1. Sales Compensation: How to Motivate Your Sales Team Human Capital Symposium October 26 th, 2011 Susan Harmer Peter Saulnier

2. Overview What Motivates Sales People Design Process Making it Work Conclusions

3. What Motivates Sales People

4. Motivation of Sales People Do you know what motivates your sales people? Motivation is often different for different roles Hunter vs. Farmer Typical motivators Clarity, line of sight between performance and reward Money, control of earnings Lifestyle - may evolve over their lifetime Achievement

5. Design Process

6. Adjusting As Markets Mature... Scaleable Growth Profitable Growth Rapid Growth Slow Growth Find customers Grow fast “Single” product Variable cost pay plans Customer tiers Multiple contacts Price pressure Talent retention Cost management Strategic evaluation SBUs Segmentation Job role specialization Profitable growth Keep current Acquire new Expand / up sell New product introduction Base pay – “glue” Phase 2Phase 4Phase 1Phase 3

7. In the beginning... Coverage Models Evolve... Sales Process Segments LeadQualifyProposeCloseFulfillManage Small Mid Large Geographic Territory Sales Reps

8. LeadQualifyProposeCloseFulfillManage Small Mid Large Enterprise Geographic Territory Reps Named Account Sales Reps Telesales Account Coordinators Iterations Begin to Accumulate... Sales Process Segments Then customer tiers or segments are defined, along with more specialized roles...

9. LeadQualifyProposeCloseFulfillManage Small Mid Large Enterprise Vertical 1 Vertical 2 Coverage models can become increasingly complex... Proj Mgrs Telesales Reps Named Account Sales Reps Named Account Sales Reps Agents/Distributors Cust Care Account Coordinators Vertical 2 Specific Partners eChannel Telemarketing Reps Vertical 1 Specific Reps Sales Process Segments And the Sales Process Becomes Disaggregated...

10. Clarifying Sales Strategy CUSTOMERS PRODUCTS/SERVICES Where is your best source of profitable growth? By buyer segment/vertical/product line/geography?

11. What Sales Roles Are Needed? Products Existing/Core New/Different Buyers Prospects Customers Keepers Finders Growers Market Makers Product Specialists Unique Sales Force Market Specialists

12. The Implications of Selling Strategy for Rewards Strategy Products Customers ExistingNew Line Customer Prospect Pay Level: 50th percentile Mix/Leverage: Conservative Measures: Retained Revenue Pay Level: 60th percentile Mix/Leverage: Aggressive Measures: New Account Revenue Pay Level: 60th percentile Mix/Leverage: Moderate Measures: New Product Revenue Pay Level: 75th percentile Mix/Leverage: Very Aggressive Measures: New Business Pay Level: 50th percentile Mix/Leverage: Moderate Measures: Total Revenue Pay Level: 50th percentile Mix/Leverage: Moderate Measures: Total Revenue

13. Strategy Drives Tactics Change Drivers Objectives and Strategies Job Definition Compensation Implications Market Forces Competition New Products Technology Changes Marketing Priorities Sales Strategy Product/ Service Mix Product/ Service Mix Customer Coverage Needs Customer ProductProcess Measures Weights Leverage Funding Measurement and Tracking The drivers of effective sales compensation plans are constantly shifting.

14. Incentive Design Process 1. Eligibility 2. Pay Levels 3. Mix 4. Upside 5. Performance Measures 6. Weights 7. Formula Mechanics 8. Measurement Period 9. Payout Frequency

15. More Weight on Salary: Selling is more of a team effort Heavy use of advertising & promotion Product or service requires little sales effort Job includes many non-sales duties More Weight on Incentives: Job requires high level of experience, technical skill and drive Individual selling has high degree of impact on sales results Individual results are quantifiable Competition is strong, talent is available Balancing Incentives and Salary SalaryIncentive Presales 80/20 A/C Mgr 60/40 Bus. Dev. 70/30 Hunter 45/55 Sr. A/C Mgr 50/50

16. Performance Measures & Upside Base Upside Incentive Performance Measures should be: Controllable (clear line of sight) Specific & Measurable Strategic Upside Opportunity should: Drive overachievement Reward strategic results Fit the strategic cost model Upside Opportunity should: Drive overachievement Reward strategic results Fit the strategic cost model Don’t Forget: Bonuses Sales Contests President’s Club Don’t Forget: Bonuses Sales Contests President’s Club

17. Examples of Plan Mechanics PositionMixTarget Upside Performance Measures, Weighting & Mechanics Frequency New Business A/C Manager 50/50 2:1 @ 175% of Quota 100% Individual Revenue Back-end Loaded – 50% of comm’n pool earned @ 70% of quota Significant tiered accelerators > 100% Strategic Bonus e.g. $X for $500k+ deal (included in upside calculations) Annual Plan pd Monthly Account Manager 60/40 1.5: 1 @ 150% of Quota 80% Run-Rate Revenue 20% New Business Revenue Straight-line 100% Strategic Bonus e.g. $X for qrtly quota Annual Plan pd Monthly Pre-Sales Consultant 80/20 1:1 @ 150% of Quota 100% Team Revenue Straight-line < 100% quota; Straight-line accelerator > 100% quota Qtrly Plan pd Monthly

18. Making it work

19. Document, Communicate, Measure Plan Documents Specific, include examples Document Sales Policies Policies may develop over time Sell to Sales Annual objectives How roles and/or compensation plans have changed Give examples Performance Tracking & Reporting Provide sales with regular reports Monitor overall sales plan performance

20. Define Performan ce Strategy A Strong Cross Functional Team is Essential at All Stages of the Design Process Sales Management Strategic business direction, sales model changes, market knowledge, communication Finance / Sales Operations Link to company strategic plan, plan costing, territories, quotas, plan administration & calculations, payroll Human Resources Compensation levels (OTEs, splits, market data), impact on retention, recruiting, change management, communication

21. Success Factors Establish core cross functional design team Be clear on the culture you want to reinforce Keep it a data focused exercise Know your competitive market Strong governance

22. Conclusions

23. Sales Comp & Your Company Culture Different compensation strategies for sales vs. non- sales may be appropriate Roles are different and they contribute in different ways to company success Sales comp practices will impact company culture You’re giving away a BMW (lease for a year) – what does that say to the rest of the company Communication is key Be proactive and transparent For example, be able to articulate why sales is paid on invoice and the Company bonus plan is tied to recognized revenue

24. Business Strategy Product / Market Focus Commission Plan Salesperson Capability Ensuring Success Sales Success is Critical for Business Success