of 26
8/10/2019 Sales Compensation: Establishing Design Principles
1/26
1
Sales Com ensation:Establishing Design Principles
David J. CichelliSr. Vice PresidentThe Alexander Group
2012 The Alexander Group, Inc.
c c e a exan ergroup.com
Topics
Importance of Design Principles
Design Principles Framework
Your Policy Document
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli 2
8/10/2019 Sales Compensation: Establishing Design Principles
2/26
2
Importance Of Design Principles
Answer These Questions
What Are Sales Compensation Design Principles?
Whats Contained in Design Principles?
Who Creates the Design Principles?
Who Owns the Design Principles?
Why Are Design Principles Important?
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli 4
8/10/2019 Sales Compensation: Establishing Design Principles
3/26
3
Design Principles Framework
Design Principles Topics Charter
Guiding Parameters Strategy & Job Alignment a es orce o va on Pay for Performance
Plan Elements Eligibility Pay Levels Pay Mix Leverage Measures Mechanics & Pay Curve Perf. & Payout Periods Quotas/Targets
Investment ROI Communication AdministrationGovernance,Assessment,
D es i n
Attract, Retain and Reward Sales Resources To Drive Sales Results...Consistent With
Corporate Strategies, Goals and Principles
EligibilityPay
LevelsPayMix
L ev er ag e M ea su re sMechanics&
Pay CurvePerf & Payout
Periods
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
PlanElements
Execution
GuidingParameters
Charter
1 2 3
1 2 3 4
Quotas/Targets
SpecialIncentives
Crediting&Policies
1 2 3 4 5 6 7 8 9 10
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Crediting & Policies Special Incentives
Execution Investment ROI Communication Administration Governance, Assessment, Design
6
8/10/2019 Sales Compensation: Establishing Design Principles
4/26
4
Sales Compensation Design Principles
Overall Strategic GoalCharter
Plan
GuidingParameters
Rules To Govern Design Solutions
Guidelines for Specific Program Components
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
ExecutionSupporting Programs: Required for Any Sales
Compensation Plan
7
Sales Compensation Plan Design Principles
Attract, Retain and Reward Sales Resources To Drive Sales Results...Consistent WithCharter
,
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
PlanElements
GuidingParameters
1 2 3
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Investment ROI Communication AdministrationGovernance,Assessment,
Design
Execution
1 2 3 4
8
8/10/2019 Sales Compensation: Establishing Design Principles
5/26
5
Sales Compensation Plan Design Principles
Attract, Retain and Reward Sales Resources To Drive Sales Results...Consistent WithCharter
,
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayPerf &PayoutPlan Quotas/
TargetsSpecial
IncentivesCrediting& Policies
1 2 3 4 5 6 7 8 9 10
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
GuidingParameters
1 2 3
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Investment ROI Communication AdministrationGovernance,Assessment,
Design
Execution
1 2 3 4
9
Sales Compensation Plan Design Principles
Attract, Retain and Reward Sales Resources To Drive Sales Results...Consistent WithCharter
,
HIGH Growth Grow; KeepCustomers
Launch NewProducts
Phase IStart-UpPhase IStart-Up
Phase IVOptimization
Phase IVOptimization
Phase IIVolume Growth
Phase IIVolume Growth
Phase IIIRe-Evaluation
Phase IIIRe-Evaluation
GrowReall
ROIROIROIROI
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
BASE Growth
LOW Growth
Reposition
ReduceCosts
Re-ThinkProduct &
MarketStrategy
Fast Grow
SelectMarkets
ProductProductProductProduct
SurviveExpenses/Expenses/
MarginsMarginsExpenses/Expenses/
MarginsMargins
ProcessProcessProcessProcess ControlPricing
10
8/10/2019 Sales Compensation: Establishing Design Principles
6/26
6
Results...Establish roles and goals, reward
for getting the job done. Exit those noton the same page...
Design PrinciplesManagement Compass
CustomersShareholders
IndividualWorkforceHire people with destiny,support them, pay them welland get out of their way...
...Create a great customerexperience and customers
will be loyal to us...
...We are here to serve theshareholders of this
company...
...Our people are our greatestasset...be loyal to them and
they will be loyal to us
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Execution
InstitutionWork Team
...People are lucky to have a jobhere. We are the leaders in ourindustry...the company founders
gave us a proud tradition......We know this business...get
the details right and the big stuffwill be easy...
