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WRI Sales Compensation Plan

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18
SALES COMP PLANNING February 23, 2004
Transcript
Page 1: WRI Sales Compensation Plan

SALES COMP PLANNING

February 23, 2004

Page 2: WRI Sales Compensation Plan

CURRENT SITUATION

• We pay $7.25/hr + $17 per Activation

• We have 70°/o of our Comp Pay as Fixed, only 30°/o is Variable

• We have 30°/o of our Reps achieving 0-9 Activations per Month, and they do not generate enough Gross Margin to "cover" their fixed labor costs (another 20°/o get 10-19 Activations/Month)

Page 3: WRI Sales Compensation Plan

NEW IDEA

• Why not drop the hourly rate significantly, and consider the base wages as a "draw" against commission?

• Instead of $7.25/Hr + $17/Act, why not something like $3.00/Hr +$50/Act?

• Could we go as far as NO hourly wage + $75/Act, a Ia Wireless Solutions?

Page 4: WRI Sales Compensation Plan

ASSIGNMENT

• Let's model the current environment, add some "what if's" under different possible scenarios, and "try them on for size"

• How to do that?

• Pickering spends 20 hours over the weekend building and validating the models, and prepare a summary for Monday's discussion

Page 5: WRI Sales Compensation Plan

ASSUMPTIONS

• September 2003 Activations (77K)

• These activations are paid in November

• 3,600 Sales Reps (exclude FMs)

• SIS only (for now)

• Base Pay and Phone Comm only (for now)

• Excludes Accessories, Spiffs, Bonus, Dish, Training, OT, etc.

Page 6: WRI Sales Compensation Plan

ASSUMPTIONS (Cont'd)

• By "backtesting" against prior period data, we can validate the components of cost plus the total cost of various options

• However, this is a "static" model test (total pay & total activations were kept constant)

• When we actually change the camp plan, SR behavior will change (some will move "up" and some will move "out)

Page 7: WRI Sales Compensation Plan

STRATIFICATIONS

• We have a diversified population of reps

• Stratify by activations/month (1-155)

• Mean (Average) is 21 activations/month

• Stratify by Hours Worked/Month (grouped into major categories: 0, 40, 60, 80, 100, 120, 140, 160+ hours/month)

• Mean (Average) is 116 hours/month

Page 8: WRI Sales Compensation Plan

PAY VARIANCE GRAPH

• This graph shows the change in total pay for implementing the New Plan vs. the Old Plan

• The overall average impact of the $3.00/Hr + $40/Act plan is a "wealth transfer" from those who achieve <22 activations/mo. to those who achieve 23+ per month

• The "cutover point" is different for each hourly strata and for each possible $/Hr + $/Act combination

Page 9: WRI Sales Compensation Plan

f.fl­U.I

20,000

0

(20,000)

~ (40,000) ~ ~

~ >­<( a. _J

(60,000}

~ (80,000} 0 1-

(100,000}

(120,000)

(140,000)

TOTAL PAY VARIANCE· OLD VS. NEW $3.00/Hr. + $40 Avg Comm

""'•:•,•,•,•,•,•,•:••,•,•/',•,•,•,•,•,•,•,•lli,illi, lll~UIJdJ,lbtdi,!,~/IIII,IJj~,J,,Inl'ln, ,o,o,o,o, \;, "'' 1,1/, ~~' ln'c' ,;,~, m' ,J, ''' ,\ cccln,,' n ,\,' 43 49 55 61 67 73 79 85 91 97 103 109 115 121 127 133 139 145 151 157

ACTIVATIONS

Page 10: WRI Sales Compensation Plan

COMPENSATION/HR GRAPH

• The Old Plan (darker diamonds) is a flatter line, starting at $7.25/Hr and extending up to around $20.00/Hr for top SR's

• The New Plan (lighter squares) is a steeper line, starting at $3.00/Hr and extending up to $35-$40/Hr for top SR's

Page 11: WRI Sales Compensation Plan

TOTAL COMPENSATION PER HOUR 45.00

IIi 40.00

111!11~

NEW II

! 35.00 II I ~~·--·- .. ---

-~~

II •• IIIII

30.00

tY-Illig llfl 5 25.00 . --~-~-~6 - -- -

IIi Ill • • :c II • 0:::: •

~ 20.00 •• ~~ ........ l (F)- . . .. OLD

,~··- 'f/111111 15.00 ..,.~~~· . 10.00 I

I 5.00 ---·-···- -------- ~!

