Sales compensation analysis - How Does Benchmarking Help Me

Sales Compensation Analysis

How Does Benchmarking Help Me?

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www.salesbenchmarkindex.com info@salesbenchmarkindex.com 1-888-556-7338

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The Situation• $520M Technology company faces:– Exodus of top sales talent– Difficulty in recruiting top sales people

• Sales Leader wants to:– Confirm if compensation is in line with

industry – Modify compensation plan to attract/reward

top performers

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What Did Not Work• Contracted with consulting team of an

incentive compensation software provider– Top recommendation was to buy their

software– Analysis restricted to field sales

people– No root cause analysis for exodus of

talent

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What Did Work• Compensation plan & incentive pay

assessed across 16 best practice areas• Analysis concludes:

– Defined base and incentive pay in-line with peers (this is not the issue)

– Separate comp plans required for higher tenured sales people and role type

– Sales management comp plans require accelerators and stock component

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Compensation Scorecard

19 out of 32 Points

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Test Results (Excerpts)

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TurnoverDoes the Compensation Plan attract and retain the best salespeople?

The plan supports high retention of strong performers and adequate turnover of non-performers

Acme

Acme

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Pay Level – Test 1 of 5External and internal benchmarking: Is the current Plan competitive?

The plan is competitive and attractive compared to the benchmark, but below world class levels

AcmeAcme

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Pay level – Test 2 of 5

Total Income at plan is slightly less than Benchmark

Actual Paid Income per Rep for FY10:$212,751 vs$185,249 plan

Acme

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Pay level – Test 3 of 5

Actual Total Comp for DSM and SET is in line with Benchmark amounts

Acme Acme

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Pay level – Test 4 of 5

Acme

Sales Management Total Comp is 13% below the Benchmark amount

Channel Mgr Total Comp is closest to World Class levels of all roles analyzed

Acme

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Pay level – Test 5 of 5

DSM Quota Attainment is 24% below the benchmark

Overall Sales Quota Attainment is 4% below the benchmark

Acme Acme

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Traction & EngagementAre enough salespeople motivated by and participating in the current Plan?

All Reps participated in the plan and several achieved the highest level pay rates.

Plan Traction Measurements

Role Engagement Rate Excitement Index

DSM 100% 36%

SET 100% 20%

Engagement Rate: Measures % of Sales Force participating in variable compensation.

Excitement Index: Measures rate difference between standard commission and the highest level payout rate.

Excitement Index Range

<10% Low 20 – 50% Med >70% High

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DistributionIs the payout variation between top producers and non-producers appropriate? SE

Distribution weighted toward low end

SET Distribution weighted toward high end

Multiples inline with Best Practice

DSM Distribution weighted toward high end

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Recommendations

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Recommendation #1• Increase Accelerators for Sales Management• Determine an appropriate accelerator rate that

is greater than 1% for each 1% of attainment over goal

• Pay overachievement accelerator in stock

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Recommendation #2• Modify Comp plans to distinguish between

Account Development and Account Acquisition• Segment Rep assignments between existing

and target accounts• Establish desired mix of revenue from each

type of account• Determine commission pay rates for each type

of account

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Recommendation #3• Assign Quotas based on Territory Potential

and link to the variable commission rate• Perform analysis of territory potential• Set attainable Quotas that are based on

territory potential, workload, pipeline, market penetration, etc.

• Refine the variable commission rates and accelerators to account for territory potential and quotas

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Recommendation #4• Stratify Incentive Compensation based on

Rep experience level• Define the criteria to distinguish tenured reps

from new reps – years of experience, years in territory, etc

• Modify comp plan, quotas and incentive variable pay to challenge and motivate tenured reps

• Modify the comp plan, quotas and incentive variable pay to reward new reps who achieve superior performance

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Learn More

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Email - info@salesbenchmarkindex.com

Phone - 1-888-556-7338

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