Finalize Your 2009

Sales Compensation Plans

Today’s Speaker

Liz Cobb, Founder & CEO Makana Solutions

• Makana is the third compensation

management company Liz founded

• Over 20 years in sales compensation

design and process automation

• Liz is a recognized industry expert, has

consulted for hundreds of companies and

speaks frequently on effective sales

compensation

Today’s Speaker

Teanna Spence, Compensation Director,

Makana Solutions Inc.

• Teanna has 28 years' experience in

financial systems including 14 years in

incentive design, management,

automation, and best-practices

development for many companies in a

wide range of industries including DEC,

Cabletron, Kinkos, Aspect Computers,

and Staples.

About Makana Solutions

“the most innovative product I’ve seen

lately…they really understand how

people design plans and work.”

James Hollincheck Research VP“Plan design is a key element of

effective sales compensation, which

drives sales behavior. Salesforce users

can take advantage of a dedicated sales

comp planning solution via the

AppExchange with Makana Motivator.”

George Hu, CMO

“We believe CEO Cobb's significant knowledge

of and insight into the sales compensation

industry….will help land Makana Solutions a

solid position in the expanding market.”

Judy Hodges, Research Analyst

Create Great Sales Comp for 2009

• See the big picture

• Access built-in best practice

• Anticipate incentive costs

• Generate graphical plan

documents

Create Great Plans

• Create Great Plans

• Calculate payments

• Share commission statements

and management reports

Planning to Payment

Makana Solutions, Inc.

Makana

Motivator helps

companies

build brilliant

plans quickly.

Brilliant plans

energize the

team to achieve

the strategy.

Motivator Express - $19/mo

Clear, motivating plans built on top of

a strong foundation

of strategy

Make a Brilliant Plan

When does your plan need to be done?

0%

5%

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15%

20%

25%

30%

35%

Overdue Middle of January End of January End of February End of March

Today you will learn…

• How to create brilliant plans and

finish in TIME!

– Review the process

– Collaborate with your planning team

– Produce clear and motivating

incentive compensation plans

– Get you ready for rollout

Why is Sales Planning Important?

• Effective sales incentives:– Improve sales motivation

– Tell your team what to sell and to whom

– Reduce turnover

• What do your comp plans

communicate?– Sales reps always ‘find the money’

– Corporate strategy must be clear

– It will drive their behavior – ideally in the way

you intended

***Mismanagement Can be Costly

General Thoughts

• Sales people will follow the money

• Reward at the point of persuasion– The point at which the sales person can help

the customer make choices

– The sales person must be in control of

achieving his or her goal

• You are busy and have:

• No visibility

• No training

• No tools

• No help

Planning Now…

Establish Timeline – When is that Kickoff?

1. Analysis

2. Design

3. Documentation

4. Implementation

Traditional timeline for a $10M SW company with 10 reps

W1 W2 W3 W4 W5 W6 W7 W8

“ ”We probably reduced the process from a 2 person, 2 month

process to a one person, two week process.

Steve Balk, VP Sales

Analysis Design, model & documentApprove & rollout

www.makanasolutions.com/save

Where are you in the process

outlined above?

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Analysis Cost Modeling Design Documentation Roll out

Analysis -- Look at Last Year’s Plans

• Did you get the results you wanted?

• Did you reward for the right metrics?

• Did the team work together as

intended?

• Did you pay for performance?

– Too much?

– Too little?

Analysis Design, model & documentApprove & rollout

Assess Team Motivation

• Is your sales team pumped?

• Are you seeing unintended

consequences?

• What is your turnover?

• What is your performance distribution?

• How are they spending their time?

Confirm the Strategy

• Understand the overall company goals

– Key economic drivers

– Areas of growth

– New markets

– New channels

Design and Align – 4 Key Steps

Identify Job Roles

Define Plan Elements

Model Costs

Produce Comp Plans

Market

Strategy

1

2

4

3

AnalysisDesign, model &

documentApprove & rollout

Eligible Job Roles

Lead Generation

OutsideSales

Account Management

Customer Service

• All customer facing roles

• Measurable influence over the actions of the customer

• Willing to consider at least 15% of TTC as incentive

1 2 3

4

Define Plan Key Elements

• Summary level info for

alignment and benchmarking

• Performance measures and

goals

• Payout Components & Rates

1

2 34

Plan Summary

• Target Total Comp– Market

– Budget

– Equity across plans

– Scope of job

– Type of sale

– Level of experience

• Leverage – Mix of salary vs. incentive

– The higher the risk, the

greater the rewards

1

2 34

Base to Incentive Ratio

Current products, customers

60/40

New products, markets

40/60

Current products, customers

85/15

New products, markets

60/40

Individual

Team

NewExistingMin Incentive Mix

85%/15%

Makana

Mix

Matrix

How much comp should be variable at target?

Products/Markets

Control

Max Incentive Mix

0%/100%

1

2 34

A Good Plan Must be Measurable

• No more than 3 measures!

• Do measure:– Sales volume, margin, units sold

– Product mix, new accounts

• Don’t measure:– Management activities

• Input to CRM system

• Sales calls/week

– The past

• What are the goals per measure?

1

2 34

Crediting Terms Must Be Clear

• What is measured

– What’s the value? Net? Margin? Gross?

• Who gets credit

– Multiple roles can erode margins

• When they are eligible

– Booking, invoice, cash receipt

• How exceptions are managed

– Person starts late, leaves early, goes on LOA

– Be careful of precedence

– What happens if there is a customer problem

Be specific about:

1

2 34

Identify Key Payout Components

• 3-5 at most

• Make sure focus is

clear

• No component should

be less than 20% of TIC

1

2 34

Review Across Roles for Alignment

• Examine:

– Mix and leverage according to level of personal

influence

– Common measurements for team alignment

– Strategic alignment of measures to company goals

– Equity within company

– Competitiveness of pay

1

2 34

Model Costs

• Know overall budget for commissions

• Start with top down using historical

attainment

• Check for full allocation of quotas

• Know incentive cost of sales

• Review direct versus overlay

• Compare to last year– don’t surprise your top performers

12 3 4

Produce Plan Documents

• Be clear and motivating

– Easy to see rewards

– Keep top priorities in mind

– Define exceptions precisely

1

2

3 4

Produce Plan Documents

• Include T&Cs that matter:– Eligibility, effective period, crediting rules for measures

– Transition policies

• late start, LOA, termination, etc.

– Customer changes

• Dissatisfaction

• Returns

– Ramp up of new hires

• Draws/guarantees

• Be careful of committee review – don’t

lose consistency but do include legal

1

2

3 4

Rollout & Implementation

• Rollout

– Be aware of history

– Explain transitional issues

• Implementation

– Make sure you have access to the accounting data

– Automate as much as possible

– Allow time to test your automation

– Explain new plans to your Administrator

Analysis Design, model & documentApprove & rollout

Questions & Answers

Makana Motivator

• Planning

– Motivator Express

– $19/month

• Planning to Payment

– Motivator Pro

– $29/month per payee

– Request an online

demonstration

– info@makanasolutions.com

– (877) 881-0001

Additional Information• Time savings

– www.makanasolutions.com/save

• Cash Receipt Blog Post

– www.makanasolutions.com/Blog

• December 9th Posting

• More Best Practices

– Sample plans

– Sample reports

– Webinars

– Surveys

– www.makanasolutions.com/resources