Managers' analytics workbench final 22 june10

Managers’ Analytics Workbench
Analyses that Enable Growth
June 24, 2010
Tom Knight
Partner
Evergreen Growth Advisors
Chicago, IL
tnight@evergreengrowthadvisors.com

© 2010 The Sales Management Association. All Rights Reserved.

Session Overview

• What’s Required to Grow more, predictably?
• Key Analyses in Detail
• Questions and Answers

2 Copyright © 2008 - 2010 The Sales Management Association.
All rights reserved.

What’s Required to Drive Growth?
Our experience indicates that sustained growth requires alignment of
Strategy, Organization, and Execution.

Which markets? Optimal sales organization Sales Management
structure and roles? Processes?
Which customers?
Complete market coverage? Sales Skills and Capability?
How much sales potential
exists? Ideal channel network & Data Driven Planning and
partner ecosystem? Analysis?
What products and services?
Most efficient sales Performance Measurement
What value proposition(s)? processes? Systems?
Most effective sales tools? Sales Force Enablement?
Compensation Plans?

Actionable Optimized Revenue Operating Platform for
Growth Plan Engine Revenue Growth


What’s Required to Drive Growth?
While all questions are important, some are more critical than others…

Which markets? Optimal sales organization Sales Management
structure and roles? Processes?
Which customers?
Complete market coverage? Sales Skills and Capability?
How much sales potential
exists? Ideal channel network & Data Driven Planning and
partner ecosystem? Analysis?
What products and services?
Most efficient sales Performance Measurement
What value proposition(s)? processes? Systems?
Most effective sales tools? Sales Force Enablement?
Compensation Plans?

Actionable Optimized Revenue Operating Platform for
Growth Plan Engine Revenue Growth


What Analyses Help Us Drive Growth?

..answering these questions requires strong analytical capability.

Sales Strategy Organization Execution

1. MAP Analysis 2. Capacity vs. 4. Territory Gains vs.
(Maintained, Opportunity Losses
Acquired,
3. Cost of Sales and 5. Upside Analysis
Penetrated)
Spans of Control


1. MAP Analysis – Are We
Growing Where We Should Be?


A growth MAP is a critical first step in
understanding whether growth is occurring where
and how you planned.
A Sales Growth MAP

$620 $10,720
$10,000 Churn
$2,450

$(7,650)
SALES ($000)

Last Year’s Maintenance Acquisition Penetration This Year’s
Sales Sales

$3,407

M A P
Calculation detail:
$7,650 Maintenance sales ÷ baseline period sales of $10,000 = 76.5% Maintenance
$ 620 Acquisition sales ÷ baseline period sales of $10,000 = 6.2% Acquisition growth
$2,450 Penetration sales ÷ baseline period sales of $10,000 = 24.5% Penetration growth
107.2% total sales growth


Building A growth MAP requires customer level
performance data.


MAP can provide some meaningful insights…


…and can be useful for benchmarking and decision
making about how to adjust one’s sales model.


Incorporating profitability provides an added level
of insight far more useful than volume alone.
Incorporating Profitability into the Sales Growth MAP

$620 $10,720
$10,000 Churn
$2,450
SALES ($000)

$(7,650)

Last Year’s Maintenance Acquisition Penetration This Year’s
Sales Sales

$3,407

M A P
Calculation detail: Growth Source Growth Category Profitability
Last year’s sales of $10,000 “Baseline”
$7,650 Maintenance sales ÷ baseline period sales of $10,000 = 76.5% Maintenance $2,180 in Maintenance profit dollars = 28.5% profitability
$ 620 Acquisition sales ÷ baseline period sales of $10,000 = 6.2% Acquisition growth $ 140 in Acquisition profit dollars = 22.5% profitability
$2,450 Penetration sales ÷ baseline period sales of $10,000 = 24.5% Penetration growth $ 884 in Penetration profit dollars = 36.1% profitability
107.2% total sales growth $3,204 in profit dollars (M+A+P) = 29.9% profitability on this year’s sales


2. Capacity vs. Opportunity
Analysis


Sales Capacity in the Context of Growth Capability

Market Factors Total Market Size

Target Market Size

Needs for Offering
Competitive Share and Churn
Accessible Market
Growth
Organization Factors Capability
Market Targets Channel Coverage
Factors

Sales Strategy Segmentation Coverage Sales Org. Coverage
and Strategy Design
Historic Growth Marketing, Service Coverage
Sources

Alignment with Sales Availability
Strategy and
Coverage Performance Sales Sales Process Workload (E+D)
Management Capacity Workload Adjusted Close Rates
Compensation,
Quotas, Metrics


