SalesCompInsights

I recently had the opportunity to partner with Ted Briggs and Clinton Gott of Better Sales Comp Consultants (BSCC) on the inaugural Sales Operations Trends & Practices Survey. 

Ted and Clinton are both recognized leaders in the sales compensation/sales effectiveness arena and I am appreciative of being able to work with them on this effort.  This survey was the first in a series that will be conducted on a quarterly basis, with a primary focus on sales operations and sales compensation practices in the technology and communications sectors. The survey ran during the first quarter 2010.  The original goal was to recruit 30 participants and we were very pleased 43 technology and communications companies chose to respond.  The questions focused on high level practices in five key areas: 

• Sales Planning
• Account and Territory Assignment
• Quota Setting
• Incentive Plan Design
• Incentive Plan Administration

With these initial questions serving as a baseline, future versions of the survey will assess more detailed practices and trends in each of the five key areas, as well as address specific topics requested by the participants.   A key goal for the survey series is to provide BSCC clients and other members of the sales operations and sales compensation community data and benchmarks that can help them better assess and enhance their organization’s performance.

While several cuts of the data were available (e.g., company size, sector, technologies used), the most interesting results were those comparing the practices of higher performing organizations against the rest of the group.   

The data suggests that high performing sale operations teams help drive superior overall results. Some of the highlights:

• 100% of the respondents who view their operations function as a “competitive differentiator” reported outperforming peer organizations in total results
• 50% of respondents who could point to “clear positive impact” from their sales operations function outperformed peer organizations in total results
• For territory and account assignment, 77% of higher performing organizations started the process at least four months prior to the fiscal year start
• For quota setting, 79% of higher performing organizations began setting quotas 2-3 months prior to the fiscal year start
• For new sales compensation plans, 43% of higher performers communicate within the first two weeks of the new fiscal year, while 60% of lower performers communicate new plans prior to the fiscal year start

If you have any questions about the data, the results or participating, let me know.  Also feel free to reach out to Ted or Clinton directly, or to receive a copy of the executive summary, at:  

Ted Briggs, briggs@bettersalescomp.com

Clinton Gott, gott@bettersalescomp.com

 
About Better Sales Comp Consultants

With well over 50 years of combined sales management consulting experience, the BSCC network offers clients a high degree of sales effectiveness and sales compensation expertise in combination with a flexible and cost effective consulting approach that leverages and enhances their internal resources. 

BSCC provides high impact, tested, and implementable solutions designed to motivate sales teams and drive growth through this emerging new market.  BSCC can help develop better solutions that shift the sales team’s focus back onto growth and achievement, while balancing some of the cost savings efforts that were required over the last four or five quarters. 

BSCC offer sales compensation solutions that:  better align with changing strategies and sales job assignments; better motivate sales people to achieve and exceed their numbers; create better retention and attraction of critical talent; and help to drive better returns on sales compensation spend!  http://www.bettersalescomp.com/

Scott and I were recently interviewed by Marci Reynolds at The Sales Operations Blog;    http://salesoperationsblog.com/2010/04/12/5-burning-questions-sales-compensation/

Marci started the blog in 2009 with a goal of sharing sales operations related ideas, trends, opinions and best practices.    It is one of the only sites dedicated to the sales operations community and we are pleased to have the opportunity to collaborate with her.  If you are a sales operations professional or interested in the kinds of topics listed below we would encourage you to check out her site.

 Sales Strategy: Design, Planning, Execution
• Reporting, Analytics, Trending
• CRM, Sales Technology, Sales 2.0
• Sales Communication
• Sales Territory Design
• Sales Data
• Sales Training, Sales Readiness
• Sales Contests and Spiffs
• Project Management, Process Improvement
• Lead Generation, Sales Programs
• Sales Policy
• Sales Quotas
• Sales Compensation

Here’s the situation: years of sustained growth, multiple acquisitions, complex sales compensation plans, manual and unreliable systems, ongoing disputes from the sales force on payment accuracy.  We met with a sales operations team of a large financial institution back in 2007.  They were done with the band aid approach to fixing the system.  Time to transform the entire operation, get ahead of the curve, become a strategic resource to the organization.