0.00 r-BIII- • 11181111 llllli.IHIII M4l ' I 0 20 40 60 80 100 120 140 160 1801

ACTIVATIONS PER MONTH I I

Page 12: WRI Sales Compensation Plan

STACKED AREA GRAPHS

• The next two graphs show fixed pay and variable pay under the Old Plan vs. the New Plan

• The huge 'Shift into variable pay (darker area) is evident.

Page 13: WRI Sales Compensation Plan

125,000 CURRENT FIXED & VARIABLE PAY MIX

.__ 100,000 --- -(f)

0 (J

!z !0 I~ 75,000 :(f)

iz I l.U in.. ~ .

0 50,000 u

,-I i<l: It-

: ~ 25 000 I ' I

I I i

0

I VARIABLE]

1 10 19 28 37 46 55 64 73 82 91 100 109 118 127 136 145 154 ACTIVATIONS

Page 14: WRI Sales Compensation Plan

125,000

t-100,000 en 0 u :z 0 i= 75 000 <:( ' en z UJ 0..

~ 50,000 (.) _J

~ 0 1:- 25,000

0

NEW IDEA $3.00 & $40/ACT FIXED & VARIABLE PAY MIX

I VARIABLE I

1 10 19 28 37 46 55 64 73 82 91 100 109 118 127 136 145 154 ACTIVATIONS

Page 15: WRI Sales Compensation Plan

COST/ACTIVATION GRAPH

• Under both plans, we have very steep leverage downward of cost/act from 0-9 activations and we have a relatively flat cost/act after exceeding 50 activations/mo.

• The crossover point is 22 activations/mo. • At 9 acts/mo, the New Plan has a $75/act

cost, where the Old Plan was $1 02/act • At 6 acts/mo, the New Plan has a $92/act

cost, where the Old Plan was $143/act

Page 16: WRI Sales Compensation Plan

z 0 -

350

300

~ 250 > t= ~ 200 0:: w 0...

~ 150 0 u

100

50

0

TOTAL COST PER ACTIVATION

----- - ,_ -- I

' I I

- - =.1 ~ .. ·r =t-=:.=t=:_: 1 ~ = : . = 1. ·!fi----t-----t--~--t--+----+------+----111-t---,i----11!1 IIBtHI, lljHII!I J--..J--.J 0 1 0 20 30 40 50 60 70 80 90 100 11 0 120 130 140 150 160

ACTIVATIONS PER MONTH

Page 17: WRI Sales Compensation Plan

ONE-PAGE MATRIX

• This page contains the key data to analyze the differences of 7 possible combinations of fixed and variable pay

• All the detail of each has been tested

• We have to decide which mix of fixed and variable is most appropriate

• We have to be ready to replace people we will lose

Page 18: WRI Sales Compensation Plan

·.:.·, MONTHLY COM MISS;~~ RATE ~Oivir A~iSJN TABLe· HOLDING Fi.JLL $FLAT

REVENUE GROSS PROFIT EE COMMISSIONS BASE PAY Activa- Sept Gross Total EE EE Comm Base Base

Rate Plan tion Activa- Profit Gross Comm Comm %Gross Pay Pay Strata Mix !ions $/Act Profit$ Rate $ Profit $/Act $

(A) THE WAY WE'VE BEEN DOING IT ($7.25 AVERAGE WAGE) 0.00-29.98 18.8% 14,524 60.71 881,748 10.00 145,240 16.5% 39.51 573,869

29.99-39.98 21.3% 16,437 151.32 2,487,230 15.00 246,555 9.9% 39.51 649,455 39.99+ 59.8% 46,090 201.02 9,264,966 20.00 921,800 9.9% 39.51 1,821,097

100.0% 77,051 163.97 12,633,944 17.05 1,313,595 10.4% 39.51 3,044,420

(B) SUGGESTION FROM THE LAST MEETING (SAME WAGE, ADJUST COMMISSIONS/RATE PLAN) 0.00-29.98 18.8% 14,524 60.71 881,748 8.00 116,192 13.2% 39.51 573,869

29.99-39.98 21.3% 16,437 151.32 2,487,230 15.00 246,555 9.9% 39.51 649,455 . 39.99+ 59.8% 46,090 201.02 9,264,966 25.00 1 '152,250 12.4% 39.51 1,821,097

100.0% 77,051 163.97 12,633,944 19.66 1,514,997 12.0% 39.51 3,044,420

(C) DOWNWARD REVISION NECESSARY TO MATCH COMP $ ($7.25 AVERAGE WAGE) .. .

