Using Total Rewards to Drive Business Performance ... - · PDF fileUsing Total Rewards to...

Using Total Rewards to Drive Business Performance Improvement

Scott SandsPrincipal and Practice LeaderHewitt Associates

2009 Total Rewards Conference & Exhibition2

Presentation OverviewHistorical obstacles of integrated total rewards programs that create real business results

Step 1: Understanding Strategies and Business Models

Step 2: Identifying Performance Drivers, Gaps, Impact

Step 3: Isolating Human Capital Levers

Step 4: Applying a Portfolio of Rewards and Incentives

Outcomes and Conclusions

1 2 3 4


Statistics show that HR spends the bulk of its time on tactical program delivery/admin

5% 4%7%

38%

30%

12%

1% 2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

% of Time

Strategy ProgramDesign/COE

Consultation Delivery ProgramAdministration

CustomerService

VendorManagement

Systems

Focus

HR Time Allocation Source: Hewitt HR Analyzer Database


The functional structure of Human Resources organizations can get in the way

SVPHuman Resources

VPComp & Ben

DirectorBenefits

DirectorCompensation

VPTalent Mgmt

DirectorTraining

DirectorStaffing

Who owns career paths in this model? How do we make certain that our R&D function can reduce poaching by competitors? Who decides which

levels of sales resources should be eligible for recognition programs?

Who owns career paths in this model? How do we make certain that our R&D function can reduce poaching by competitors? Who decides which

levels of sales resources should be eligible for recognition programs?


HR’s “seat at the table” requires shared ownership of performance with the business

Clear vision of strategy

Alignment on near- and long-term priorities

Shared goals

Agreement on performance drivers

Application of the full portfolio of rewards


Sample Case Problem StatementCompany was struggling with flat revenue and seeking to return to industry growth rates

Labor costs, especially for the sales force, were high relative to benchmarks

Existing customers were churning at 15% per year

Customer satisfaction levels indicated erosion of the company’s market value proposition


Step 1: Re-orient the organization by mapping out business performance drivers

Net Profit

Operating Expenses

Interest, Taxes, Depreciation, Amortization

Gross Profit

1

Building with alignment to company or business unit

financials (in this case income statement) creates an immediate connection

with other functions (Accounting, Marketing,

Operations, etc.)

Building with alignment to company or business unit

financials (in this case income statement) creates an immediate connection

with other functions (Accounting, Marketing,

Operations, etc.)



Net Profit

Operating Expenses


Revenue

COGS

Gross Profit

SG&A

Research & Development

1

At the next level of detail, HR can begin to integrate with business-unit high-level strategic plans and objectives (“for 2009, our

strategy is to improve sales productivity by

growing the top line 10% while reducing SG&A to

24% of revenue”)

At the next level of detail, HR can begin to integrate with business-unit high-level strategic plans and objectives (“for 2009, our

strategy is to improve sales productivity by

growing the top line 10% while reducing SG&A to

24% of revenue”)



Net Profit

Operating Expenses


Revenue

COGS

Customers

Units

Price

Gross Profit

SG&A

1


Digging further, HR can link up with specific

functional plans, strategies and objectives. In this case, Marketing is trying to support the top-

line growth goal by growing the customer

base.

Digging further, HR can link up with specific

functional plans, strategies and objectives. In this case, Marketing is trying to support the top-

line growth goal by growing the customer

base.



Net Profit

Operating Expenses


Revenue

COGS

Customers

Units

Price

Retained Customers

Acquired Customers

Service Levels

Contact Frequency

Contract Breadth

Gross Profit

SG&A

1


HR does not need to be an expert on Marketing to

partner strategically with that organization. The

organization does need to ask “How?” to get to the

next level of detail, business performance drivers and

human capital levers.

HR does not need to be an expert on Marketing to

partner strategically with that organization. The

organization does need to ask “How?” to get to the

next level of detail, business performance drivers and

human capital levers.


Step 2: Identifying a gap in performance and its link to strategy creates focus

Net Profit

Operating Expenses


Revenue

COGS

Customers

Units

Price

Retained Customers

Acquired Customers

Service Levels

Contract Breadth

Contact Frequency

Gross Profit

SG&A

$200M

$800M

$2,000M

$1,200M

20,000

100

$1,000

17,000

3,000

$500MWhich of these

numbers is a bigger issue? Relative to business goals?

Relative to external benchmarks? What is

the root cause?

Which of these numbers is a bigger issue? Relative to business goals?

Relative to external benchmarks? What is

the root cause?

