Presented by
© Copyright 2017 The Sales Management Association. All rights reserved.
SalesManagementAssociationWebcast
18March2015
Exploring New Territory – The Geography of Compensation Planning
KevinGrayDirector,[email protected]
PerTorgersonPrincipalBetterSalesComptorgerson@bettersalescomp.com
© Copyright 2017 The Sales Management Association. All rights reserved.
About The Sales Management Association
Aglobal,cross-industryprofessionalassociationforsalesoperationsandsalesmanagement.
Focusedinprovidingresearch,casestudies,training,peernetworking,andprofessionaldevelopmenttoourmembership.
Fosteringacommunityofthought-leaders,serviceproviders,academics,andpractitioners.
www.salesmanagement.org
www.salesmanagementconference.com
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16 – 18 OCTOBER 2017 ATLANTA
© Copyright 2017 The Sales Management Association. All rights reserved.
Today’s Speakers
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ClintonGott
Principal
BetterSalesComp
gott@bettersalescomp
KevinGray
Director,ProductMarketing
Anaplan
PerTorgerson
Principal
BetterSalesComp
Presented by
© Copyright 2017 The Sales Management Association. All rights reserved.
SalesManagementAssociationWebcast
18March2015
Exploring New Territory – The Geography of Compensation Planning
KevinGrayDirector,[email protected]
PerTorgersonPrincipalBetterSalesComptorgerson@bettersalescomp.com
© Copyright 2017 The Sales Management Association. All rights reserved.
Agenda
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• SalesPlanningToday• AligningSalesPlanswithCorporateObjectives• UnstoppableSalesPerformanceFramework• AnaplanCustomerCaseStudy
• DefiningOptimalTerritoryPlanning• VariousLevelsofTerritoryPlanningPractices• HowSalesCompensationSupportsTerritoryPlanning• UseofAbsoluteCommissionvs.QuotaBasedPlans• BetterSalesComp(BSC)CaseStudies– WhereCompensationandTerritoryPlanningGoWrong
© Copyright 2017 The Sales Management Association. All rights reserved.6
$5M to $10M Lost Annual Sales Revenue.
Critical to “Get It Right” and “Keep It Right”
Slide 7
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
© Copyright 2017 The Sales Management Association. All rights reserved. 7
Sales Planning Today
Slide 8
OPERATIONS
SALES
HR
FINANCE
ITMARKETING
Limited Scale &
Collaboration
No Audit & Controls
Resource Intensive
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Misaligned Plans
No Trust in Data
A BROKEN LANDSCAPE
© Copyright 2017 The Sales Management Association. All rights reserved.
Reality and Minutia
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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…
SALES
XLS
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XLS
© Copyright 2017 The Sales Management Association. All rights reserved.
Reality and Minutia
9
Improving Sales Performance is a Constant Struggle
NEW CUSTOMERSACQUISITIONS
Corporate Objectives & AlignmentCROSS-SELL &
UP-SELL OPPORTUNITIEs
RETAIN EXISTING CUSTOMERS
NEW PRODUCTLAUNCH
INDUSTRY VERTICAL
EXPANSION
GLOBALREACH
© Copyright 2017 The Sales Management Association. All rights reserved.
Reality and Minutia
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Improving Sales Performance is a Constant Struggle
TERRITORY PLANNING
INCENTIVE COMPENSATION
PLANNINGQUOTA
PLANING
ACCOUNTSEGMENTATION
PLANNING
SALES CAPACITYPLANNING
REVENUEPLANNING
PLANNING & MODELING
CONFIGURE, PRICE & QUOTE
TERRITORYCREDITINGPROCESS
INCENTIVE COMPENSATION
PROCESSING
EXECUTING
INCENTIVE COMPENSATION
ELIGIBILITYPROCESS
QUOTA ATTAINMENT
PROCESS
NEW CUSTOMERSACQUISITIONS
Corporate Objectives & AlignmentCROSS-SELL &
UP-SELL OPPORTUNITIEs
RETAIN EXISTING CUSTOMERS
NEW PRODUCTLAUNCH
INDUSTRY VERTICAL
EXPANSION
GLOBALREACH
© Copyright 2017 The Sales Management Association. All rights reserved.