0.00-29.98 18.8% 14,524 60.71 881,748 6.00 87,144 9.9% 39.51 573,869 29.99-39.98 21.3% 16,437 151.32 2,487,230 16.00 262,992 10.6% 39.51 649,455 ' 39.99+ 59.8% 46,090 201.02 9,264,966 21.00 967,890 10.4% 39.51 1,821,097

100.0% 77,051 163.97 12,633,944 17.11 1,318,026 10.4% 39.51 3, 044,420

(D) NEW IDEA $6.00 BASE + $24 WEIGHTED AVERAGE COMMISSION 0.00-29.98 18.8% 14,524 60.71 881,748 8.00 116,192 13.2% 32.70 474,926

29.99-39.98 21.3% 16,437 151.32 2,487,230 21.00 345,177 13.9% 32.70 537,480 39.99+ 59.8% 46,090 201.02 9,264,966 30.00 1,382,700 14.9% 32.70 1,507,114

100.0% 77,051 163.97 12,633,944 23.93 1,844,069 14.6% 32.70 2,519,520

(E) NEW IDEA $5. 00 BASE + $29 WEIGHTED AVERAGE COMMISSION 0.00-29.98 18.8% 14,524 60.71 881,748 11.00 159,764 18.1% 27.25 395,772

29.99-39.98 21.3% 16,437 151.32 2,487,230 28.00 460,236 18.5% 27.25 447,900 39.99+ 59.8% 46,090 201.02 9,264,966 36.00 1,659,240 17.9% 27.25 1,255,929

100.0% 77,051 163.97 12,633,944 29.58 2,279,240 18.0% 27.25 2,099,600

(F) NEW IDEA $4.00 BASE + $35 WEIGHTED AVERAGE COMMISSION 0.00-29.98 18.8% 14,524 60.71 881,748 13.00 188,812 21.4% 21 .80 316,617

29.99-39.98 21 .3% 16,437 151.32 2,487,230 32.00 525,984 21.1% 21.80 358,320 39.99+ 59.8% 46,090 201.02 9,264,966 43.00 1,981,870 21.4% 21.80 1,004,743

100.0% 77,051 163.97 12,633,944 35.00 2,696,666 21.3% 21.80 1,679,680

(G) NEW IDEA $3.00 BASE + $40 WEIGHTED AVERAGE COMMISSION 0.00-29.98 18.8% 14,524 60.71 881,748 14.00 203,336 23.1% 16.35 237,463

29.99-39.98 21.3% 16,437 151.32 2,487,230 37.00 608,169 24.5% 16.35 268,740 39.99+ 59.8% 46,090 201.02 9,264,966 50.00 2,304,500 24.9% 16.35 753,557

100.0% 77,051 163.97 12,633,944 40.44 3,1 16,005 24.7% 16.35 1,259,760

(H) NEW IDEA $2. 00 BASE + $46 WEIGHTED AVERAGE COMMISSION 0.00-29.98 18.8% 14,524 60.71 881 ,748 17.00 246,908 28.0% 10.90 158,309

29.99-39.98 21.3% 16,437 151.32 2,487,230 43. 00 706,791 28.4% 10.90 179,160 39.99+ 59.8% 46,090 201:()2 9,264,966 56.00 2,581,040 27.9% 10.90 502,371

100.0% 77,051 163.97 12,633,944 45.88 3,534,739 28.0% 10.90 839,840

(I) NEW IDEA $1 00 BASE+ $51 WEIGHTED AVERAGE COMMISSION 0.00-29.98 18.8% 14,524 60.71 881,748 19.00 275,956 31 .3% 5.45 79,154