...We are team driven...thereis no I in team. Work together;
win together
11
Management CompassMatch The Incentive PlanResults
Goal-Based Compen sation
Custom er Serv ice Incentiv e Plans
CustomersShareholders
IndividualWorkforce
Stra ight Commiss ion Plans
Equity Incentive Plans
Corporate Bonus Plans
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Execution
InstitutionWork Team
Seniority-Based Pay
Scorecard Plans
Team Incentives
12
8/10/2019 Sales Compensation: Establishing Design Principles
7/26
7
Sales Personnel Are The Most Performance Accountable Workforce
Design PrinciplesSales Accountability Model
Sales FunnelProgression
PerformanceReporting
SupervisoryMembership/
Appraisal/Development
LevelAdvancement
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
SalesCompensation
Where Does Sales Compensation Fit?
13
Design PrinciplesSales Compensation Phases
Phase I Phase IVPhase II Phase IIIStart-Up OptimizationVolume Growth Re-Evaluation
Contests
Base plusCommission
RampedCommissions
Add-OnBonuses
Commission
Uncapped
Multiple Plans
Base PlusBonus/Base
PlusCommission
Reward/Recognition
Contests
Base PlusCommission
RampedCommissions
Add-OnBonuses
Commission
Uncapped
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
ManagedPayoutsNo Glue Glue
Salary Level
Job FamiliesNo Glue Salary Level
Job Families
14
8/10/2019 Sales Compensation: Establishing Design Principles
8/26
8
Sales Compensation Plan Design Principles
Attract, Retain and Reward Sales Resources To Drive Sales Results...Consistent WithCharter
,
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayPerf &Payout
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
Plan
GuidingParameters
1 2 3
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Investment ROI Communication AdministrationGovernance,Assessment,
Design
Execution
1 2 3 4
15
Guiding Parameters: Strategy & Job Alignment
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
GuidingParameters
1 2 3
Reinforce strategy andgrowth objectives
Strategy & Job Alignment1
Buyers
Prospects ConversionSelling
ConversionSelling
New MarketSelling
New MarketSelling
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
categories
Drive desired behaviors
Globally consistent to driveWW strategy
Current New/Different
Customers FulfillmentSelling
FulfillmentSelling
PenetrationSelling
PenetrationSelling
Products
16
8/10/2019 Sales Compensation: Establishing Design Principles
9/26
9
Sales Strategy Drives Job Specialization
General Sales
Representative
Sells to all segments Maintains current business
Primary Focus Typical Responsibilities
New BusinessDeveloper
AccountManager
Sales
Maintains current business Services current accounts effectively Expands business with current accounts opportunistically
Expands base of business Establishes and maintains relationships with key decision-makers Business-to-business selling, using all appropriate resources
Sells to and services moderately-sized current and new accounts
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Product SalesSpecialist
Industry/Market or
Channel Specialist
Acts as segment resource on an as-needed basis
Sells specific product to current and new accounts
17
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
GuidingParameters
1 2 3
Guiding Parameters: Sales Force Motivation
Target total compensationobjective
Marketcom etitive u side
Sales Force Motivation2
Positive
Negative
Source Need InfluenceVector
Seek Economic Gain
Avoid Economic Loss
Motivation Response
Economic
External
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
pay
Each plan is simple tounderstand
Sales force can tie results topayouts
Positive
Negative
Positive
Negative
Seek Acclaim/Belonging
Avoid Embarrassment/Rejection
Seek Self-Image Confirmation
Avoid Self-Image Detractors
Social
Self-DefinitionInternal
18
8/10/2019 Sales Compensation: Establishing Design Principles
10/26
10
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
GuidingParameters
1 2 3
Guiding Parameters: Pay For Performance
Differentiate top & bottomperformance
Pay for Performance3
Tiffany Shop
Sell or Die
75th Market Tracker
Nice Place toWork
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
business), not effort
Absolute pay correlates toabsolute results
Compensation programmeets fiscal requirements
LowPerformers
MedianPerformers
HighPerformers
25th
BottomFeeder
19
Sales Compensation Plan Design Principles
Attract, Retain and Reward Sales Resources To Drive Sales Results...Consistent WithCharter
,