The situation is not unique.  We’ve listed what are common issues that can drive a complete transformation of the incentive management function:

• Incentive management (IM) technology platforms are disparate and lack functionality;
• Processes for plan adjustments and redesign lack analytical decision-making rigor;
• IM staff is reactive, not proactive, in keeping the incentive plans aligned with the needs of the business;
• Leadership is unclear as to the effectiveness of its incentive compensation investment.

In solving these issues, the company needed to ensure its incentive compensation plans were effectively managed, and aligned with the needs of the business, and enabled through a robust technology platform.

The solution approach focused on three discrete areas:

• Incentive operations: people, processes and tools that report performance and payment data, address disputes and adjustments, and provide analysis for ongoing incentive plan alignment;
• Incentive compensation plans: structure and policy for motivating the required behaviors and delivering compensation to specific sales and service job roles;
• Technology: applications for measuring and reporting sales and service performance, and facilitating incentive compensation management, including goals, payments, analysis and ongoing administration.

Subsequently, the project approach included three work streams designed to identify current state practices, desired-state practices, gaps and action plans for closing those gaps.

The company formed a task force to execute the three-phase initiative, along with an executive steering committee to guide progress and decide on structural elements.  The 30-week effort provided these outcomes:

• Formation of a formal IM governance structure, including:
  • Decision rights and accountabilities for the analysis, redesign, approval, implementation and ongoing management of the incentive plans;
  • A cross-functional incentive advisory panel chartered with the delivery of outcomes tied to an annual incentive management calendar;
  • An executive incentive leadership team chartered with addressing recommendations from the incentive advisory panel;
  • The role and staffing requirements for staff positions responsible for execution of incentive management functions;

• A comprehensive redesign of its incentive compensation plans for key jobs to realign goals and payment opportunity with the company’s strategic objectives; the redesign included development of plan design principles and operational standards to guide future plan realignment efforts;
• Funding and implementation of a “best-of-breed” incentive compensation management application.

By using a comprehensive approach, the company transformed its incentive management function to one capable of meeting the needs of the business for years to come.    The business impact includes:

• An increase to the company’s return on its sales compensation investment – more revenue and net operating income relative to the sales and service compensation spent;
• Increased sales and sales support productivity through a reduction in the number of sales and staff time previously engaged in IM activities;
• A reduction in the time required to cost-model and introduce incentive components and campaigns for new products;
• A reduction in the number of performance and payment reporting errors tied to sales credits.

Granted, this is a tough pill to swallow, but it’s a very comprehensive approach.  Just fixing the plans, the technology or organizational structure is piecemeal.   It’s a band aid.  Sound familiar?  Time to transform.

A question we hear frequently in our line of work is, “who owns the sales compensation program?”  In principle, it’s the head of sales, as sales leadership theoretically has accountability for motivating the sales force, and sales compensation is a key motivational tool.

In practice, the answer depends on the organization, and in many companies the ownership over sales comp isn’t clear.

According to OpenSymmetry’s annual sales compensation practices survey last year, 31% of the study’s respondents said the sales function is the organization’s designated owner of the sales compensation program.   Finance was the second most frequent response at 21%, ahead of HR at 17%.  In specific industries the numbers differ.  While the data are fairly consistent since we began the research in 1990, we observe in our work with financial services firms, retail/commercial banking in particular, a shift to finance and HR, away from the lines of business.

In cases where sales does not have formal ownership of the program, we have seen instances of sales leadership not engaged in the requirements phase and final determination of program changes.  This is unfortunate, as the sales leaders may not stand behind the requirements of the new program, yet must motivate his or her team to perform consistent with it.

Having formal accountability does not guarantee meaningful influence.  Leaders over the various stakeholder functions often debate over how best to fix the current plans, or even what’s wrong with them in the first place.  Too often we observe sales leaders making a case for change based on anecdotes and exceptional circumstances – e.g., “Competitor X just offered our top AE a $50k signing bonus.”

