By: Emilia De Simone, Director, Consulting Services

In the face of a highly competitive business environment, increasing the effectiveness of your sales force can significantly improve the financial performance of your organization. How do you improve sales force effectiveness? There are many moving parts that ultimately combine to form a sales organization which is driven to succeed. The following is an overview of some of the moving parts:

1. Clear and Well-Communicated Business Direction and Sales Strategies
   • A sales organization cannot perform effectively without understanding the business objectives and sales strategies of the organization. Many organization do not invest in the time and effort required to communicate company direction and business priorities. This creates confusion among the sales force in that they cannot make the connection between the intent of supporting programs and processes and what the organization requires from their efforts.
2. A Sales Organization Structure Aligned with the Objectives of the Business
   • To be effective a sales organization must have clearly defined roles and responsibilities that align with the sales activities required from the field. The sales organization structure should take into account market and channel objectives addressed in the sales strategies; product and account management strategies; how business development will be addressed; the technical or sales support required; etc.
3. A Sales Compensation Plan that Drives the Right Behaviours
   • Sales compensation should support your business model and essentially be aligned with the goals and sales strategies of the organization. An effective sales compensation plan should communicate what you value as an organization and where you want sales people to spend their time and effort. Sales compensation costs can be very costly to an organization; ensuring you have the right sales compensation plan and performance metrics in place that drives the right sales behaviours is essential for financial success.
4. Defined Sales Processes and Performance Management Practices
   • Once you have identified plan performance measures it is essential to have sales processes in place which enable efficient tracking and monitoring of performance. Further, identifying performance issues early in the performance year enables management to address concerns and coach staff to ensure financial expectations are met.

While everyone is looking back on 2009 and reminiscing about what has happened in the past year, I thought that it has limited relevance for 2010. From a business perspective, most companies would love to forget 2009 as a time of restructuring, downsizing, re-strategizing or worse yet closing down. Rather, I - being a serial optimist - would like to look forward and present a few proactive thoughts about things that readers can do to constructively influence the performance and results for next year.

Critical to sales success in 2010 will be the need to drive new business growth and account retention. Further, ensuring that salespeople achieve or exceed their targets is also paramount to climbing back to the performance levels that preceded last year's recession. Having said this, sales management is usually not about personally delivering sales, but rather creating the environment that allows salespeople to be successful. How then do we do this for 2010?

First, you have to step back from the minutia, issues, customers etc. and look at the bigger picture. If you could fast forward to December 31, 2010, what would that look like? Creating that vision for yourself and your staff is essential for setting goals and objectives that are realistic and achievable. Further, having the end point sets expectations and allows people to strive and celebrate when they are reached.

Some additional elements of managing for success in 2010 are:

• Preparation - For the next few weeks/months we will still be somewhat in retrenched mode (although with the New Year will hopefully come new budgets and decisions to spend) with some time available. Use this time to prepare and position your sales force for success. What do you need to do to remove roadblocks to sales execution or provide the tools for salespeople to sell more effectively? This might include information, resources, templates or training. Having a competent sales force has been proven to be the greatest factor in developing sustained competitive advantage.
• Focus - Salespeople by their nature are positive and well meaning when performing their work. They have to be to deal with the rejection and frustration that often comes with performing in the sales environment. However, if their activities are unfocused and scattered, they will not achieve optimal performance and their level of frustration will escalate. Assist them in creating focus both through better direction on where to spend their time and effort and through sales incentives and compensation that reward them for delivering on the things that you value and want to pay them for delivering.
• Channel Strategies - Clarity in articulating which sales channels and activities are strategic to delivering the sales vision for 2010 will assist salespeople to behave and execute actions that will increase expected outcomes and elevate close ratios.
• Planning - Most customers have fewer people who can interact with salespeople on a regular basis, which means, unless it is a large/major account with dedicated resources, the amount of time and influence that your salespeople have with the customer is less than it was in the past. This means that with limited opportunity, their information content, presentation and solution to meet the needs of the customer better be spot on, or you will be in trouble. Therefore, more time on planning, assessment of the customer and their situation as well as quality in the alternatives, selection of the preferred alternative to offer the customer and how and what is presented will determine your success.
• People - Getting performance and successful execution from its people is the only way for an organization to achieve targets and expectations. What do your people need to be successful in 2010? They need clear direction, performance management, proper incentives and rewards, coaching and mentoring to improve delivery and they need good management.

While all of this might sound like common sense and the "motherhood and apple pie" of management, we rarely allow ourselves to sit down and address these needs in a way that not only aligns with the business but translates into changes in behavior and sales activity. Instead, we prefer to be busy rather than effective.

If you believe in it are taking a few moments to set some resolutions for the 2010 New Year as I am, resolve to be a better manager and leader through thoughtful realization of the things that are within your control.

All the best for a happy and prosperous New Year.

By: Matt Tyre, Director, Client Services

Game planning your incentive compensation program is very difficult in a fluctuating economy; it's hard to predict whether the economy will steadily climb or have some setbacks for 2010. So, how does this impact your program?