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
PlanElements
GuidingParameters
1 2 3
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Investment ROI Communication AdministrationGovernance,Assessment,
Design
Execution
1 2 3 4
20
8/10/2019 Sales Compensation: Establishing Design Principles
11/26
11
Plan Elements: Eligibility
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Eligibility
Eligibility Criteria:
1. Significant customer and/orpartner contact andrelationship
GainsharingAdd-On3x
Uncapped2x
CappedUnit Rate
No RiskRisk
Target PayTarget Rate
1
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
. ersua e e cus omer oact in a positive financialbenefit to the company
3. High level of sales processinvolvement/ownership
4. Clear and quantifiable salesobjectives
BaseSalary
BaseSalary
Target TotalCash
Compensation
BaseSalary
Types of Variable Compensation Plans
BaseSalary
21
Eligibility Decision Tree
Direct Sales: SalesFocus Only
PersuadeProspect
Contact Style Role Job Type Eligibility
3x Uncapped
Titles
Indirect Sales:Channel Sales
Efforts
Reactive Selling:Sell on In-bound
Call or Service Issue
Customer Service:Service Only
Support: Influence
PersuadeOther
Sellers
PersuadeBuyer
FulfillCustomer
Respond
3x Uncapped
3x Uncapped
2x Capped
External
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Efforts to Achieve
Sales Objective
Support: Administer/Implement Sales
Programs
Support:TransactionProcessing
Promote
Administer
Execute
FacilitateInternal
2x Capped
Add-On Team
Add-OnGroup
22
8/10/2019 Sales Compensation: Establishing Design Principles
12/26
12
Plan Elements: Pay Levels
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Pay Levels
Clear and consistent payphilosophy
Competitive pay levels toattract the level of talent
...Medians and Averages Alone Are Meaningless
$170,000
$180,000
$190,000
$200,000
Total W-2
$210,000
2
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
sales requires
Benchmarking to the rightroles based upon job content
Benchmarking to the right setof companies
10th 25th 50th 75th 90th$130,000$140,000
$150,000
$160,000
PercentileOur Data Survey Data
23
Target Total CompensationJob Levels
High
Income Producer
W-2 Earnings
Sales Representative
Territory Representative
Senior Sales Representative
Account Executive
Senior Account Manager
Global Account Manager
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Sales Territory Volume
Low
Low High
24
8/10/2019 Sales Compensation: Establishing Design Principles
13/26
13
Plan Elements: Pay Mix
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Pay Mix
Pay mix reflects the jobsdegree of individual influencewithin the deal and considers
3
10 30100
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Jobs with the most influenceon the purchasing decisionhave more aggressive paymix
Mix
90 70 50
Degree of InfluenceJob A Job B Job C
Low High
25
Plan Elements: Leverage
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Leverage
Leverage (upside opportunity)reflects the jobs degree ofindividual influence on
120
10
200
160
30
50
Upside
10 3050
100 Leverage
4
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
attaining quota and considers
market benchmarks
Jobs with the most influenceon the purchasing decisionhave a higher upside earning
Mix90 70
50
Degree of Influence
Job A Job B Job C
Low High
30
50
26
8/10/2019 Sales Compensation: Establishing Design Principles
14/26
14
Performance MeasuresTypes
Revenue, Profit Dollars, Items SoldProduction
, , ,ManagementSales Effectiveness
Customer Satisfaction, Sales Satisfaction,Customer LoyaltyCustomer Impact
Productivity, Channel Effectiveness, SubordinateSuccessResource Management
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Sales Milestone Tasks, Sales EventsActivities
Supervisor EvaluationSubjective
27
Performance MeasuresWeightings
Jobs Revenue ProfitNew
AccountsCrossSell
KSOs Total
Sales Rep 50% 25% 25% 100%
Key Accounts 50% 25% 25% 100%
Pre-Sales 75% 15% 10% 100%
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Telephone 100% 100%
Customer Service 75% 25% 100%
Channel Mgr 70% 30% 100%
28
8/10/2019 Sales Compensation: Establishing Design Principles
15/26
15
Plan Elements: Measures
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Measures
No more than three measures
Criteria include:Alignment to strategy and job Influence their measures (Line of Sight)
Just Say No To:
More than three measures
Corporate galactic measures
Activit measures
5
