HSMAI CSO Roundtable: Sales Incentive...
Transcript of HSMAI CSO Roundtable: Sales Incentive...
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HSMAI CSO Roundtable
Sales Incentive Compensation
Prepared for HSMAI November 29, 2016
This document is solely for the use of client personnel. No part of it may be circulated,
quoted or reproduced for distribution outside of the client organization without prior
written approval of ZS Associates.
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Agenda
Common issues in Account Manager motivation and incentives
A framework for incentive design
Wrap-up and a request
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Why are incentives important?
Companies spend a massive amount on variable sales force compensation
– Estimated $200B in the US (equivalent to all advertising spend)
There are many, many perspectives on how to motivate…
– “Call it what you will, incentives are what get people to work harder” - Nikita
Khrushchev
– “Goals may cause systematic problems for organizations due to narrowed focus,
unethical behavior, increased risk taking, decreased cooperation, and decreased
intrinsic motivation. Use care when applying goals in your organization.”- Daniel
Pink, author of “Drive”
Done well, sales incentives can help with:
– Attraction and retention
– Motivation
– Right activities and behaviors
− 4 − © 2016 ZS Associates | CONFIDENTIAL HSMAI CSO Roundtable - Sales Motivation v1.0
Sales is one of the most complex functions in business
Achieve revenue plan
Profitable growth
Market share growth
…
High customer
satisfaction and
advocacy
Right activities
Right effort allocation
- Customers
- Products
- Activities
Non-selling time kept to minimum
COMPANY
RESULTS
CUSTOMER
RESULTS ACTIVITY SALESPEOPLE
Enabled
Engaged & motivated
… Knowledgeable
- Products
- Markets
- Selling skills
Financial reporting systems
FOUNDATIONAL
SELLING STRATEGY &
STRUCTURE
Causality
Diagnosis
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Engaged and motivated salespeople outperform their peers
98%
100%
104%
97%
100%
103%
95%
100%
105%
Disengaged Passive Engaged
An
nu
al
Go
al A
ttain
men
t
Salesperson Engagement Score
Client A
Client B
Case Examples
“Sales engagement score” based on likelihood to: 1- Stay with company; 2- Recommend company/role to others; 3- Go above and beyond
Goal attainment normalized to 100%
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Incentives and goals are a critical driver of sales AM
employee satisfaction
4.6
4.5
4.3
4.3
4.3
4.2
4.2
4.2
4.1
4.1
4.0
4.0
3.8
3.3
3.3
3.3
3.3
3.0
3.0
3.0
3.9
3.1
3.0
2.9
Overall Company Leadership
Strategic Accounts Leadership
Quality Managers
Effective Communication
Work/Life Balance
Career Opportunity
Competitive Pay
Effective Quotas
Company Leadership in the…
Valued Development
Differential Earning
Recognition
Importance
Effectiveness
How important is this aspect to you?
How effective is your company at this?
1 = not at all important/effective, 5 = very important/effective
All AMs
Importance (n= 87)
Effectiveness (n= 97)
Incentive-related driver
Source: 2013 Strategic Account Management Compensation Survey (SAMA & ZS Associates)
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What factors make incentive plan design for hotel
sales roles especially difficult?
Complex accounts
Often operating in a team selling environment
Results often realized over a multi-year time horizon
Often difficult to directly measure impact on financial results
Multiple objectives, often highly specific to individual accounts
Data quality and availability
Others?
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0.3
0.4
0.5
0.6
5% 15% 25% 35% 45%
Opportunity for Improvement
Differential earning, recognition & goals are key
opportunity areas for hotels
* “Low firm effectiveness” denotes responses “Not at all effective” or “Slightly effective” (1/2 on 5-point scale)
Q37. Pretend that you are giving a recommendation to a friend of a colleague who is managing a hotel similar to your own, how likely are you to recommend that your
company’s incentive plan be used at their property? Assume there are no competitive considerations.
Q39. Revenue manager satisfaction: How effective do you believe your company is at doing this?
Derived Drivers of Satisfaction vs. Improvement Opportunities
De
rive
d Im
po
rta
nc
e
Co
rre
lation
of F
irm
Eff
ective
ne
ss
to P
lan S
atisfa
ction
% of Respondents Rating Low Firm Effectiveness*
Differential Earning
Competitive Pay
Effective Goals
Recognition
Programs
Effective
Communications
Areas of significant
drivers of incentive plan
satisfaction as well as
areas that can be most
improved compared to
firms’ current level of
effectiveness
# of respondents (n=322)
Highly important to
satisfaction
High opportunity for
improvement
Less important to
satisfaction
Low opportunity for
improvement
Higher importance to
satisfaction, firms currently
not as effective
Higher importance to
satisfaction, firms currently
somewhat effective
Lower importance to
satisfaction, firms currently
not as effective
Lower importance to
satisfaction, firms currently
somewhat effective
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Pay Level Pay Mix Plan Period Additional
Elements
Plan Design
Metrics Plan Type Payout Curve
$200K
$50K
How much
should AMs be
paid?
What should be
the salary to
incentive mix?
