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Entrepreneur’s Toolkit : www.marsdd.com/entrepreneurs-toolkit.html HR Workbook 1: Building an A-Team HR Workbook 2: Compensation HR Workbook 3: HR at Work Creating an HR plan: Butteriss on human resources Building HR processes, policies and procedures Compensating employees Hiring your friends: Is it such a good idea? Video: Human Capital: Building high performance teams Video: Human Resources Management

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Best Practices HR Series Finding, Managing and Compensating Your Sales Team Effectively

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Agenda <ul><li>Why must companies pay attention to the sales function? </li></ul><ul><ul><li>Focus on the impact to the business. </li></ul></ul><ul><li>Tips on hiring and managing sales. </li></ul><ul><ul><li>Sales DNA; knowing what you need and then finding it. </li></ul></ul><ul><ul><li>Tips on managing sales teams for effective results. </li></ul></ul><ul><li>Sales Compensation </li></ul><ul><ul><li>Strategy Design Implementation Evaluation </li></ul></ul><ul><li>War stories and lessons learned. </li></ul><ul><ul><li>Sharing real stories from the field - what worked, what didn’t. </li></ul></ul>

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Why companies need to pay attention to the sales function…. <ul><li>One assumption: </li></ul><ul><ul><li>Your business needs to make money! </li></ul></ul><ul><ul><li>If so, then this topic is of critical importance. </li></ul></ul>

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Revenue Stream Cost to create revenue Margin

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Revenue Stream Cost to create revenue Margin Deal structure will drive the amount of margin. Margin Margin Sales Rep. will use ALL of these levers to close the deal.

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<ul><li>Costs associated with each new sales hire: </li></ul><ul><ul><li>Salary </li></ul></ul><ul><ul><li>Travel </li></ul></ul><ul><ul><li>Additional staff (SE’s) </li></ul></ul>Revenue Stream Cost to create revenue Margin Selling costs will further impact margin. Margin <ul><li>Sales Compensation Plan Design: </li></ul><ul><ul><li>Poorly set quotas </li></ul></ul><ul><ul><li>Multi-layered sales teams </li></ul></ul><ul><ul><li>Commission payment triggers </li></ul></ul>

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Sales DNA <ul><li>Hunter </li></ul><ul><ul><li>Will sell what product you have now </li></ul></ul><ul><ul><li>Will sell what is easiest </li></ul></ul><ul><ul><li>Will drive to close deals </li></ul></ul><ul><ul><ul><li>Will use and overuse every lever available </li></ul></ul></ul><ul><ul><li>Will continually hunt out new business </li></ul></ul><ul><ul><ul><li>So will not focus on post-sales activities </li></ul></ul></ul><ul><ul><li>Will place lots of demands on your team to respond to customers wants/needs </li></ul></ul><ul><li>Compensation Features </li></ul><ul><ul><li>Higher ‘at risk’ pay </li></ul></ul><ul><ul><li>Incentive based on quotas </li></ul></ul><ul><ul><ul><li>Revenue targets, or margin targets </li></ul></ul></ul>

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<ul><li>Farmer </li></ul><ul><ul><li>Will milk additional sales from existing accounts </li></ul></ul><ul><ul><li>Will not seek new accounts </li></ul></ul><ul><ul><li>Will use levers to drive repeated sales </li></ul></ul><ul><ul><li>Will operate more autonomously </li></ul></ul><ul><ul><li>Will have more focus on post-sales support </li></ul></ul><ul><ul><ul><li>Values ongoing customer relationship </li></ul></ul></ul><ul><li>Compensation Features </li></ul><ul><ul><li>Lower ‘at risk’ pay </li></ul></ul><ul><ul><li>Incentive based on quotas </li></ul></ul><ul><ul><ul><li>Revenue targets, or margin targets </li></ul></ul></ul><ul><ul><ul><li>More support/service revenues targets </li></ul></ul></ul>Sales DNA

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<ul><li>Business Development </li></ul><ul><ul><li>Focus on early engagement & evangelizing </li></ul></ul><ul><ul><li>Usually has a more technical background, or extensive sector experience </li></ul></ul><ul><ul><li>Focused on building relationships; influencing strategic decisions </li></ul></ul><ul><ul><li>Selling product and ideas at multiple levels </li></ul></ul><ul><ul><li>Not driven to close a deal </li></ul></ul><ul><ul><ul><li>Relationship focused </li></ul></ul></ul><ul><ul><li>Usually after a target list of customers or partners </li></ul></ul><ul><ul><ul><li>May focus more on the ‘big fish’ </li></ul></ul></ul><ul><ul><ul><li>Not uncovering every stone for new accounts </li></ul></ul></ul><ul><li>Compensation Features </li></ul><ul><ul><li>May have no incentive, or low ‘at risk’ pay </li></ul></ul><ul><ul><li>Incentive based on pre-sales milestones </li></ul></ul><ul><ul><ul><li>MOU’s </li></ul></ul></ul><ul><ul><ul><li>Trials </li></ul></ul></ul><ul><ul><ul><li>Partnering agreements </li></ul></ul></ul>Sales DNA