You can protect your company, customers and employees by instituting policies and providing increased communication to your sales force. These protective measures are important to all parties involved in the compensation process.

What you can do is introduce legal terms and conditions in the plan document to sales people and ensure that the company reserves the right to adjust targets where necessary. Assessing and establishing targets is very difficult in the most stable sales environment. Therefore, when the market is in a state of flux, it is even easier for the company to miss, and either set targets too high or low. Communicating to your sales people upfront that the company has a right to make changes if required avoids issues with your sales people questioning why the targets are changing in the future. Of course, this could impact a sales person's compensation payout negatively in their eyes. However, as a company you are protecting your sales person from under payouts if the targets are set too high in a flat economy. The protection for the company, in this case, is against large win-falls for sales people if targets are set too low and the economy corrects itself and shows in the positive territory for 2010.

You don't want to de-motivate your sales force with the wrong incentive plan. This will impact how they interact with your customers. These cases can be avoided by simply stating a policy to change the targets to appropriate levels as required. The message can still remain positive in the communication to ensure there is buy-in to the new policy. Leaving the company open to potential issues with your incentive compensation program can be very costly.

By: Matt Tyre, Director, Client Services

I had a lengthy discussion today with a company about the differences between a rewards program versus incentive program. I decided to write about it as i thought this might help others who would like to know the difference between these closely-related programs.

The two types programs are listed below with differentiating factors and examples to help paint a more vivid picture.

1. Rewards Program
• Is a type of incentive that is typically an annual or longer-term program
• Usually results in a onetime bonus payout at the end of the year
• Doesn't greatly impact daily behaviour
• Example: Bonus on annual company performance
• Provides a longer term line of sight
2. Incentive Program
• Are types of compensation that track, and payout, for short-term performance (bi-weekly, monthly, quarterly)
• Payouts are recognized upon achievement of the measure
• Typically bonus and/or commission
• If designed and communicated efectively, they can greatly impact daily behaviour
• Example: Monthly commission on margin with a modifier on new accounts
• Provides a clear, short-term line of sight that can be impacted by daily activities. This incentive tells the sales person to meet margin performance objectives that they can impact and focus on new accounts. When properly communicated, sales people know where to spend their time and effort.

These programs provide two very different sales cultures within an organization. Your industry vertical, regional location and/or your existing sales culture, would also help define which program is better suited to your company.

By: Matt Tyre, Director, Client Services

In the mind of great sales people you may think that compensation is the primary driver in attracting, motivating and retaining their talent. I was in discussions with a Sales Executive recently and we were talking about what would attract a sales person at the senior management level to make a move from their current position. To be honest, I was not shocked to hear that monetary compensation was not their only motivator. Looking at a balanced total reward mix (compensation, benefits, recognition, work life balance, and career development opportunities) was more important to experienced sales people. Younger, less experienced sales people will typically look at money as the main attraction. Senior sales people seem to be more selective on what will attract them to make a move or stay with their current organization.

Here are some key motivators that came up in my conversation:

1. Work flexibility - working from home and flex hours
2. Less travel
3. Reduced distance from home to the office
4. Other monetary benefits - stock options, deferred profit sharing programs
5. Desire to have a leadership role
6. Willing to take slightly less in monetary compensation if some of the above concessions can be made.

You can see that work life and career-advancement opportunities seem to play a prevalent role in the discussions, more so than money. Sure, if you're offered an obscene amount of money most sales people will strongly consider the option, however it just goes to show that money doesn't by happiness and that to get great sales people to work for your company you must look at the total reward mix to attract them.

If you are in a senior management role, what would motivate you to make a move?

Sales compensation programs need to have consistency across an organization as a whole. Typically a framework is developed to create the alignment across multiple business units and within the job functions. With this approach you provide the individuality that each business unit needs, but holistically the company has a similar structure in their comp plans.

There are two levels in the framework process. First is looking at the company as a whole and then looking at each business unit's:

• Business Goals and Objectives
• Strategies
• Tactical Execution and;
• Key Performance Metrics

The second level is taking this information and looking at the key elements in each business unit. Some elements included in Sales Compensation Frameworks:

• Sales Roles
• Pay Mix
• Metrics for Measurement
• Performance and Payout Frequency
• Individual/Team Measurement

When designing a framework you can take a basic excel spreadsheet and build a table. The table should be presented in a way that you can compare the jobs and the differences in mix, individual or team metrics, and the performance and payout frequency. When you build your framework you should see some consistency in some of the measure/metrics, except the variability by role and level of responsibility. An example would be to have a sales rep focused on individual gross margin sales and a manager being rewarded on the sum of all sales for their sales reps and for their region in gross margin sales. The consistency in the design will unfold and should ultimately tie back to the business goals and objectives for the company and their business unit.

By: Matt Tyre, Director, Client Services

Every year Sales and HR organizations invest time to develop incentive programs for their sales people with positive intentions. Here are three situations that can arise and result in negative impacts on the program.