Business Case Parameters
Customer provided:
• Account and rep data for the 2 districts
• Call frequency and call duration values
• Current territories assignment
• Target work for each territory = 1,696 hours per year

TerrAlign
• Geocoded each store and rep record
• Calculated travel time estimate and work for each store using TerrAlign 4
software and Drive Time Network
• Work = call frequency x (travel time estimate + call duration)
• Optimized territories within district boundaries balancing on work
• Manually reviewed and fine tuned territories
• Compared current and optimized alignment

14 Copyright © 2010 The TerrAlign Group. Used with permission by The Sales
Management Association. All rights reserved.

Travel Time Reduction
Optimizing territories reduced travel time creating the following benefits:

Travel time reduction
• NE decreased by 5.2%
• SE decreased by 4.7%
• Total savings on mileage = 11,960 miles x $.50 = $5,980

Increased available call hours
• NE increased by 1.6%
• SE increased by .6%
• Total value of increased call hours = $100,000 x 2.2% = $2,200


Over/Under-Capacity Issues and Costs
Optimizing Territories Improves Overall Balance
• Over-capacity means that the reps can’t make all
planned calls
• Under-capacity means that reps can make more calls
• Target for each territory is 1,696 +/- 10% hours per
year
1,526 – 1,866 hours per year


Over-Capacity Issues and Costs
Optimizing Territories Improves Overall Balance

CURRENT ALIGNMENT OPTIMIZED ALIGNMENT

• 6 territories over 110% of target • 2 territories over 110% target
• 877 total hours above 110% • 59 total hours above 100%
• Value = $51,733 • Value = $3,466
• Improvement of 818 hours and
$48,267

TOTAL ROI
Mileage saving ($5,980) + increased call time ($2,200) + over-capacity
improvement ($48,267) + under-capacity improvement ($43,266) = $99,713


Ways to Improve Capacity
Over-capacity
• Add reps
• Move reps from under-capacity areas to over-capacity areas
• Reduce call frequencies
• Reduce call durations
• Remove stores from coverage
Under-capacity
• Reduce reps
• Move reps from under-capacity areas to over-capacity areas
• Increase call frequencies
• Increase call durations
• Add additional stores to coverage


Territory Opportunity vs. Rep Capacity & the
Impact on Incentive Compensation
Opportunity by Territory Average Opportunity
Rep capacity
4,000

3,500

3,000

2,500
Opportunity

2,000

1,500

1,000

500

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Territories


Costly Resources
Average Opportunity
Opportunity by Territory Rep capacity
Lost Opportunity
4,000

3,500

3,000

2,500
Opportunity

2,000

1,500

1,000

500

0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Territories


The Inverse Bell Curve
Imbalanced Territories Create Over and
Underperformers, Regardless of Talent
Distribution of Attainment

25
% of Sales Force

20

15

10

5

0
50 60 70 80 90 100 110 120 130 140
% of Quota


Improved Balance and Workload

Opportunity by territory

2000
1800
1600
1400
Opportunity

1200
1000
800
600
400
200
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Territories


The Desired Outcome
Balanced Territories Lead to Expected Incentive
Compensation Costs, Aligned with Revenue

Distribution of Attainment

25

20
% of Sales Force

15

10

5

0
50 60 70 80 90 100 110 120 130 140 150
% of Quota


Optimizing Territories Creates Predictable
Incentive Compensation Costs
Planned Incentive Comp Cost Actual Incentive Comp Cost

200 reps x $1M quota = $200M 100 reps x $75k var = $7.5M
(not always attainable) + 100 reps x $150k = $15M

200 reps @ $200k OTE = $40M $22.5M IC Spent
50/50 Base vs. Variable = $100k/rep

$20M IC planned

Same Revenue - $2.5M Over-spent on variable incentive comp


3. Cost of Sales Analysis and
Spans of Control


How many of you have
reviewed your Cost of Sales
and Spans of Control recently?


Questions to Ask When Optimizing

Cost of Sales Spans of Control
• Are we spending enough on • Are spans appropriate given the
New vs. Retained business? nature of the role (transactional
• Is our spend aligned with vs. strategic)?
revenue and profit potential? • Do spans reflect the experience
• Are our costs variable enough? level of direct reports (e.g. larger
with tenured reports)?
• Should we be spending more
in alternate channels? • Do clearly understand how we
want managers to interact with
• Is the cost curve to our benefit; direct reports and the time
do returns increase as we requirements of interactions?
invest more?
• Is our spend competitive?