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<ul><li>Channel Management </li></ul><ul><ul><li>Focus on developing sales through 3 rd party channels </li></ul></ul><ul><ul><li>Not focused on direct sales </li></ul></ul><ul><li>Compensation Features </li></ul><ul><ul><li>May have no incentive, or low ‘at risk’ pay </li></ul></ul><ul><ul><li>Incentives based on revenue quotas achieved through channel partners </li></ul></ul><ul><ul><li>Layered commission - $$ to channel manager & to channel partner </li></ul></ul>Sales DNA

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<ul><li>Very difficult to find one individual with multiple Sales DNA styles </li></ul><ul><li>HOWEVER – as company’s needs change – you may need different sales DNA </li></ul><ul><ul><li>Very expensive to have the wrong sales person in place </li></ul></ul><ul><ul><li>Not just $$$, but highly distracting to the business and the team </li></ul></ul><ul><li>Must be prepared to make changes as necessary </li></ul>Sales DNA Challenges

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How to hire the RIGHT sales person…. <ul><li>STEP 1 </li></ul><ul><li>Know what you need to (or can) accomplish – the GOAL </li></ul><ul><ul><li>Amount and timing of revenues required in your business plan (has it changed!)? </li></ul></ul><ul><ul><li>Do you have something to sell…is the product ready? </li></ul></ul><ul><ul><li>Is there a loss leader product? </li></ul></ul><ul><ul><ul><li>To drive adoption; create footprint; establish relationships </li></ul></ul></ul><ul><ul><li>Do you need partnerships or sales or both? </li></ul></ul><ul><li>STEP 2 </li></ul><ul><li>Understand the SELLING ECOSYSTEM </li></ul><ul><ul><li>Is it a complicated sale? Are there multiple influencers involved? </li></ul></ul><ul><ul><ul><li>Can have organizations that create demand but will not buy your product </li></ul></ul></ul><ul><ul><ul><li>Can have organizations that will influence demand through technical standards, regulatory environment, etc. </li></ul></ul></ul><ul><ul><ul><li>Can have organizations that will buy your product, BUT will not buy directly from you and will only buy through partners or resellers </li></ul></ul></ul>

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How to hire the RIGHT sales person…. <ul><li>STEP 3 </li></ul><ul><li>Match the SALES DNA to the GOAL and the SELLING ECOSYSTEM </li></ul><ul><ul><li>This will also help in designing an effective sales compensation plan </li></ul></ul><ul><li>STEP 4 </li></ul><ul><li>Consider where the sales function should be located? </li></ul><ul><ul><li>Close to the customer </li></ul></ul><ul><ul><li>Close to a regional hub </li></ul></ul><ul><ul><li>Close to HQ </li></ul></ul><ul><li>STEP 5 </li></ul><ul><li>Create a description that reflects all of the above </li></ul><ul><ul><li>Review session on Recruiting your A-team for tips on sourcing candidates </li></ul></ul>

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Tips on successfully interviewing for Sales <ul><li>What to find out about the candidate: </li></ul><ul><ul><li>Building a pipeline </li></ul></ul><ul><ul><li>Success in closing deals </li></ul></ul><ul><ul><li>Post-sales focus (or not) </li></ul></ul><ul><ul><li>Sales team support needed </li></ul></ul><ul><ul><li>Quota results </li></ul></ul><ul><ul><ul><li>Types of deals (size of deals, number of customers, types of customers) </li></ul></ul></ul><ul><ul><ul><li>Hitting quotas </li></ul></ul></ul><ul><li>Remember that these are sales professionals – very adept at convincing you they can achieve anything </li></ul><ul><ul><li>Must validate their claims </li></ul></ul><ul><li>Understand their personal drivers </li></ul><ul><ul><li>Key to determining a good match </li></ul></ul><ul><ul><li>Will also help in designing an appropriate compensation plan </li></ul></ul><ul><ul><li>Doing a 2 nd interview is key; the candidate shifts from selling mode to asking mode </li></ul></ul><ul><li>Validate everything through references </li></ul>

