more useful than volume alone.
$10,000
$3,407
Last Year’s
Sales
$10,720
This Year’s
Sales
$(7,650)
Maintenance
M
$2,450
Acquisition
A
$620
Penetration
P
Calculation detail: Growth Source Growth Category Profitability
Last year’s sales of $10,000 “Baseline”
$7,650 Maintenance sales ÷ baseline period sales of $10,000 = 76.5% Maintenance $2,180 in Maintenance profit dollars = 28.5% profitability
$ 620 Acquisition sales ÷ baseline period sales of $10,000 = 6.2% Acquisition growth $ 140 in Acquisition profit dollars = 22.5% profitability
$2,450 Penetration sales ÷ baseline period sales of $10,000 = 24.5% Penetration growth $ 884 in Penetration profit dollars = 36.1% profitability
107.2% total sales growth $3,204 in profit dollars (M+A+P) = 29.9% profitability on this year’s sales
Churn
Incorporating Profitability into the Sales Growth MAP
SA
LE
S (
$0
00
)
11 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
2. Capacity vs. Opportunity
Analysis
12 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Sales Capacity in the Context of Growth Capability
Market Factors
Organization FactorsGrowthCapability Factors
Total Market Size
Target Market Size
Needs for Offering
Competitive Share and Churn
Accessible Market
Segmentation and Strategy
Coverage Design
Performance Management
Sales Capacity
Channel Coverage
Sales Org. Coverage
Marketing, Service Coverage
Sales Availability
Sales Process Workload (E+D)
Workload Adjusted Close Rates
Market Targets
Sales Strategy
Historic Growth Sources
Alignment with Strategy and Coverage
Compensation, Quotas, Metrics
Market Factors
Organization FactorsGrowthCapability Factors
Total Market Size
Target Market Size
Needs for Offering
Competitive Share and Churn
Accessible Market
Segmentation and Strategy
Coverage Design
Performance Management
Sales Capacity
Channel Coverage
Sales Org. Coverage
Marketing, Service Coverage
Sales Availability
Sales Process Workload (E+D)
Workload Adjusted Close Rates
Market Targets
Sales Strategy
Historic Growth Sources
Alignment with Strategy and Coverage
Compensation, Quotas, Metrics
13 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Business Case Parameters
Customer provided:
• Account and rep data for the 2 districts
• Call frequency and call duration values
• Current territories assignment
• Target work for each territory = 1,696 hours per year
TerrAlign
• Geocoded each store and rep record
• Calculated travel time estimate and work for each store using TerrAlign 4
software and Drive Time Network
• Work = call frequency x (travel time estimate + call duration)
• Optimized territories within district boundaries balancing on work
• Manually reviewed and fine tuned territories
• Compared current and optimized alignment
14 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
Travel Time Reduction
Optimizing territories reduced travel time creating the following benefits:
Travel time reduction
• NE decreased by 5.2%
• SE decreased by 4.7%
• Total savings on mileage = 11,960 miles x $.50 = $5,980
Increased available call hours
• NE increased by 1.6%
• SE increased by .6%
• Total value of increased call hours = $100,000 x 2.2% = $2,200
15 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
Over/Under-Capacity Issues and CostsOptimizing Territories Improves Overall Balance
• Over-capacity means that the reps can’t make all
planned calls
• Under-capacity means that reps can make more calls
• Target for each territory is 1,696 +/- 10% hours per
year
�1,526 – 1,866 hours per year
16 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
Over-Capacity Issues and CostsOptimizing Territories Improves Overall Balance
CURRENT ALIGNMENT
• 6 territories over 110% of target
• 877 total hours above 110%
• Value = $51,733
OPTIMIZED ALIGNMENT
• 2 territories over 110% target
• 59 total hours above 100%
• Value = $3,466
• Improvement of 818 hours and $48,267
TOTAL ROI
Mileage saving ($5,980) + increased call time ($2,200) + over-capacity improvement ($48,267) + under-capacity improvement ($43,266) = $99,713
17 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
Ways to Improve Capacity
Over-capacity
• Add reps
• Move reps from under-capacity areas to over-capacity areas
• Reduce call frequencies
• Reduce call durations
• Remove stores from coverage
Under-capacity
• Reduce reps
• Move reps from under-capacity areas to over-capacity areas
• Increase call frequencies
• Increase call durations
• Add additional stores to coverage
18 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
Territory Opportunity vs. Rep Capacity & the
Impact on Incentive Compensation
Opportunity by Territory
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Territories
Op
po
rtu
nit
y
Average Opportunity
Rep capacity
19 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
Costly Resources
Opportunity by Territory
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Territories
Op
po
rtu
nit
yAverage Opportunity
Rep capacity
Lost Opportunity
20 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
The Inverse Bell Curve
Distribution of Attainment
0
5
10
15
20
25
% of Quota
% o
f S
ale
s F
orc
e
50 60 70 80 90 100 110 120 130 140
Imbalanced Territories Create Over and Underperformers, Regardless of Talent
21 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
Improved Balance and Workload
Opportunity by territory
0
200
400
600
800
1000
1200
1400
1600
1800
2000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Territories
Opport
unity
22 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
The Desired Outcome
Distribution of Attainment
0
5
10
15
20
25
% of Quota
% o
f Sale
s F
orc
e
50 60 70 80 90 100 110 120 130 140 150
Balanced Territories Lead to Expected Incentive Compensation Costs, Aligned with Revenue
23 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
Optimizing Territories Creates Predictable
Incentive Compensation Costs
Planned Incentive Comp Cost
200 reps x $1M quota = $200M
(not always attainable)
200 reps @ $200k OTE = $40M
50/50 Base vs. Variable = $100k/rep
$20M IC planned
Actual Incentive Comp Cost
100 reps x $75k var = $7.5M
+ 100 reps x $150k = $15M
$22.5M IC Spent
Same Revenue - $2.5M Over-spent on variable incentive comp
24 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.