What should be
the measuring
metric for each
of the identified
components?
– $ Sales
– Unit Sales
– Share
– Contribution
– # of
Customers
– # of calls
What plan type
to choose from?
– Commission
– Goal Based
– Forced
Ranking
– Matrix
– MBOs
What will the
payout curve
look like?
– Threshold
– Slopes
– Accelerators
– Kickers
– Etc.
How long is the
plan period?
What is the
payout
frequency?
– Monthly
– Quarterly
– Semi-annually
– Annually
– Eligibility
– Contests
– Awards
$200K
$100K
100%
Salary
100%
Incentive
Compensation Guiding Principles
Aligned with Corporate Strategic Goals; Motivational; Simple; Fair; Fiscally Responsible
A framework for incentive compensation design
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Does it drive the
desired behavior?
Is it motivational?
Is it fair and paying
for performance?
Is it financially
responsible?
Can it be
implemented?
• Supports the sales and marketing objectives
• Focuses on the “right” customers and activities
• Focuses on the “right” products to sell with the proper emphasis
• Is simple to understand and communicate
• Substantial effort leads to significant reward
• Keeps people engaged
• Overall payout is competitive in the marketplace
• Territories with different characteristics have similar earning potential
• The plan does not penalize sales force for forecasting uncertainties
• At multiple corporate performance levels, the total compensation payout is within acceptable range of budget
• The total compensation payout varies appropriately according to company success
• The current infrastructure and resources can support the resulting plan administration
• The data available can be confidently utilized to measure performance
Plans should be evaluated against company and
role-specific guiding principles
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Factors within our control directly lead to sales
results
Salespeople
Sales &
marketing
activity
Customer
Results
Company
Results
• Enabled
• Engaged & motivated
• Knowledgeable
• Sales process
execution
• Business planning
• Opportunity pipeline
• Activity level / quality
CAUSALITY
• Customer
satisfaction
• Customer retention
• New customer
acquisition
• Partnerships
• Business integration
• Revenue
• Profit
• Market share
• Goal-attainment
• New business
Work right to left, evaluating metrics for:
• Does it drive the desired behaviors?
• Is it motivational?
• Will it be fair and pay for performance?
• Is it within the AMs control?
• Can it be implemented?
Incentive metric selection
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Success Measures and Plan Types
PARTNER
CREATE
VALUE
SOLVE
PROMOTE
PUSH
SA
LE
S P
RO
CE
SS
MBOs
CUSTOMER MEASURES
GOALS
SALES
SHORT-TERM
HIGH BASE + BONUS/MBO
BASE + QUOTA BONUS
BASE + COMMISSION
COMMISSION
Success Measures
MULTI-YEAR
ANNUAL
MONTHLY / QUARTERLY
Compensation Plan Time Period
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Some considerations going into 2017
Right metrics: strategic, measurable, controllable
Appropriate upside (and downside) earning opportunity
Fair, motivating targets
Timely, frequent communications (plan, progress, payouts, what-
if?,…)
Right pay levels, benchmarked to role and location
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Tony Yeung Principal – Sales Strategy
Tony Yeung is a Principal with ZS Associates’ Go-to-market
Strategy & Transformation Practice.
Since joining ZS in 2004, Tony has led client engagements
in sales & marketing strategy and execution across a
number of industries including medical devices, consumer
healthcare, travel & transportation, industrial products, and
high tech. Tony supports clients on sales transformation
initiatives and his areas of expertise include sales force
design, sales effectiveness, incentives and sales
operations. He has worked directly with a variety of sales
channels including key accounts teams, field sales, inside
sales, distributors, and other channel partners. Tony has
worked in the London & Toronto offices of ZS, engaging
with clients across Europe & North America. He is a
frequent writer and speaker on sales effectiveness issues.
Tony holds a MBA from INSEAD & a BASc in electrical
engineering & physics from Queen's University in Canada.
Prior to joining ZS, he worked at a major high-tech
company, where he was engaged in sales of hardware &
enterprise software used in manufacturing, industrial
automation & research applications.
+1.416.777.5146
Glenn Hollister Principal - Travel & Hospitality Practice Lead
Glenn Hollister is a Principal with ZS in the Chicago office
and leads the ZS Travel & Hospitality Practice. His client
work has focused on large scale sales force
transformations, value-based selling, sales effectiveness,
and building, supporting and operating sales operations
teams.
Since joining ZS in 2003, Glenn has worked continuously in
the airline industry. His experience includes airline sales
and marketing issues covering individual travelers,
corporations, travel management companies (travel agents)
and frequent flyer programs. Glenn has assisted his airline
clients in areas ranging from go-to-market strategy, to sales
effectiveness, incentive compensation, and ongoing sales
and marketing operations. In the operational areas, he has
helped with processes including incentives administration,
business intelligence, executive analytics, and quota
setting.
Glenn has an MBA from Northwestern University's Kellogg
School of Management, a Master of Engineering
Management from Northwestern University, and a BS in
Electrical Engineering from the United States Military
Academy at West Point.
+1.312.233.4816
ZS Leadership Contacts -
About ZS
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