Despite the diminishing influence of wholesalers
on demand, our investment is wholesaler centric.

Division Dep.% Field On-Prem Off-P Corp. Total
Northeast 17% 26 2 5 1 34
North Pacific 15% 25 2 4 1 32
South Pacific 14% 20 2 12 1 35
M id-Atlantic 14% 21 2 5 1 29
Southeast 12% 17 2 8 1 28
Central 10% 22 3 7 1 33
Southwest 9% 14 5 10 1 29
Rocky M ountain 8% 18 1 4 1 23
Grand Total 100% 162 19 54 9 244
% of Total 66% 8% 22% 4%

66% of all Sales headcount is in Field Sales, focused on wholesale execution, where just 8% and 22% are
focused on demand generation at On-Premise and Off-Premise, respectively


Offices are staffed largely the same; spans of
control vary little by Division (e.g. Oppty)
FTE Equivalents by Division - 2009
30 29
Frontline Sales
28
27
27 Operations Mgmt
Sales Mgmt
25
24 24
23

19
20
Number of FTE equivalents

15

10

5 5
5 4 4 4
4 3 4

1 1 1 1 1 1 1 1

0
Northeast North Pacific South Pacific Mid-Atlantic Southeast Central Southwest Rocky Mountain


And, the current investment in sales resources are
not aligned with volume
Sales Costs (TCC & T&E), Headcount & Depletions - 2008
$4,000,000 30,000,000
34 35
Sales Costs
32 33 Depletions (Case Eqs)
$3,500,000
29 25,000,000
28 28

Total Depletions (in Case Equivalents)
$3,000,000

24
Total Sales Costs (TCC & T&E)

20,000,000
$2,500,000

$2,000,000 15,000,000

$1,500,000
10,000,000

$1,000,000

5,000,000
$500,000

$- 0
Northeast South Pacific North Pacific Central Southwest Southeast Mid-Atlantic Rocky
Mountain


4. Analysis of Territory Gains


More than half the sales force is not generating
net new revenue.


This analysis can be revealing, particularly when
cut to reveal

• Customer Segments
• Types of Accounts/Customers
• Products
• Geographies/Regions


5. Upside Analysis


What is Upside?

% Of Target Compensation

100
60
20
10
100% 30
50

90
70
50 Upside
Target Incentive

Extent of Mix and Upside Potential Base Pay

Low High
Prominence of Sales Person


Why is Incentive Mix Important?

Incentive Proportion Impact

< 10% Minimal to none
10% to 15% Performance reminder
16% to 25% Directional
26% to 40% Highly directional
> 40% Independent action

The higher the proportion in incentive, the greater the impact on behavior


Setting Upside Levels

1. Understand today’s distribution of performance
2. Determine at what level to set the excellence point, typically the upper 10th
percentile of performance
Distribution of Performance
e
Incentive nc
lle
ce
Ex
Frequency Cap

Target
A
Fixed
Pay
B

Threshold Target Maximum
Threshold Target Maximum
80% 100% 120%
80% 100% 120%
Percent of Goal


Two Ways of Providing Upside
The earnings opportunity above total target compensation for outstanding performance

“Progressive”
Typically…
Unlimited Each sale is more difficult
No cap $ Additional sales are very profitable
“Progressive” Pay discrimination is desired

Volume

“Regressive” Typically…
Limited Each additional sale is easier
Maximum (cap) To avoid windfalls; runaway earnings
Reduced $ Excessive sales are unprofitable
opportunity
Similar pay treatment is desired

Volume


Upside Is Defined Differently at Times

“Double” Leverage = Opportunity for an additional 1x of target
incentive is available for above target
performance

“Triple” Leverage = Opportunity for an additional 2x of target
incentive is available for above target
performance

Be careful: it is common for companies to have their own interpretation
of what leverage means – make sure you compare apples with apples.


Examples of Upside
Target Compensation = $50,000

Double Leverage (1x)
Total Target Target Target Upside Excellence
Compensation Mix Base Salary Incentive Opportunity Pay
$50,000 80 / 20 40,000 10,000 10,000 60,000
$50,000 70 / 30 35,000 15,000 15,000 65,000
$50,00 50 / 50

Triple Leverage (2x)
Total Target Target Target Upside Excellence
Compensation Mix Base Salary Incentive Opportunity Pay
$50,000 80 / 20 40,000 10,000 20,000 70,000
$50,000 70 / 30 35,000 15,000 30,000 80,000
$50,000 50 / 50


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