Sales Planning & Modeling
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Improving Sales Performance is a Constant Struggle
CONFIGURE, PRICE & QUOTE
TERRITORYCREDITINGPROCESS
INCENTIVE COMPENSATIONPROCESSI=NG
INCENTIVE COMPENSATION
ELIGIBILITYPROCESS
QUOTA ATTAINMENT
PROCESS
NEW CUSTOMERSACQUISITIONS
CROSS-SELL & UP-SELL
OPPORTUNITIEs
RETAIN EXISTING CUSTOMERS
NEW PRODUCTLAUNCH
INDUSTRY VERTICAL
EXPANSION
GLOBALREACH
Sales Planning & Modeling to Align with Corporate Objectives
Corporate Objectives
AlignmentMisalignment
TERRITORY PLANNING
INCENTIVE COMPENSATION
PLANNINGQUOTA
PLANING
ACCOUNTSEGMENTATION
PLANNING
SALES CAPACITYPLANNING
REVENUEPLANNING
© Copyright 2017 The Sales Management Association. All rights reserved.
Unstoppable Sales Performance Framework
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Improving Sales Performance is a Constant Struggle
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
Eval
uatin
g, A
dapt
ing
to C
hang
e Dashboard, R
eporting, Analytics
ReconciliationProcess
Get It Right. Keep It Right.
© Copyright 2017 The Sales Management Association. All rights reserved.
Customer Case Study
13
© Copyright 2017 The Sales Management Association. All rights reserved.
Customer Case Study
14
© Copyright 2017 The Sales Management Association. All rights reserved.
Optimal Territory Planning
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Maximizesalesresultsfromourmarketopportunities
Allocateenoughsalestimetoappropriatelycoverourcurrentandpotentialcustomers
Ensureweprofitablycoverallofourrelevantaccounts
Youhadmeat“Optimal”butwhatdoesallthisreallymean?!
© Copyright 2017 The Sales Management Association. All rights reserved.
What is Territory Planning?
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How we organize and evaluate our accounts
How we set expectations for those accounts
“A”
“B”
“C”Howwecoverthoseaccounts
© Copyright 2017 The Sales Management Association. All rights reserved.
How We Organize and Evaluate Our Accounts
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“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
© Copyright 2017 The Sales Management Association. All rights reserved.
How We Cover Those Accounts
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“AnteUp” “Good” “NextLevel”
• Havedefinedroles• Havesalespeoplesuitedtofillthoseroles
• Assignthemlogically(location,windshieldtime,skillset,etc.)
• Createsomelogicalgearingratios– andconsistentlytestandvalidatethem
• Matchsalestimesupplyanddemand
• Analyzeandensureenough“quality”sellingtime,e.g.,75%
• Usetime-basedcoveragemethodologies– timeneededtocovereachaccount’ssalesprocess
CommonFactorstoConsider
• Basicgearingratios,e.g.,10-20accountsor$1M-$2Minrevenue
• Typesofsalesrepsneeded• Timerequiredfromleadto
close(funnelanalysis)
• Timeavailableforqualityselling(salestimevs.admintime)
© Copyright 2017 The Sales Management Association. All rights reserved.
How We Set Expectation For Those Accounts
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“AnteUp” “Good” “NextLevel”
• Use“lastyearplus” • Usequantitativeorqualitativeapproachestodetermineaccountorterritorylevelgrowthpotential
• Involvebottom-upinputsandplanning
• Noreally – usesomekindofbottom-upplanning!
• Useexternaldata• Considerregressionanalysistohelpforecastreasonableexpectationsandinformthequotas
CommonFactorstoConsider
• 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***
© Copyright 2017 The Sales Management Association. All rights reserved.
What Else Matters? Hmm Let Me See..
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Effectiveterritoryplanningrequireseffectivesalescompensationplans
Theyshoulddriveandrewardappropriatelyfortheresultsyoujustsopainstakinglyplannedfor!
Butthereare“betterplans”andnotsogoodplans...
(Youknewwe’dsaythat!)(“BetterSalesComp”– it’sinourname!)
© Copyright 2017 The Sales Management Association. All rights reserved.
