sales governance study 2008

8/12/2019 Sales Governance Study 2008

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Table of content

2008 Capgemini Consulting. All rights reserved.

Executive summary 3

Study overview 4

Definition of Sales Governance and its elements 6

Overview Sales Governance maturity 8

Sales Management 10

Sales Performance Measurement 14

Compensation and Incentives 18

Sales Coaching and Training 22

Summarising discussion and way forward 26

About Capgemini Consulting 28


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Sales Governance study 3

Executive summary

Companies face many challenges inoptimally steering their sales organisa-tions. For example, this is often thecase for more mature organisations inneed of more structure. Usually thisneed occurs after phases of businessgrowth with many sales initiativesand less control, as well as after costsaving phases when companies aimto steer their sales organisation moreefficiently.

Capgemini examined 42 leadingcompanies from different industriesin Finland, Norway and Swedenregarding how they handle Sales Gov-ernance and the related challengesand best practices. The study was

conducted through in-depth qualita-tive interviews and a quantitativeonline survey. The participants wereSales Executives, mostly the Heads ofSales, but also CEOs or Business AreaManagers.

All Sales Executives stated that SalesGovernance will become more impor-tant in the future. In addition, 86%of the Sales Executives anticipatetheir group management to put more

focus on questions related to SalesGovernance the coming three years.

The Sales Executives saw driving salesproductivity and reducing non-valueadding time as the major benefits ofSales Governance. In addition, SalesGovernance enables best practice iden-tification and implementation, andensures an adequate sales behaviour.

The four elements of SalesGovernance have reached differentlevels of maturity. Sales Managementis the most elaborated element. Buteven though basic enablers are typi-cally well defined, companies continu-ously improve the synchronisation ofthe strategic and operational levelsof Sales Management and enhancecross-functional co-operation. SalesPerformance Measurement is mod-erately mature, however, the definedKey Performance Indicators (KPIs)-did not fully enable an efficient track-ing and steering of sales behaviour.Due to the various Compensationand Incentive models available, com-panies face challenges in optimising

their compensation structure. SalesCoaching and Training was seen as anemerging area.

Even though the maturity levels varybetween the companies and industriesinvestigated, a common pattern existsfor Sales Governance. It is used ratherfor controlling purposes than for driv-ing the continuous improvement ofsales performance.

Overall, leading companies in theNordic region have the potential tofurther develop and improve theirSales Governance models. To takeSales Governance to the next level,three main principles should be keptin mind: Integration of the differentSales Governance elements, Cross-functional alignment and keeping aclear focus on the improvement objec-tives and benefits.


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Why a study on Sales

Governance?

This study is part of Capgeminis con-tinuous research into the trends andissues in the business environment

of our clients. Sales Governance hasbeen experienced as a very importanttopic by many Sales Executives.

Companies face many challenges inoptimally steering their sales organisa-tions, for example:

Having evolved to more matureorganisations, companies struggleto establish more structured andconsistent ways of working.

Phases of business growth oftenresult in new sales initiatives and

less control of the sales organisa-tion in terms of operations andcosts.

Expansion to new business seg-ments requires a more thoroughand coordinated sales governancemodel.

Business complexity and thenumber of interaction points haveincreased due to a wider businessscope, involving more customersand suppliers.

Phases of cost savings often resultin pressure to run the sales organi-sation in a more cost efficient way.

For companies from all industries,the elements of the Sales GovernanceFramework are key in actively drivingthe sales organisations towards effec-tiveness and higher performance.

Study overview

Objective and methodology

This study examines sales governancepractises in leading Nordic companiesand aims to identify related chal-lenges, best practices and areas for

further development. To gain a broadunderstanding of the topic, the studycovered a broad range of industries.

During January-April of 2008, 42representatives from Finland, Norwayand Sweden participated in the study.The participants were Sales Executi-ves, mostly the Heads of Sales, butalso CEOs or Business Area Managers(or equivalent).

A total of 35 in-depth interviews were

conducted in addition to 21 onlinesurvey responses. The qualitativeinterviews followed a standardisedapproach with open questions onSales Governance and its elements togain insights based on the statementsof the Sales Executives. The quan-titative part of the study comprisedan online survey targeting the inter-viewed Sales Executives and other keymanagers within the sales organisation.