2



Step 2: Quantifying impact on business performance supports investment

Net Profit

Operating Expenses


Revenue

COGS

Customers

Units

Price

Retained Customers

Acquired Customers

Service Levels

Contact Frequency

Contract Breadth

Gross Profit

SG&A

$220M

$840M

$2,100M

$1,260M

21,000

100

$1,000

18,000

3,000

$520M

Raising the customer retention number from

market median to market 75th

percentile would add 10% to net profit, if no more than $20 million in incremental SG&A

were spent per year

Raising the customer retention number from

market median to market 75th

percentile would add 10% to net profit, if no more than $20 million in incremental SG&A

were spent per year

2



Step 3: Can internal benchmarking isolate human capital drivers of performance?

2

Median: 467

Productivity based on City and Regional headcount (Permanent & Contract)

0

200

400

600

800

1000

1200

武汉

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an郑州

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zhou

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厦门

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ing

CentralChina

East China 1 EastChina 2

North China

Shanghai South China 1 South East ChinaII

SouthWest

Total

Mon

thly

Pro

duct

ion

Uni

ts /

per e

mpe

e

Median: 467


0

200

400

600

800

1000

1200

武汉

Wuh

an郑州

Zhen

gzho

u长沙

Cha

ngsh

a南通

Nan

tong

金华

Jinh

ua徐州

Xuz

hou

温州

Wen

zhou

台州

Taiz

hou

苏州

Suzh

ou南京

Nan

jing

杭州

Han

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u?波

Nin

bo无锡

Wux

i济南

Jina

n青岛

Qin

gdao

合肥

Hef

ei南昌

Nan

chan

g赣州

Gan

zhou

哈?

滨ha

'erb

in大连

Dal

ian

长春

Cha

ngch

un沈

?Sh

enya

ng天津

Tian

jing

太原

Taiy

uan

北京

Bei

jing

Shan

ghai

东莞

Don

ggua

n惠州

Hui

zhou

深?

Shen

zhen

开平

Kaip

ing


0

200

400

600

800

1000

1200

武汉

Wuh

an郑州

Zhen

gzho

u长沙

Cha

ngsh

a南通

Nan

tong

金华

Jinh

ua徐州

Xuz

hou

温州

Wen

zhou

台州

Taiz

hou

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Suzh

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Nan

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Han

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Nin

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Wux

i济南

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Qin

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Nan

chan

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North China

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SouthWest

Total

Mon

thly

Pro

duct

ion

Uni

ts /

per e

mpe

e

Understand factors driving poor productivity here

Understand factors driving high

productivity here

3


Retention Rate

District Profitability

Best Fit Line y = 4,257,331x+12,918

72%

$3.08M

Can regression analysis help identify other performance drivers?

3

Can we tie this to service levels,

responsiveness, issue prevalence?


Reason-coding results by district or period can help prioritize improvements

Find patterns in the business, identify the

factors that are controllable and deploy an action plan with resources and motivational programs

to drive performance.

Find patterns in the business, identify the

factors that are controllable and deploy an action plan with resources and motivational programs

to drive performance.

Retention or Churn Codes

Penetration Codes Acquisition Codes

Service Issue- Partner Additional User Licenses Won for Currently Purchased Product

Displacement of Competitor Product

Service Issue- Company Upgrades Won of Currently Purchased Product- Use Sub-Codes

Replacement of Internal Solution

Sales Coverage Issue-Partner

Additional Maintenance and Service Won

New Product or Solution Not Used by the Customer

Sales Coverage Issue-Company

New Product Licenses Won for Product Not Currently Purchased by Customer

Multiple Product/Suite Purchase

Product Performance New Maintenance and Service Won for New Products Not Currently Purchased by the Customer

Single Product Purchase

Value of Service Competitive Win Competitive Win

Price Non-Competitive Win Non-Competitive Win

Competitive Loss- Use Sub-codes

Final Price vs. List Percent Final Price vs. List Percent

Customer Business Decline

RFP Used RFP Used

Customer Macro Industry Issues

Team Composition Team Composition

Customer Bankruptcy Partner and Company Roles Partner and Company Roles

Uncontrollable (U)

Controllable (C)

3


Gap Analysis helps prioritize improvement opportunities from the customer perspective

Importance

Perf

orm

ance

Low

Low

High

High

Service Responsiveness

Price

Fulfillment Time

Product Quality

Product Scalability

Brand Perception

3


Issue #2: Effect of ChurnIssue #1: Focus on Acquisition

Examining the sales and service process helped focus on people issues & worksteps

Generate Lead

Generate Lead

Qualify Lead

Qualify Lead

Design & Propose

Design & Propose

Negotiate & Close

Negotiate & Close

Fulfill & Deliver

Fulfill & Deliver

Service & RetainService & Retain

4Hours

4Hours

6Hours

6Hours

30Hours

30Hours

25Hours

25Hours

90Hours

90Hours

20Hours

20Hours

4000 Man-hours

4000 4200 Man-hoursMan-hours

4200 Man-hours

12000 Man-hours

12000 Man-hours

5000 Man-hours

5000 Man-hours

18000 Man-hours

18000 Man-hours

3400 Man-hours

3400 Man-hours

1000Leads1000Leads

700Leads700

Leads400

Proposals400

Proposals200

Wins200

Wins200

Deliveries200

Deliveries170

Retained170

Retained

3


Using a generalist sales talent strategy was costing this organization focus and yield