29.99-39.98 21.3% 16,437 151.32 2,487,230 47.00 772,539 31.1% 5.45 89,580 39.99+ 59.8% 46,090 201.02 9,264,966 63.00 2,903,670 31.3% 5.45 251,186

100.0% 77,051 163.91 12,633,944 51.29 3,952,165 31.3% 5.45 419,920

(J) NEW IDEA $0 00 BASE+ $57 WEIGHTED AVERAGE COMMISSION 0.00-29.98 18.8% 14,524 60.71 881,748 21.00 305,004 34.6% 0.00 0

29.99-39.98 21 .3% 16,437 151.32 2,487,230 51.00 838,287 33.7% 0.00 0

39.99+ 59.8% 46,090 201.02 9,264,966 70.00 3,226,300 34.8% 0.00 0 1100.0% 77,051 163.97 12,633,944 56.71 4,369,591 34.6% 0.00 0

*NOT INCLUDING ACCESSORIES, SPIFF, DISH, BONUS, OT, TRAINING, OR ACCF.! ERA TOR

Base %Gross

Profit

65.1% 26.1% 19.7% 24.1%

65.1% 26.1% 19.7% 24.1%

65.1% 26.1% 19.7% 24.1%

53.9% 21.6% 16.3% 19.9%

44.9% 18.0% 13.6% 16.6%

35.9% 14.4% 10.8% 13.3%

26.9% 10.8% 8.1%

10.0%

18.0% 7.2% 5.4% 6.6%

9.0% 3.6% 2.7% 3.3%

0.0% 0.0% 0.0% 0.0%

TOTAL REP COMP* I IOta! Pay $/Act

Total Total Pay Pay % Gros~t $ Profit [

49.51 719,109 81.6% 54.51 896,010 36.0% 59.51 2,742,897 29.6% 56.56 4,358,015 34.5%

47.51 690,061 78.3% 54.51 896,010 36.0% 64.51 2,973,347 32.1% 59.17 4,559,417 36.1%

'"'--45.51 661,013 75.0% 55.51 912,447 36.7% 60.51 2,788,987 30.1% 56.62 4,362,446 34.5%

40.70 591 ,118 67.0% 53.70 882,657 35.5% 62.70 2,889,814 31.2% 56.63 4,363,589 34.5%

38.25 555,536 63.0% 55.25 908,136 36.5% 63.25 2,915,1.69 31.5% 56.83 4,378,840 34.7%

34.80 505,429 57.3% 53.80 884,304 35.6% 64.80 2,986,613 32.2% 56.80 4,376,346 34.6%

30.35 440,799 50.0% 53.35 876,909 35.3% 66.35 3,058,057 33.0% 56.79 4,375,765 34.6%

27.90 405,217 46.0% 53.90 885,951 35.6% 66.90 3,083,411 33.3% 56.78 4,374,579 34.6%

24.45 355,110 40.3% 52.45 862,11.9 34.7% 68.45 3,154,856 34.1% 56.74 4,372,085 34.6%

21.00 305,004 34.6% 51.00 838,287 33.7% 70.00 3,226,300 34.8% 56.71 4,369,591 34.6%

VAR VS. FIXED Variable . Fixed

%of %of Total Pay Total Pay

20.2% 79.8% 27.5% 72.5% 33.6% 66.4% 30.1% 69.9%

16.8% 83.2% 27.5% 72.5% 38.8% 61.2% 33.2% 66.8%

13.2% 86.8% 28.8% 71.2% 34.7% 65 .3% 30.2% 69.8%

19.7% 80.3% 39.1% 60.9% 47.8% 52.2% 42.3% 57.7%

28.8% 71.2% 50.7% 49.3% 56.9% 43.1% 52.1% 47.9%

37.4% 62.6% 59.5% 40.5% 66.4% 33.6% 61.6% 38.4%

46.1% 53.9% 69.4% 30.6% 75.4% 24.6% 71 .. 2% 28.8%

60.9% 39.1% 79.8% 20.2% 83.7% 16.3% 80.8% 19.2%

77.7% 22.3% 89.6% 10.4% 92.0% 8.0% 90.4% 9.6%

100.0% 0.0% 100.0% 0.0% 100.0% 0.0% 100.0% 0.0%


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