The Sales Governance

framework creates the

necessary balanced, holistic

perspective to optimise sales

effort and maximise results.

Sales Director, Energy Industry


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16%

5%

25%

14%

10%

10%

10%

5%

Consumer

goods

Manufacturing

Energy

Financial

services

Tele-

communication

Media

Retail

Transportation

Other

5%

Figure 1 Participating companies perindustry

Participating companies

The interviews and online surveyswere conducted primarily with largecompanies in the Nordic region. 50%of the participating executives were

from Sweden, 31% from Norway and19% from Finland.

As seen in figure 1, the participatingcompanies cover different indus-tries to ensure a broad approach toand solid understanding of SalesGovernance. The main industriesare consumer goods, manufacturing,energy, financial services, and tele-communication.

Among the participating companies,

more than 90% have multinationalsales operations including Finland,Norway and Sweden.

Capgemini Consulting would like to express its

sincere appreciation to the Executives who par-

ticipated in this study. There was an enormous

interest in the topic, and we hope you find our

report thought-provoking and valuable.


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Definition of Sales Governance and

its elements

Corporate Strategy

Culture

CompetitorsC

ustomers

Sales

PerformanceMeasurement

Sales

Coaching

and TrainingCompensation

and Incentives

Sales

Management

Figure 2 The Sales Governance framework

Sales Governance is influenced by envi-ronmental factors, such as the corporatestrategy, corporate culture, customers,and competitors. These factors can havea constraining or encouraging effect onthe development of each element, butare not further examined in this study.Similarly, aspects such as sales strat-egy definition, sales process, and salesorganisation structure are also not inscope of this study.

Sales Managementis the core elementof the Sales Governance Framework. Itentails both a strategic and an opera-tional level. At the strategic level ofSales Management, the sales strategyis aligned with the corporate strategy

and short-term and long-term busi-ness objectives are defined. At theoperational level, the activity plan isimplemented and managed as required.Cross-functional co-operation is a pre-requisite for achieving internal strategyalignment and operational efficiency.To support the strategic and operationallevels of sales management and thecross-functional co-operation, four keyenablers (forums, roles and responsi-bilities, processes and tools) need to be

in place.

Sales Governance is defined as themethod used by management to drivethe sales organisation towards effec-tiveness and high performance and topromote a desired sales behaviour. Itcan be visualised in the Sales Gover-nance Framework containing four dif-ferent elements (see figure 2):

Sales Management

Sales Performance Measurement

Compensation and Incentives

Sales Coaching and Training

There are strong links between all ofthese elements, and they can not beviewed or developed separately.


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Sales Performance Measurementis used to monitor how the salesorganisation is performing againstthe set targets. Performance meas-ures are typically expressed as KPIsand can be both, financial and non-financial. KPIs play a vital role insteering the sales organisation. Inaddition, they allow initiating correc-tive measures, if defined targets areat risk. Performance measures can bedistinguished as leading and lagging.Lagging measures include financialKPIs such as revenue and margin, andreport the final results of sales activi-ties. Leading measures are often proc-ess-related, action-oriented and focuson performance driving the result, e.g.

number of customer visits.

Compensation and Incentivesinclude a variety of rewards both forthe individual and the team to rewardgood performance and to stimulatemotivation. Compensation can bedivided into fix and variable parts,

which are in most cases equivalentto a monthly salary and a monthlyor annual bonus. Incentives can begrouped into financial and non-financial. Good performance is ulti-mately defined by breaking down cor-porate targets to an individual level forwhich performance can be measured.

Sales Coaching and Trainingis anefficient tool in supporting individualsand groups to recognise ways to opti-mise their sales behaviour. Coachingprovides individual guidance, sup-port and feedback through interactionrather than instruction. It aims toincrease the awareness for personalstrengths and improvement areas to

reach the sales goals. Coaching is par-ticularly useful for one-on-one con-versations, but can also be included ingroup sessions. It must be seen in the

context of an overall model for salestraining and sales career development.Trainings help to develop skills andcompetence through typically stand-ardised course format. In combinationwith that, coaching is an efficient wayof encouraging salespeople to adopt thetraining content in their daily work.