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Ability to set quotas/goalsAbility to track Objective metrics
Weights reflect the jobs focusand have impact
Measures aligned verticallyand across teams
Wishful thinking measures
Weighting less than 15%
Compliance measures
Can not measure measures
29
Plan Elements: Mechanics & Pay Curve
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Appropriate mechanics:
Set thresholds at point ofrecurring business
Use quotas to
Mechanics &Pay Curve
400%
500%
600%
% of TargetIncentive
ExcellenceDecelerator
Pay Curve
6
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
territoryUse excellence to setaccelerator rates
Decelerate rate afterexcellence to avoid overpayment
Use modifiers, valueadjustments and matrices tobalance measures
0%
100%
200%
300%
0% 25% 50% 75% 100% 125% 150% 175%
Attainment of Goal
No ThresholdThreshold
Target
Upside
Cap
30
8/10/2019 Sales Compensation: Establishing Design Principles
16/26
16
FormulaModifiers
FormulaType
FormulaMechanics
PayProgram
Formula MechanicsSpecification Worksheet
Limits Threshold Cap Order Size Account
Draw None Non-
Recoverable Recoverable
Schedule Lump Sum Step Formula
Slope Flat Rate Progressive Regressive
Value Adjust
Individual Commission Bonus ICR KSOs
Team Shared Goals Gainsharing Pool
Pay Program
Producer Seller 3x Sales Help 2x Add-On
Or
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Permanent Expiring
Period Discrete Cumulative
Revenue Rates
Linkage None Hurdle Multiplier Matrix
Group Location Sales Unit
Division
Hybrid
Or
Or
31
Formula ExamplesMechanics Description Pros Cons
Commission
Percentage of each sale given ascompensation. Different percentagerates can be used for different productsand rates can ramp as sales increase.
Simple Motivational
AbsolutePayout
ProductPoints
Assign point value to each product sale;payout depends on total number ofpoints attained.
Can weightkey products
Di icult admin Plan
Shopping
Payout Curve Earnings increase linearly as quotaattainment increases.
Equalizesdiverseterritories
Two-stepcalculation
Step Bonus Earnings increase in a step-basedfashion as quota attainment increases.
Addressesquota settingdifficulty
No paybetween steps
P ro du ct A 1 5 3 0+ P oi nt s $ 2 0, 00 0
Product B 10 16-30 Points $10,000
P ro du ct C 5 5 -1 5 P oi nt s $ 5, 00 0
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Hurdle
Earnings are held back for one measure
unless the goal for another measure ismet.
Creates high
priority forachievement
Can be overlypunitive
MultiplierEarnings for one measure are increasedor decreased depending on the goalattainment of another measure.
Balanceasymmetricalmeasures
Unclear focuson individualmeasures
MatrixPerformance for X-axis measure andperformance for Y-axis measuredetermine reward.
Balancescompetinginitiatives
Involved
4 7 10 12 18
3 5 7 9 1 2
2 4 6 7 1 0
1 2 4 5 7
0 1 2 3 4
Rev
Profit
8/10/2019 Sales Compensation: Establishing Design Principles
17/26
17
Plan Elements: Performance & Payout Periods
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Performance &Payout Periods
Performance periods should:
Match sales cycle length
Set realistic goals
Minimize pushing/pulling
7
Separate, standalone payments foreach period
Discrete Periods
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
orders
Payment should: Occur close to sales event
Ensure proper cash flow
Be Consequential
Cumulative Performance-to-Date
Divided performance period paid on acumulative performance-to-date basis
33
Performance PeriodDiscrete And Cumulative
Achievement Incentive Payment
Q1 Actuals versus Q1 Quota Q1
Discrete
Achievement Incentive Payment
Q2 Actuals versus Q2 Quota Q2
Q3 Actuals versus Q3 Quota Q3
Q4 Actuals versus Q4 Quota Q4
Cumulative Year-to-Date
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
c uas versus uo a
Q1+Q2 Actuals versus Q1+Q2 Quota Q1Q2 less Q1
Q1+Q2+Q3 Actuals versus Q1+Q2+Q3 Quota Q1Q3 less Q1+Q2
Q1+Q2+Q3+Q4 Actuals versus Q1+Q2+Q3+Q4 Quota Q1Q4 less Q1+Q2+Q3
34
8/10/2019 Sales Compensation: Establishing Design Principles
18/26
18
Plan Elements: Quotas/Targets
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Quotas/Targets
Quotas are fair, realistic,stretch goals based on salespotential
2/3 of incumbents achievegoal
30-40%of
Sellers
60-70%of
Sellers
Quota Distribution
8
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Consistent quota methodologyfor similar roles and segments
well documented andcommunicated
Process includes both top-down and bottom-up
Threshold 100% Excellence