1. Rolling out compensation plans late
2. Communicating plans poorly
3. Complicated or incorrect plan design

Rolling out plans late in the year
What are the most common reason that plans are rolled-out late? Well, as sales compensation administrators might tell you, it is often the decision making process that stagnates the green light for plan approval. The approval process in some organizations has to go through multiple departments and levels of management, which slows down the communication of the plan to the sales force. Issues could also stem from target setting, to the lack of urgency. Some sales organizations don't connect the level of importance of the sales compensation program as the direct link to supporting the sales strategies. The impacts of a plan being rolled out one-month late, for example, is that your sales people lacked reinforcing direction for one-twelfth of the year that should drive the behaviors the company is expecting. One-month's lack of focus equals trickle effect number one.

Poor communication is common
The communication of a plan is as important and the design itself. It needs to be clear, understood and positively reinforced so the impacts produce the desired results. Consider this, for example, a new plan is rolled out and the sales people have not bought into the plan. It is beginning to create negative behavior within the organization. This behaviour runs juxtaposed to the original intent of the incentive program and creates an inefficient working environment. It is hard to measure the impacts of a mass exodus of sales people and customers hearing negative condemnation of the company. However, such could be the result of trickle effect number two.

Complicated or incorrect design leads to a myriad of issues.
Finally, a simple plan that can be understood easily by a sales person will deliver desired results. A complicated plan that confuses a sales person will create no behavioral change and in turn is a waste of resources - both time and financial - to the organization. If you want your sales people to focus on sales of widgets, pay them for widgets sales. If they can impact margin, incent them to focus on margin. Metrics that are key foci for sales management, that you want to have your sales people focus on, must be within their ability to impact. For example, many organization want to focus on margin, but if the sales person in unable to impact the result, it shouldn't be in their plan. Build plans that are within the sales persons' control, where they have the ability to influence the results and recognize a reward. Poor results stem from a lack of focus, and lack of focus stems from complicated incentive plans. This illustrates trickle effect number three.

The trickle effect theory outlines that each time a negative-reinforcing element in your sales incentive compensation plan occurs, it happens at a a cost to the business. The goal is to avoid these mistakes to ensure an effective incentive program and achieve desired results. When incentive compensation is managed effectively and is supporting the strategies of the company, positive results ensue.

Tomorrow's blog: Incentive sales compensation, burden or blessing?

By: Matt Tyre, Director, Client Services

This week I had the opportunity to work with one of our customers in the software industry on a sales incentive compensation plan for a new hire. In designing a plan we assessed many elements of the role and the anticipated impacts on the business. I thought it may help others out there trying to find simple ways to learn how to design plans. Here is a high level, 10-step approach!

1. Have a company framework - a framework provides consistency in the plans for the company, from a communication and design perspective. This should include consistent measures/focuses so all your sales people are rowing in the same direction.
2. Establish the Role - In this case it was an entry-level, New Business Development role, or in simple terms, a Sales Rep. When establishing the role we know the nature of the position; where a Sales Rep is a hunter, and the Account Manager being a farmer.
3. Establish Target Total Compensation (TTC) - Look at market data to establish what the job is worth and what the business can afford. Also, audit the current compensation pay structure for current employees, so you are providing fair and equitable pay for performance.
4. Establish your mix (eg. 50/50) - The mix is how much of your total target pay is base and how much is target incentive. When setting up the mix for the role recognize the impacts of higher or lower base salaries it will help in establishing the performance and payout frequency for your sales people.
5. Establish the key metrics and measure of performance for the role - The metrics should be measurable and link back to the objectives and strategies of the company. If a company is quite simply looking at revenue figures, than a metric for gross margin dollars doesn't link back.
6. Establish the type of incentive(bonus, commission, MBO) - Depending on the role, sales life cycle, individual or team performance, etc. a bonus or commission may apply more appropriately in the defined performance measures. In setting up your measures look at individual and team performance. In this case, we looked at a very simple individual performance metric of revenue and applied a single fixed commission.
7. Establish the performance and payout frequency - This was important as we increased the frequency to accommodate the cost of living and having a lower base salary and being paid out on incentives quarterly was to long of a period. We increased the pay and performance periods to monthly.
8. Set targets - Set realistic targets that can be achieved by at least 70% of your sales people. If you set stretch targets that are unachievable you are driving the wrong behavior with your sales people. When you look at target setting you can look at previous year's performance in the territory or if the person has been with the company for while you can look at the trending numbers to set proper targets.
9. Set Commission rates - look at the profitability of your business to establish how much you can pay and still reach the profit level you are trying to achieve. Also, consider what the market is paying and if it applies to your business.
10. Costing/Modeling - how much will this plan cost the business if the sales person hits x%? Run the numbers against previous year's data to see if their performance is the same as last year; what will it cost?

After constructing the plan in an hour, the President of this software firm presented the plan to the candidate and they start next week! Our customer is happy, and so is their new employee.

Hope these simple guiding principles help to design your own sales compensation plans!