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Maturity levels vary between the

Sales Governance elements

The four elements of Sales Governancehave reached different levels of maturi-ty in the investigated companies.

According to the Sales Executives,Sales Management is the most matureand elaborated element, as a lot ofeffort has gone into developing SalesManagement practises and processes.Thus, basic enablers are typically welldefined. As this is the core element,companies focus on continuouslyimproving their Sales Management,especially in terms of synchronising thestrategic and operational levels of SalesManagement and enhancing cross-functional co-operation.

The Sales Executives evaluated the ele-ment of Sales Performance Measure-ment as moderately mature, statingthat KPIs were defined and sales per-formance was followed-up. However,the defined KPIs were not assessed tofully enable an efficient tracking andsteering of sales behaviour. Due to thevarious Compensation and Incentivemodels available, companies face chal-lenges in optimising their compensa-

tion policies. For instance, SalesExecutives found it difficult to firmlydefine on which KPIs the compensa-tion and incentive model should bebased. Sales Coaching and Trainingwas seen as an emerging area and,thus, evaluated to have the lowestmaturity level. Although the majorityof investigated companies has stand-ardised training programmes, they lackan established coaching culture.

The importance of Sales

Governance is growing rapidly

All Sales Executives stated that theimportance of Sales Governance willincrease in the future. In addition,

Overview Sales Governance maturity

86% of the Sales Executives anticipatetheir Group Management to put morefocus on questions related to SalesGovernance the coming three years.

The Executives saw driving salesproductivity and reducing non-valueadding time as the major benefits ofSales Governance. In addition, SalesGovernance enables best practice iden-tification and implementation, andensures an adequate sales behaviour.

As illustrated in figure 3, certain SalesGovernance components are regardedas more important in driving thedesired sales behaviour. However, thecapabilities to apply these components

varied (see figure 4), an aspect closelylinked to areas of improvement. Thecoaching of salespeople is evaluatedto have a very high impact on thepossibility to drive sales behaviour,but applying coaching was seen asvery challenging. As many as 33% ofthe respondents stated that their com-panies are poor or very poor at coach-ing their salespeople. A similar issuecan be seen in the Sales Managementprocess. Companies experience that

the processes can make a difference insteering sales behaviour but that theyare not sufficiently skilled in usingthem. If improved, both Coachingsalespeople and Sales Managementprocesses thus have a potentialimpact.

Regardless of the enhancement area,the Sales Executives highlighted theimportance of involving the sales-people and creating commitment tothe components as a key success fac-tor in implementing improvementinitiatives.

Verypoor

Poor Good Verygood

Non-financial salesbehavior measures

Coaching salespeople

Sales competitions

Documentedsales process

Performanceincentives

Clear salesmanagement process

Financial KPIs

Defined roles andresponsibilities

Clear forum structure

Clearly definedsales targets

Figure 4 Current performance of SalesGovernance components

Figure 3 Impact of Sales Governancecomponents

Noimpact

Low

impact

High

impact

Veryhigh

impact

Sales competitions

Financial KPIs

Non-financial salesbehavior measures

Doccumented salesprocess

Clear forum structure

Performanceincentives


Clearly definedsales targets

Clear salesmanagement process

Coaching salespeople


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10/3010

Introduction

Sales Management is the core elementof the Sales Governance Framework(see figure 5 for an overview of itscomponents). Sales Management is

strongly linked to Sales PerformanceMeasurement through the tar-get setting process. Linkage toCompensation and Incentives as wellas Sales Coaching and Training ele-ments is, for example, created byaligning the salespeoples individualobjectives and coaching needs withSales Management targets.

Sales Management

Sales Management related

findings

Having solid Sales Management ena-

blers in place is not a genuine source

of competitive advantage

Independently of the industry, a basicset of processes and forum structuresare defined and in place. More than95% of the respondents stated thatthey use a clear Sales Managementprocess and forum structures. 86%of the companies indicated that theroles and responsibilities within SalesManagement are also well defined(see figure 6 on next page). In addi-tion, a clear interdependency emergesbetween the role descriptions and the

process. To some extent, good roledescriptions can compensate weekprocess documentations, and viceversa.