Top10%
ofSellers
Bottom10% ofSellers
35
Quotas
Quota Level 2
Quota Level 1
Sales Objective
Forecast Company Number
Sales Department Goal
East Region
Area 1 Area 2
West Region
Area 3 Area 4
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Quota Level 4
Quota Level 3 District
Sales Rep Sales Rep Sales Rep
36
8/10/2019 Sales Compensation: Establishing Design Principles
19/26
19
Plan Elements: Crediting & Policies
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Sales crediting rules:
Credit for salesinvolvement
Pay for persuasion
Administer Efficiently
Crediting & Policies
Region
DistrictVertical Crediting
9
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Avoid budget inflation
Policies for: Employee changes
Quota changes
Windfall deals/mega deals
Sales crediting
SR #1 SR #2 Specialist
Horizontal Crediting
37
Plan Elements: Special Incentives
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayCurve
Perf &PayoutPeriods
PlanElements
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
Special Incentives
Use standard governanceprocess
Incentives will: Not com ete with annual
OvertargetIncentive
Pay
Recognition
Contests/Spiffs
TargetIncentive
Excellence
10
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
SIP Not exceed 5% ofpopulations TTC
Be limited to more than 5incentives a year
Last no longer than 1-3months
Pay
Salary
Benefits
SalesExpenses
Target
38
8/10/2019 Sales Compensation: Establishing Design Principles
20/26
20
Sales Compensation Plan Design Principles
Attract, Retain and Reward Sales Resources To Drive Sales Results...Consistent WithCharter
,
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayPerf &Payout
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
Plan
GuidingParameters
1 2 3
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Investment ROI Communication AdministrationGovernance,Assessment,
Design
Execution
1 2 3 4
39
Execution: Investment ROI
Investment ROI Communication AdministrationGovernance,Assessment,Execution
1 2 3 4
Program costadheres tocompanys financialgoals
Program costs are
Investment ROI
100%
120%
140%
160%
ment
Cost-Per-Order Dollar1/3 1/3 1/3
$0.12 $0.08 $0.04
1
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
expectedperformance
Finance ownsprogram costing
Program preventsblow out payouts
0%
20%
40%
60%
80%
$0 $180 $360 $540 $720 $900 $1,080 $1,260 $1,440 $1,620 $1,800
QuotaAttain
Quota Size ($K)
40
8/10/2019 Sales Compensation: Establishing Design Principles
21/26
21
Execution: Communication
Investment ROI Communication AdministrationGovernance,Assessment,Execution
1 2 3 4
Comprehensivecommunicationstrategy
Detailed web-support
Communication2
Key Elements of a Leadership Message
State Compelling Business Condition1
Disconnect from Past2
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Estimators
Line-sales
managementcommunicates tofield
Expansive trainingand programdocumentation
Present the Future3
Thank for Past Efforts4
Call for Volunteers5
41
Execution: Administration
Investment ROI Communication AdministrationGovernance,Assessment,Execution
1 2 3 4
Single source forprocessing andreporting
Plans areadministered in a
Administration
COMPLEXITY(Jobs x Measures x
High
BOE
3
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
,
cost-efficient manner Clearly defined and
consistent policiesand procedures forplan administration
Standards governingexpected behaviorsand performance
Rules x Changes)
INTENSITY(Incumbents x Transactions x Period)
Low
Low High
42
8/10/2019 Sales Compensation: Establishing Design Principles
22/26
22
Execution: Governance, Assessment, Design
Investment ROI Communication AdministrationGovernance,Assessment,Execution
1 2 3 4
Governancestructure exists toassess, design,
Governance,Assessment,
DesignSales
Management
Establish Objectives, Define Deployment,Identify Measures, Represent FieldPerspectives and Own the Sales Comp Plan
Marketing Confirm Product and Price Objectives
4
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
mp emen an auplans
Defined roles andaccountabilities
Specified process
Governance bodyenforces alignmentto principles
FinanceEstablish Expense-to-Revenue Ratio, Costof the Plan and Provide Administration
Sales OperationsProvide Pay/Performance Data, EnsureTracking and Evaluate Plan Performance
HR/CompGather External Pay Data and Facilitatethe Design Process
43
Assessment: Data AnalysisPay Percentile Distribution ChartsAnalyze the range of payouts across incumbents by percentile Purpose: Assess the level of pay variance and upside pay levels