Where Do Sales Compensation Plans Most “Break” Good Territory Planning Details
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TargetTotalCompensation
PayMix
Upside
PlanMeasures
PlanMechanicsandCrediting
PayCycles
Fromtheworldofsalescompensation,oneareastandsoutasmostproblematicforgoodterritoryplanning...
AbsoluteCommissionvs.QuotaBasedPlans
© Copyright 2017 The Sales Management Association. All rights reserved.
Absolute Commission vs. Quota Based Plans
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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
© Copyright 2017 The Sales Management Association. All rights reserved. 23
“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!
© Copyright 2017 The Sales Management Association. All rights reserved. 24
“HavingMore
AccountsIsAlways
BetterThanLess,Right?”
1. Rep’spatch=manyaccountsandmaywaystomatchlastyear’sresultsandcompensation
2. Mayonlybe“covering”aportionofaccounts=mostaccountsgetno“touch”
3. Repstendtohoardaccounts=nodownsideiffailto“maximizeresults”
HowQuotaBasedPlansCanHelp
• First,accountplanningcanidentifypoorcoverageandresults• Youcanthendividetheterritories (“prunethebush”)andadda
salesperson– legacyrepandnewrepeachgetappropriatequotasandgrowthtargets
• Youcancreatemorecustomgrowthexpectations, andbyspecifyingrepfocus,drivebetteroverallresults
Absolute Commission Issue 2: “Tip of the Iceberg Territories” (aka “Prune the Bush”
© Copyright 2017 The Sales Management Association. All rights reserved. 25
“ControllingPayThroughTerritoryCuts”
1. Badpruning=toofar/wrongreasons2. Growingresultsundercommissionplan
=somesay“toomuchpay”3. Companiesslashterritories=controlpay
ornormalizepayacrosssalesforce4. Reps“figureitout”=onlygrow
territoriestoapointjustbelowgettingcut!
HowQuotaBasedPlansCanHelp
v Paydoesn’tgoupordowninlockstep justbecauseabsolutevolumegoesupordown
v Providingtargetincentiveforhittingtargetperformance(quota)canavoidexcessivepruning reactions
v Territoryassignmentsandchangesaremadetocreateoptimalworkload anddrivegrowth eachandeveryyear
Absolute Commission Issue 3: “Excessive-Bonsai-Tree-Pruning”
© Copyright 2017 The Sales Management Association. All rights reserved. 26
“HowNottoDriveGoodTeamSelling”
1. Somesalesmodelsarecomplex=can“takeavillage”(cross-geosales,productspecialists,salesengineers,etc.)
2. Commissionplansoftenrequiresplitcrediting=“noonepaidonsamedollar”
3. Splitcredit=reducedcommission=lesswillingtobringintherightresourcesattherighttime
HowQuotaBasedPlansCanHelp
• Canassignquotastorespectivesaleteammembers – worksbestwithproactiveaccountcoverage
• Effectiveterritoryplanningmeansyou’llhaveabetterhandleonwhichaccountswillneedwhichsalespeople
• Territoryplanningalsoallowsmoregranulardeployment sooverlaysaren’tpaidforaccountstheylikelywon’ttouch
Absolute Commission Issue 4GOTEAM!(UnlessIhaveto
giveyousomeofmycommission$$$)
© Copyright 2017 The Sales Management Association. All rights reserved.
How Do We Move From Commission to Quota Plans?
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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?
© Copyright 2017 The Sales Management Association. All rights reserved.
Territory Planning and Sales Compensation
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Optimalterritoryplanningrequires...• Greatdiligence• Awell-reasonedprocessandmethodology• Ideally,agoodtooltohelpenablethatprocess
Butterritoryplanningwithouttherightsalescompensationdesignscannottrulybeoptimal
© Copyright 2017 The Sales Management Association. All rights reserved.
So we have what you call the Fat Cat problem. We are worried about turnover risks. What can we do?
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© Copyright 2017 The Sales Management Association. All rights reserved.
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?
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© Copyright 2017 The Sales Management Association. All rights reserved.
Where do ICR plans fit in the structural debate?
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© Copyright 2017 The Sales Management Association. All rights reserved.
Thank You
ThankYou