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Managing Sales Teams Effectively <ul><li>Requires a lot of maintenance!! </li></ul><ul><ul><li>Set and monitor clear targets </li></ul></ul><ul><ul><ul><li>Quotas – revenues; margins; etc. </li></ul></ul></ul><ul><ul><ul><li>Milestones – must have meaningful value to the company </li></ul></ul></ul><ul><ul><ul><li>Continually monitor results & pipeline – test credibility and assign appropriate probabilities </li></ul></ul></ul><ul><ul><ul><li>Size of funnel 3:1 (depends on sector) </li></ul></ul></ul><ul><li>When results don’t happen – understand why </li></ul><ul><ul><li>Wrong DNA for type of selling needed </li></ul></ul><ul><ul><li>Market adoption of the product </li></ul></ul><ul><ul><li>Availability of GA product </li></ul></ul><ul><ul><li>Support to sales </li></ul></ul><ul><ul><li>Changes in technology, regulatory environment, standards, competitive landscape, etc. </li></ul></ul><ul><li>Remember it is difficult to get different sales DNA in one person </li></ul>

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Sales Compensation <ul><li>Linking the sales compensation plan to your business strategy </li></ul><ul><li>Establishing the design team </li></ul><ul><li>Assessing the existing plan (if required) </li></ul><ul><li>Designing the new plan </li></ul><ul><li>Implementing the new plan </li></ul><ul><li>Evaluating results </li></ul>

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Linking the Sales Compensation Plan to your Business Strategy <ul><li>Drive Desired Results: </li></ul><ul><ul><li>Sales objectives which support business plan </li></ul></ul><ul><ul><li>Building customer faith </li></ul></ul><ul><ul><li>Supporting revenue generation and profitability </li></ul></ul><ul><ul><li>Incenting achievement of short term and long term goals </li></ul></ul>

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Understanding the Strategy <ul><li>Who?- Customers/Dealers </li></ul><ul><li>What? - Specific Products & Services </li></ul><ul><li>When?- Sales Cycle </li></ul><ul><li>Where? - Competitive Environment </li></ul><ul><li>Why? - Profitability, market share </li></ul><ul><li>How? - By Customer? By Territory? by Product? </li></ul>

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Balancing Business Objectives <ul><li>In-year objectives </li></ul><ul><ul><li>Sales volume goals </li></ul></ul><ul><ul><li>Sales channel development </li></ul></ul><ul><ul><li>profit targets </li></ul></ul><ul><ul><li>% revenue growth </li></ul></ul><ul><ul><li>specific customers </li></ul></ul><ul><ul><li>specific products or services </li></ul></ul><ul><ul><li>penetration of new markets </li></ul></ul><ul><ul><li>keep salespeople focused </li></ul></ul><ul><li>Long term objectives </li></ul><ul><ul><li>Increasing shareholder value </li></ul></ul><ul><ul><li>sustained profitability </li></ul></ul><ul><ul><li>strategic customer or dealer base, customer loyalty </li></ul></ul><ul><ul><li>improved market share </li></ul></ul><ul><ul><li>product evolution </li></ul></ul><ul><ul><li>retention of salespeople </li></ul></ul>

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Balance Revenue and Profit <ul><li>Margins - requirements and flexibility </li></ul><ul><li>Meeting commitments to shareholders </li></ul><ul><li>Affordability of incentive plan </li></ul>

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2. Establishing the Design Team <ul><li>Sales & Marketing </li></ul><ul><li>Finance </li></ul><ul><li>HR </li></ul><ul><li>Legal </li></ul><ul><li>Possibly IT </li></ul>

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3. Assessing the Existing Plan <ul><li>Business goals and strategies – review and assess </li></ul><ul><ul><li>Costs and productivity </li></ul></ul><ul><ul><li>products </li></ul></ul><ul><li>Customers </li></ul><ul><li>Employees </li></ul><ul><li>Metrics </li></ul><ul><ul><li>Sales Productivity </li></ul></ul><ul><ul><li>Customer Service </li></ul></ul><ul><ul><li>Return on Compensation Investment (ROI) </li></ul></ul>

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Design Elements <ul><li>Eligibility </li></ul><ul><li>Mix/Leverage </li></ul><ul><li>Total Target Compensation </li></ul><ul><li>Performance Measures </li></ul><ul><li>Incentive Formulas </li></ul><ul><li>Formula features </li></ul>

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Eligibility <ul><li>Sales vs Non-sales focus </li></ul><ul><ul><li>Technical, Administrative staff etc. </li></ul></ul><ul><li>Team vs Individual </li></ul><ul><ul><li>Bonus </li></ul></ul><ul><li>Senior management </li></ul><ul><ul><li>Executive or Sales Compensation? </li></ul></ul>

