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Design, Communicate And Assess Your Sales Incentive Plan S Bardot 2010
- 2. Outline
2
Design
Linking design to company strategy
Categories of targets
General compensation aspects
Compensation perspective on retention
Other checkpoints for design
Design ownership
Some considerations on operations
Communicate
Communication objectives
What you need for effective communication
Content of plan communication
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- 4. Sales plan design
4
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Linking design to company strategy
Categories of targets
General compensation aspects
Compensation perspective on
retention
Other checkpoints for design
Design ownership
Some considerations on operations
- 5. Linking design to company strategy
5
You want to :
Beyond revenue and profitability, examples of
desired business results :
Manage a major portion of sales costs by linking selling
success directly with compensation expenditures
Drive top and bottom line performance
New product / service offering
Finding new accounts or retaining existing ones
Focus on major accounts
…
Centralized approach vs. plans developed by
Business Units ?
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- 6. Categories of targets
6
Incorporate some non-financial metrics ?
Customer-centric
Behaviours and activities related
Consider length of sales cycle
Customer type (one-off consumer sale, repeat BtoB
customer, direct sales or channel sales...)
How do you encourage team targets ?
If financial : Who receives it ? How do you measure
it ? Is it included in the bonus or on top of it ?
If non financial : What form will it take (e.g : a day out,
a prize) ? Who gets it ?
How do you emphasize and publicise team
achievements ?
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- 7. General compensation aspects
7
Competitive pay position vs. market
Define the acceptable level of risk (ratio
fixed/variable pay)
Security vs earnings expectancy
What is the sales prominence and difficulty ?
Earnings limitations ?
Link payment frequency to length of sales cycle
If it’s important, reward it through your plan
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- 8. 8
Compensation perspective on
retention
Build a comprehensive compensation and reward
system :
Car policy
“Challenges”, competitions
Qualitative bonus ?
“Stay-in” reward ? Stock options ?
Pension, medical coverage, other fringe benefits
Presidents’ Club
Recognition, formal and informal
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- 9. Other checkpoints for design
9
Keep it simple !
Test against “what if” scenarios.
Line of sight – have goals that are credible to the
sales force
Look for any unintentional behavior generated by
the plan
Have a formal escalation path and process for the
management of exceptions
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- 10. Design ownership
10
How to design your plan :
Internal design :
Leverage collaborative efforts of Management, Finance,
Sales and HR
Get buy-in
Time-consuming, power games
Outsource to consultant :
Reduce the workload internally
Get external expertise
Could “miss” some important cultural aspects, cost
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- 11. Some considerations on operations
11
How to run your plan :
Build, maintain and operate internally
Very adapted to your unique needs
Inflexible and hard-coded homegrown systems are often
expensive to run and require lots of manual feed
Buy some external software and customize it
Fast, easy and predictable
The risk is to redesign your processes to fit the software – it
should be the other way around !
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- 13. Communication objectives
13
Multiple vehicles / venues / communicators
Employees understand strategy and how the plan ties to it
Focus on behaviors that will lead to individual success
Make it personal
What if scenarios for employees in a learning
environment : provide a simulation tool
Show a mock up of how the results will be
communicated at the end of the fiscal year
Ensure consistency of data between tracking tool and
performance measurement/payout calculation tool
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- 14. 14
What you need for effective
communication
Have a roll-out plan
Focus on key milestones & deliverables of the
plan
Ensure you have senior management buy-in to
your change approach and communication
materials
Request sample employee feedback before the
roll-out to adapt your documents to their questions
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- 15. Content of plan communication
15
Reference materials :
Presentation materials and training aids:
Statement of corporate compensation philosophy
Detailed incentive plan description (including examples)
Policies and territories management
Plan Participant Approvals
Executive overview presentation
Question and answer document
Simulation tool (performance tracking and payout simulation)
On-going communication tools :
Email teasers about different components of the plan
Best practices sharing…
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- 17. Plan members feedback
17
Conduct employee focus groups to know how
they react to the plan.
Top 3 reasons why plans need improvement
Managers
Inadequate line of sight to individual effort
Payout/pay insufficient
Insufficient tie-in to individual performance
Employees
Inadequate line of sight to individual effort
Poor payout history
Plan design complicated or inadequately communicated
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Source : Hay
- 18. General considerations
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“Wear & tear” effect in terms of motivation of
the sales employees
Evaluate the plan over a period of time to see
if it drives the desired sales behaviors and
goals
The maximum life span of a plan should be
5/6 years
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- 19. Two approaches for plan
assessment
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Employer analysis :
Cost and profitability
Sales outcomes vs. goals,
Drive desired behaviors ?
Customer retention and attraction…
Employee analysis :
Internal pay equity
Quota & goal attainment difficulty
Total pay levels vs. expected at individual level (compare to
historical payouts)
Perceived competitiveness of plan (external equity)…
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- 20. Example of ratios to track
20
In parallel, analyse :
Sales goal vs actual performance
And target vs actual pay
This will check alignment between the degree of
attainment of company goals, and resulting payment
for participants
Payout distribution :
For good motivation effect, 60 to 70% of population
should reach 100% or more of their quotas.
Ensure top performers are paid at 90th percentile of
the plan
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- 21. Free resources from my blog
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http://compensationinsider.com/7-steps-to-compensation
http://compensationinsider.com/analyse-my-sip/
http://compensationinsider.com/why-am-i-not-on-the-sal
http://compensationinsider.com/why-the-sales-director-h
http://compensationinsider.com/prospecting-orexisting-customers-what-do-you-focus-on-in-yoursales-incentive-plan/
© 2013
- 22. Thank you !
22
+971 566 172 864
Sandrine@Compensationinsider.com
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