3. Cost of Sales Analysis and
Spans of Control
25 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
How many of you have
reviewed your Cost of Sales
and Spans of Control recently?
26 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Questions to Ask When Optimizing
• Are we spending enough on
New vs. Retained business?
• Is our spend aligned with
revenue and profit potential?
• Are our costs variable enough?
• Should we be spending more
in alternate channels?
• Is the cost curve to our benefit;
do returns increase as we
invest more?
• Is our spend competitive?
• Are spans appropriate given the
nature of the role (transactional
vs. strategic)?
• Do spans reflect the experience
level of direct reports (e.g. larger
with tenured reports)?
• Do clearly understand how we
want managers to interact with
direct reports and the time
requirements of interactions?
Cost of Sales Spans of Control
27 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Despite the diminishing influence of wholesalers
on demand, our investment is wholesaler centric.
66% of all Sales headcount is in Field Sales, focused on wholesale execution, where just 8% and 22% are
focused on demand generation at On-Premise and Off-Premise, respectively
66% of all Sales headcount is in Field Sales, focused on wholesale execution, where just 8% and 22% are
focused on demand generation at On-Premise and Off-Premise, respectively
Division Dep.% Field On-Prem Off-P Corp. Total
Northeast 17% 26 2 5 1 34
North Pacific 15% 25 2 4 1 32
South Pacific 14% 20 2 12 1 35
Mid-Atlantic 14% 21 2 5 1 29
Southeast 12% 17 2 8 1 28
Central 10% 22 3 7 1 33
Southwest 9% 14 5 10 1 29
Rocky Mountain 8% 18 1 4 1 23
Grand Total 100% 162 19 54 9 244
% of Total 66% 8% 22% 4%
28 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Offices are staffed largely the same; spans of
control vary little by Division (e.g. Oppty)
28
27
29
24
23
27
24
19
1 1 1 1 1 1 1 1
54 4
44
5
3 4
0
5
10
15
20
25
30
Northeast North Pacific South Pacific Mid-Atlantic Southeast Central Southwest Rocky Mountain
Nu
mb
er
of
FTE
eq
uiv
ale
nts
FTE Equivalents by Division - 2009
Frontline Sales
Operations Mgmt
Sales Mgmt
29 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
And, the current investment in sales resources are
not aligned with volume
34 35
32 33
2928 28
24
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
$-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
Northeast South Pacific North Pacific Central Southwest Southeast Mid-Atlantic Rocky
Mountain
Tota
l De
ple
tio
ns
(in
Ca
se E
qu
iva
len
ts)
Tota
l Sa
les
Co
sts
(TC
C &
T&
E)
Sales Costs (TCC & T&E), Headcount & Depletions - 2008
Sales Costs
Depletions (Case Eqs)
30 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
4. Analysis of Territory Gains
31 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
More than half the sales force is not generating
net new revenue.
32 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
This analysis can be revealing, particularly when
cut to reveal
• Customer Segments
• Types of Accounts/Customers
• Products
• Geographies/Regions
33 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
5. Upside Analysis
34 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
What is Upside?
Prominence of Sales Person
90
10
20
70
30
60
50
50
100
Extent of Mix and Upside Potential
Low High
% O
f T
arg
et
Co
mp
en
sati
on
100%
Upside
Target Incentive
Base Pay
35 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Why is Incentive Mix Important?
Incentive Proportion Impact
< 10% Minimal to none
10% to 15% Performance reminder
16% to 25% Directional
26% to 40% Highly directional
> 40% Independent action
The higher the proportion in incentive, the greater the impact on behavior
36 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Setting Upside Levels
Distribution of Performance
Frequency
Threshold80%
Target100%
Maximum120%
Percent of Goal
Threshold80%
Target100%
Maximum120%
Target
Incentive
Excelle
nce
Cap
A
B
FixedPay
1. Understand today’s distribution of performance
2. Determine at what level to set the excellence point, typically the upper 10th
percentile of performance
37 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Two Ways of Providing Upside
The earnings opportunity above total target compensation for outstanding performance
Typically…
� Each sale is more difficult
� Additional sales are very profitable
� Pay discrimination is desired
Unlimited
� No cap
� “Progressive”
Limited
� Maximum (cap)
� Reduced
opportunity
Typically…
� Each additional sale is easier
� To avoid windfalls; runaway earnings
� Excessive sales are unprofitable
� Similar pay treatment is desired
“Progressive”
Volume
Volume
“Regressive”
$
$
38 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Upside Is Defined Differently at Times
Be careful: it is common for companies to have their own interpretation
of what leverage means – make sure you compare apples with apples.
“Double” Leverage = Opportunity for an additional 1x of target incentive is available for above target performance
“Triple” Leverage = Opportunity for an additional 2x of target incentive is available for above target performance
39 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
Examples of Upside
Target Compensation = $50,000
Double Leverage (1x)
Total Target Target Target Upside Excellence
Compensation Mix Base Salary Incentive Opportunity Pay
$50,000 80 / 20 40,000 10,000 10,000 60,000
$50,000 70 / 30 35,000 15,000 15,000 65,000
$50,00 50 / 50
Triple Leverage (2x)
Total Target Target Target Upside Excellence
Compensation Mix Base Salary Incentive Opportunity Pay
$50,000 80 / 20 40,000 10,000 20,000 70,000
$50,000 70 / 30 35,000 15,000 30,000 80,000
$50,000 50 / 50
40 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.
© 2010 The Sales Management Association
Discussion