Generate Lead

Generate Lead

Qualify Lead

Qualify Lead

Design & Propose

Design & Propose

Negotiate & Close

Negotiate & Close

Fulfill & Deliver

Fulfill & Deliver


4Hours

4Hours

6Hours

6Hours

30Hours

30Hours

25Hours

25Hours

90Hours

90Hours

20Hours

20Hours

4000 Man-hours

4000 Man-hours

4200 Man-hours

4200 Man-hours

12000 Man-hours

12000 Man-hours

5000 Man-hours

5000 Man-hours

18000 Man-hours

18000 Man-hours

3400 Man-hours

3400 Man-hours

1000Leads1000Leads

700Leads700

Leads400

Proposals400

Proposals200

Wins200

Wins200

Deliveries200

Deliveries170

Retained170

Retained

3

Sr. Account Manager $150,000



Creating focus in responsibilities allowed tailored performance metrics, EVP

Generate Lead

Generate Lead

Qualify Lead

Qualify Lead

Design & Propose

Design & Propose

Negotiate & Close

Negotiate & Close

Fulfill & Deliver

Fulfill & Deliver


4Hours

4Hours

6Hours

6Hours

30Hours

30Hours

25Hours

25Hours

100Hours100

Hours30

Hours30

Hours

4000 Man-hours

4000 Man-hours

4200 Man-hours

4200 Man-hours

12000 Man-hours

12000 Man-hours

5000 Man-hours

5000 Man-hours

20000 Man-hours

20000 Man-hours

5400 Man-hours

5400 Man-hours

1000Leads1000Leads

700Leads700

Leads400

Proposals400

Proposals200

Wins200

Wins200

Deliveries200

Deliveries180

Retained180

Retained

3

Jr. Bus. Dev. Mgr. $90,000



Sr. Account Manager $150,000 $90,000

Jr. Retention Rep. $90,000


The company was managing a large portfolio of potential rewards for Sales

Managing From a Total Rewards Perspective

Cash rewards linked to short-term sales and

marketing campaigns

Cash and Non-cash Awards

linked to contests – top sales team or performer etc

Cash rewards that are earned

directly on a “sale by sale” /

“day by day basis

Cash rewards linked to the

achievement of specific sales,

productivity and service targets

Sales Incentive

SalesCommissions

SalesAwards and

Contests

“Sprint”Programs

Base rewards reflecting

experience and skills needed to meet the core

role requirements

Base Pay

Cash rewards linked to annual

company or business unit performance

CompanyBonus /

Profit Share

Non-cash rewards

recognising special

achievements

RecognitionPrograms

Progression or development opportunities

linked to sustained sales

performance

DevelopmentRewards

Do you know what programs you have in place, how much they are costing you and the impact they have on your business ?

Do you know what programs you have in place, how much they are costing you and the impact they have on your business ?

4


The WorldatWork’s EVP Model adds even more opportunities for balanced motivation

4


Importance of Each Factor in Motivating You to Perform

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Company Car

Recognition Trip

Equity/Stock Grants

Sales Training Provided

Value of Sales Leads Provided

Company Strength

Retirement Benefits

Paid Time Off

Health Benefits

Company Culture

Quota Size

Future Career Advancement

Base Salary

Variable Incentive Opportunity

Perc

ent o

f Res

pond

ents

Not a Consideration Not Important, but Considered Important Critical

Knowing the different motivators in employee segments helped

(<10 Years in Sales)

4

Source: 2009 Hewitt survey of 1200 sales representatives


Importance of Each Factor in Motivating You to Perform

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Company Car

Recognition Trip

Sales Training Provided

Value of Sales Leads Provided

Company Strength

Equity/Stock Grants

Paid Time Off

Retirement Benefits

Company Culture

Health Benefits

Future Career Advancement

Base Salary

Quota Size

Variable Incentive Opportunity

Perc

ent o

f Res

pond

ents

Not a Consideration Not Important, but Considered Important Critical

The senior reps cared about different things than junior resources

(>10 Years in Sales)

4

Source: 2009 Hewitt survey of 1200 sales representatives


Effective sales compensation plans translate the key business objectives and sales strategy into a design that drives behavior to execute. In creating this alignment, there are 10 critical elements:

1. Business Objectives, Sales Strategy & Roles

2.Eligibility

3.Target Pay Levels

6.Measures/Weights

5.Upside Opportunity

8.Quotas/Crediting

9.Payout Timing

4.Pay Mix

7.Mechanics

10.Administration

Competitive Aligned Effective

Successful companies move only the necessary levers in cash compensation

4


The profile for each role helps shape and align the competencies and EVP







• Research• Planning• Analysis

• Communication• Business Acumen• Persuasion

• Communication• Problem-Solving• Organization

• Base Salary• Career Progression• Affiliation

• Variable Incentive• Quota• Benefits

• Career Progression• Base Salary• Work-Life Balance

4

Competencies

EVP Elements


Specific compensation elements then cascade down from the role and EVP







• 70/30 Mix• 1.5:1 Upside• Team Contests

• 60/40 Mix• 2.0:1 Upside• Base Equivalent

• 80/20 Mix• 1.0:1 Upside• Recognition

• Revenue• Qualified Leads• New Customers

• Revenue• Bookings• Product Breadth

• Revenue• Renewal Rate• Customer Satisfaction

4

Reward Features

Performance Metrics


Use both historical performance and improvement potential in setting goals

10% Below 10% Above

ExcellenceTargetThreshold

4


Include qualitative feedback from within the organization to prioritize improvement work

Sale

s Fo

rce

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rce

Gov

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ship

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Com

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ion

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Util

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Util

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On

On --

boar

ding

boar

ding

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rce

Sale

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Tota

l Rew

ards

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ards

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Cap

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Stru

ctur

e St

ruct

ure

1. Highly Effective1. Highly Effective

2. Effective2. Effective

3.Partly Effective3.Partly Effective

4.Mostly In4.Mostly In--EffectiveEffective

5. Not Existing5. Not Existing

Sales Force Effectiveness Survey ResponseSales Force Effectiveness Survey Response

1.41.41.61.6

1.81.82.12.1

2.52.5

3.13.13.33.33.43.4

4.04.04.04.0

4.34.34.74.7

4


Quantitative analysis of the rewards and performance delivered ensures alignment

4

Pay Differentiation

0%

50%

100%

150%

200%

250%

300%

350%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Percentile

Pay

Perc

ent o

f Med

ian

Direct Rep Performance Distribution

0

10

20

30

40

50

60

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

120%

130%

140%

150%

160%

170%

180%

190%

200% More

Quota Performance

Num

ber

Global Account Rep Pay:Performance

y = 1.0130x + 0.1076R2 = 0.8957

0%

50%

100%

150%

200%

250%

300%

350%

400%

0% 50% 100% 150% 200% 250% 300% 350%

Performance %

Pay

%

Pay and performance data

from key resources supports standard

analytics

Pay and performance data

from key resources supports standard

analytics

This is as close as many companies

come to measuring compensation ROI

This is as close as many companies

come to measuring compensation ROI


ConclusionHR has the tools to effectively partner with business leaders to articulate and implement strategy

Focus on alignment and linkage of human capital levers to business priorities and goals creates a sustainable performance advantage

Using the right rewards elements to match performance expectations and employee motivations is critical


Additional InformationStop by our booth if you’d like more information

Business Performance ImprovementTotal Rewards DesignSales Force Effectiveness

Hewitt’s Booth #909E-mail: [email protected]: 404.276.7876

mailto:[email protected]


Professional Biography - Scott SandsScott Sands is a Principal and Sales Force Effectiveness Practice Leader located in Atlanta, Georgia. He works with senior executives in large, global companies to identify opportunities for revenue growth, select the proper sales channels, refine selling processes and messages for specific market segments, staff organizations with the right type and number of sales professionals, set fair but challenging goals, and design motivational incentives. He has 18 years of experience in industry and with leading professional service firms, including Briggs & Sands Consulting, Sibson Consulting, The Alexander Group, and Watson Wyatt. His recent client work includes: Fortune 1000 telecommunications, technology, pharmaceutical, insurance, banking, energy, and heavy manufacturing companies including: Adobe, Assurant, AT&T, Avaya, British Petroleum, Broadcom, Cisco, Cox Communications, CSC, Dell, Electrolux, EMC, General Electric, Intelsat, Johnson & Johnson, Merial, MetLife, National Semiconductor, Nortel, Northrop Grumman, Qwest, Roche, SonyEricsson, Sprint, Symantec, Travelers, Unisource, Verizon, VeriSign, and WellCare.

Scott is a frequent author and speaker at national conferences. His work has appeared in Workspan, Selling Power, SAMA's Velocity, and Sales & Marketing Executive Review. In 2006, he co-authored the WorldatWork's bestselling book Sales Compensation Essentials. Scott holds a bachelor's degree in Electrical Engineering and Mathematics from Vanderbilt University and a MBA with a focus in Marketing and Organization Effectiveness from The University of Texas.

Scott oversees all dedicated Sales Force Effectiveness consulting resources in North America. He coordinates with global Hewitt Talent and Organization Consulting resources to ensure that this fast-growing segment delivers proven approaches, cutting-edge insight, and client business impact.

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