What’s missing from these debates is a set of principles, requirements or criteria for shaping plan design decisions, and data to indicate how well the current plan meets those standards.

We recently polled a group of sales, finance and HR leaders on the approaches they use to evaluate how well their sales compensation plans are performing.  Over half said they had no formal process for measuring plan effectiveness and ROI.  Clearly, there’s opportunity for fact-based decision making.

Below we list the most frequently-used reports for analyzing the sales compensation program.  Taken in aggregate, these reports help measure a company’s return on its sales compensation investment:

1. Group Pay Distribution: checks for plan participation rates, compensation efficiency and trending relative to competitive benchmarks for 25^th, 50^th and 90^th percentile earners ;
2. Individual Pay-and-Performance Correlation: identifies potential over- or under-pay scenarios – see scatter plot, left;
3. Quota Attainment Distribution: checks for quota reasonableness and identifies potential over- and under-pay scenarios and engagement issues – see distribution chart, below;
4. Compensation Cost-of-sales Trending and Benchmarking; measures total compensation (individual contributor, supervisor, region/division management) as a percent of revenue relative to competitive trends;
5. Administrative Efficiency Ratios; includes administrative FTE per payee, adjustment volume (occurrence and dollars) rate and system costs (hardware, software and professional-services fees).

(Charts courtesy of Xactly Corporation)

Evaluating the program through robust analytics is but one lever in an overall process for effective program management.  Other attributes include an annual calendar for planning and ongoing program-management activities, and clear accountabilities and decision rights for supporting the program across various stakeholder functions.

The company’s program requirements to a large degree dictate the data necessary for the ROI analysis.  Many firms can’t easily source the data needed, and thus require some investment to enable the analysis.  These are good investments because they provide greater overall program transparency.

The role of the sales leader is to motivate and engage the sales force to sell more.  Sales compensation is a key mechanism.  More important than program ownership the sales leader’s influence over plan change decisions based on objective criteria and analytical findings.

Better Sales Comp Consultants, a sales management consulting firm founded Ted Briggs and Clinton Gott, is hosting a Sales Operations Practices survey.  Scott and I were asked to help develop and facilitate the survey.  We’re excited about the information being collected, and the list of companies participating.  

This is the first in a series of surveys targeted specifically at the sales operations teams in the technology and communications sectors.  While there are several surveys that focus on pay levels, quotas and related information, this is the first ongoing survey focused on the organization approaches, processes and tools used by sales operations professionals. 

This introductory survey examines high level practices in five key areas:  Sales Planning; Account and Territory Assignment; Quota Setting; Incentive Plan Design and Incentive Plan Administration.  The surveys will be conducted every quarter and will assess more detailed practices and trends in each of the five key areas as well as address specific topics requested by survey participants.   The goal of the survey is to provide BSCC clients and other members of the sales operations and sales compensation community data and benchmarks that can help them better assess and enhance their organization’s performance.

So far the responses have been very good.  Several leading technology/telecommunication companies of different sizes.  The survey is going to run through February 3^rd.   If you’re interested in taking the survey you can access it through the link below:

http://bettersalescomp.salesopsssurvey.sgizmo.com

Once the survey is complete we’ll post some of the more interesting results.

Welcome to our blog. 

SalesCompInsights was created by Scott Barton and Mike Meisenheimer.  In our 30+ combined years of working on sales compensation design and management, we’ve collected a lot of  intellectual capital and developed a few opinions on the subject.  So it’s time to share.  This includes reliable information on sales compensation principles, as well as current trends and research. 

Over time SalesCompInsights will continue to evolve based on feedback we receive, specific requests and changes in the broader sales compensation world.  

From time to time, we’ll ask our clients — professionals in sales, HR, finance and sales ops — to comment on industry trends and news that impacts sales compensation policy and administration.

We’d like to hear from you.  Please let us know if there are specific topics you’d like us to cover or comment on posts you find of interest.  Share with us your own sales compensation insights as they pertain to plan design, implementation and administration – things that worked, things that didn’t or questions you’d like to get answered.  We also appreciate a good story. 

We hope you find this site of value.  If you don’t, let us know that, too!