Analyze the range of revenue across incumbents by percentile Purpose: Assess the level of revenue variance between individual reps
Margin Attainment Percentile Distribution ChartsAnalyze the range of sales performance across incumbents by percentile Purpose: Assess current threshold and excellence levels; determine percent
of incumbents above and below target performance levels
Pay vs. Revenue Attainment Correlation ScatterAnalyze the correlation between total compensation and revenue generation
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Purpose: Identify inconsistencies between payouts and revenue
Pay vs. Margin Attainment Correlation ScatterAnalyze the correlation between total compensation and sales performance Purpose: Identify inconsistencies between pay and performance
44
8/10/2019 Sales Compensation: Establishing Design Principles
23/26
23
Design Methodology
Confirm Des ign Execu te
BusinessObjectives
Sales Strategyand Structure
Job Design
Eligibility
TargetPay
PayMix
Upside
Measures
Weightings
Mechanics
Performance
Period
PayoutFrequency
Quota
Crediting
Cost Modeling
Administration
Documentation,Communicationand Rollout
Sales Representative
Key Account Manager
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
CompensationPhilosophy
OngoingEvaluation
Channel Manager
Technical Specialist
45
Design Spreadsheet
Sales Representative
National Accounts Manager
Vertical Market Representative
Channel Sales Manager
$140,000
Y
Y
Y
Y $150,000
$120,000
$120,000
50/503x
70/303x
75/253x
80/202.5x
Rep Perf
Volume
Volume
Volume
Volume
Partners
Retention
Price
60%
40%
70%
30%
70%
30%
80%
20%
Comm
Bonus
Bonus
Modifier
Matrix
Matrix
Matrix
Matrix
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Sales Associate N $68,000 100/0Volume
MBO
85%
15%
Merit
Merit
46
8/10/2019 Sales Compensation: Establishing Design Principles
24/26
24
Sales Compensation Plan Design Principles
Attract, Retain and Reward Sales Resources To Drive Sales Results...Consistent WithCharter
,
EligibilityPay
LevelsPayMix
Leverage MeasuresMechanics
& PayPerf &Payout
Strategy & JobAlignment
Sales ForceMotivation
Pay forPerformance
Plan
GuidingParameters
1 2 3
Quotas/Targets
SpecialIncentives
Crediting& Policies
1 2 3 4 5 6 7 8 9 10
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
Investment ROI Communication AdministrationGovernance,Assessment,
Design
Execution
1 2 3 4
47
Your Policy Document
8/10/2019 Sales Compensation: Establishing Design Principles
25/26
25
Crafting A Policy Document
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli 49
David J. Cichelli, Senior Vice PresidentDavid Cichelli, a Senior Vice President with The Alexander Group, Inc., a sales effectivenessconsult ing f irm, contributes his knowledge and experience to a wide array of salesorganizations. His clients include leading companies in technology, telecommunications,wholesale/distribution, financial services and healthcare. David helps clients redefine anddeploy sales coverage to ensure optimal sales performance. By applying the AlexanderGroup's Sales Management System, he helps companies achieve their sales objectives
Business Experience
Prior to joining the Alexander Group in 1985, David served for five years as
, , , ,sales forecasting,quota allocation, sales force automation solutionsand sales compensation.
Widely recognized by national professional associations and trade publications for his work inlinking sales compensation to management's objectives, David is a frequent speaker on salescompensation topics. He is author of McGraw Hil ls Compensating the Sales Force (2nd
edition). He is also the author of The Sales Growth Imperative, published by McGraw Hill. Heserves a leadership role in the design of the firm's sales effectiveness conceptual models.David is an officer of the company.
2012 The Alexander Group, Inc. SC Establishing Design Principles David Cichelli
compensation consult ing firm. Previously, he had spent seven yearsproviding support to the field sales organization of a multinational Fortune200 chemical company.
Academic Credentials
M.S., Michigan State UniversityB.S., Pennsylvania State UniversityFaculty Experience: Merage Foundation University California, Irvine;WorldatWork; Columbia University
50
8/10/2019 Sales Compensation: Establishing Design Principles
26/26
omp
2012 The Alexander Group, Inc. SC Establishing Design Principles David CichelliAtlanta | Chicago | San Francisco | Scottsdale | Stamford