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Compensation Mix/Leverage <ul><li>Factors influencing leverage: </li></ul>Leverage <ul><li>degree of sales focus </li></ul><ul><li>level of influence </li></ul><ul><li>management responsibility </li></ul><ul><li>administrative responsibility </li></ul><ul><li>customer service focus </li></ul><ul><li>product sales cycle </li></ul>+ -

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Total Target Compensation <ul><li>Determine Organization’s compensation strategy </li></ul><ul><li>Define job design and org structure </li></ul><ul><li>Slot employees into jobs </li></ul><ul><li>Collect relevant market data </li></ul><ul><li>Focus on Total target compensation </li></ul><ul><li>Create individual plans </li></ul>

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Performance Measures <ul><li>Performance Measures – Sales staff </li></ul><ul><li>Volume </li></ul><ul><li>Profitability </li></ul><ul><li>Strategic Objectives – MBO </li></ul>

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Incentive Formulas and Features <ul><li>Tie market data to the target incentive </li></ul><ul><li>Determine incentive payout </li></ul><ul><ul><li>Performance measures by job level </li></ul></ul><ul><ul><li>Weightings by job level </li></ul></ul><ul><ul><li>Accelerators by job level </li></ul></ul>

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Affordability - Cost Modeling <ul><li>Use financial ratios (profit margins by product, cost of sales etc) to determine affordability of plan design </li></ul><ul><li>Finalize Accelerators, Performance measures and weightings </li></ul>

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Terms and Conditions <ul><li>Eligibility </li></ul><ul><li>Transfers </li></ul><ul><li>Terminations </li></ul><ul><li>Split credits </li></ul><ul><li>House accounts </li></ul><ul><li>Territory or accounts changes </li></ul><ul><li>Foreign currencies </li></ul><ul><li>Pricing </li></ul><ul><li>Adjustments to payments </li></ul><ul><li>“ Out Clause” </li></ul>

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Implementation <ul><li>Communication Plan </li></ul><ul><ul><li>Explain any new or revised changes to plans </li></ul></ul><ul><ul><li>Updates on forecasting models, product, customer, employee changes </li></ul></ul><ul><ul><li>Individual meetings </li></ul></ul><ul><ul><li>Makes changes as required </li></ul></ul><ul><li>Administration </li></ul><ul><ul><li>Finance reports and payouts </li></ul></ul><ul><ul><li>Quarterly updates </li></ul></ul>

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Evaluation <ul><li>Back to step # 3 “Assessing the existing plan” Performance Measures – Sales Plan </li></ul><ul><li>Business goals and strategies – review and assess </li></ul><ul><ul><li>Costs and productivity </li></ul></ul><ul><ul><li>products </li></ul></ul><ul><li>Customers </li></ul><ul><li>Employees </li></ul><ul><li>Metrics </li></ul><ul><ul><li>Sales Productivity </li></ul></ul><ul><ul><li>Customer Service </li></ul></ul><ul><ul><li>Return on Compensation Investment (ROI) </li></ul></ul>

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Driving Behaviour – Keys to Effective Sales Compensation <ul><li>Setting pre-revenue sales targets – must be milestones that create significant value in the eyes of board/investors </li></ul><ul><li>Paying out incentives at end of year for more strategic roles: </li></ul><ul><ul><li>gives more opportunity to build revenue stream and ‘afford’ the incentive payout </li></ul></ul><ul><ul><li>allows time for success to be measured </li></ul></ul><ul><li>For BD roles – make payment of incentive conditional upon closing a financing round </li></ul><ul><ul><li>aligns to the goals of the whole team/company </li></ul></ul><ul><li>Higher ‘at risk’ pay plan design </li></ul>

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Trends Cont’d <ul><li>Move to growth focus, </li></ul><ul><li>Move to more value-add solutions sales - not box products </li></ul><ul><li>Sales staff want access to plan details and performance/incentive - not 3 months for statement. </li></ul><ul><li>3 or less performance measures - less is more </li></ul><ul><li>HR and Finance working more closely - critical for evaluation of plan </li></ul><ul><li>Improved modeling and testing </li></ul>

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War Stories and Lessons Learned Lesson 1 Hiring pedigree over substance. Lesson 2 The Asian footprint – tread carefully. Lesson 3 Multi-layered sales teams – who really makes the deal happen?

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War Stories and Lessons Learned <ul><li>Lesson 4 </li></ul><ul><li>Think global – act local… </li></ul>Lesson 5 Quota nightmares – adjustments, windfalls, turnover… Lesson 6 Late Sales Contracts – meet your deadlines or…

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Thank You! Questions?