To compensate the lack of process, thecompany relies on well-defined roledescriptions and tries to enforce thecoaching culture to secure that Sales ismanaged and controlled.

Manager Marketing and Sales,

Manufacturing Industry

Overall, the respondents are con-fident with the Sales Managementenablers and see these as importantfor driving sales, but not as a sourceof competitive advantage. The mainimprovement area appears to be thesales process documentation, where afourth of the participating companiesstill saw improvement potential(see figure 6 on next page).

Figure 5 Sales Management model

Roles &

responsibilitiesForums ProcessesEnablers

Cross-functional co-operation

Tools

Strategy alignment

Product, brand, channel

strategy

Production, sourcing

Operational efficiency

Strategy input

Corporate

strategy

Customers

Competion

Strategic Level

Sales Management

Operational Level

Sales Management

Pla

nn

ing&im

plementatio

n,

ex

ecut

ethestrategy

Feedback,integrat

ion

,

synchronisation


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Other improvement areas mentionedwere enhancing efficiency of forumin terms of frequency, participation,agenda, and objectives to increase thetime with the customers. Companiesalso strive to improve the tools sup-porting Sales Management, especiallyregarding data management and inte-gration.

Increasing need for enhanced cross-

functional co-operation and transpar-

ency

Only 52% of the Sales Executivesbelieved that the roles and responsi-bilities of other functions involved inthe sales process, such as marketing,

customer services, supply chain, orfinance, are clearly defined and under-stood (see figure 7).

In many of the interviewed compa-nies, co-operation with other func-tions is centred around joint forumstructures, whereas companiestypically lack deeper cross-functionalco-operation based on aligned roledescriptions, joint processes, and tar-get setting.

Challenges to synchronise the strategic

and operational levels of Sales Man-

agement

Achieving excellence at the operation-al Sales Management level or havingclear sales strategies does not sufficefor an effective Sales Management.Many companies see a challenge insynchronising the operational and thestrategic levels of Sales Managementdue to different time horizons and

planning frequencies: the strategiclevel in Sales Management is typically

touched upon annually or bi-annu-ally, whereas operational planning andsales performance measurement maytake place daily.

The link from the operational to thestrategic level is often not as wellimplemented as the other way around.

Annually prepared sales strategies orcustomer plans are rarely reviewedand updated during the year. Whentargets are not met, fire fighting takesplace in the shape of action planning,though this easily leaves strategicplanning as an isolated annual task.

Due to the challenges of synchronis-ing the strategic and operational lev-

els, Executives have limited optionsto effectively drive the desired Salesbehaviour of the salespeople. Asdecision making power is typicallyfocused on the Sales Executives, oper-ational issues are often unnecessarilyescalated to the executive level, whichin turn decreases time for customer-related and strategic level decisionmaking.

0% 20% 40% 60% 80% 100%

PoorGoodVery Good


Documentedsales process

Clear forumstructure

Clear salesmanagement

process

Very poor

Figure 6 Application of SalesManagement enablers

0%

10%

20%

30%

40%

50%

60%

StronglyDisagree

DisagreeAgreeStronglyAgree

The roles and responsibilities of non-sales functionemployees involved in the sales process are clearly

defined and understood

Figure 7 Roles and responsibilities ofnon-sales function employees

Senior Sales Executives

should spend more customer-

related time than internal

managerial time 70%

external and 30% internal

focus would be ideal.

Business Area Head, ConsumerGoods Industry


12/3012

Recommendations to further

improve Sales Management

Facilitate effective and flexible cross-

functional co-operation

To deepen cross-functional co-opera-tion, companies are recommendedto design aligned role descriptions,

joint processes, and common targetsto clarify how to drive collaborationbetween functions. To improve theco-operation, one option is to appointcoordinative roles with overall respon-sibility for certain areas (e.g. customersegments or strategic products) toensure that suboptimal activities with-in the different functions are resolved.

Due to increasing customer demands,sales organisations need to tighten thetouch points across the organisations,from finance and controlling to mar-keting and supply chain functions.Many companies focus on developinga seamless co-operation between salesand marketing, but in manufacturing,for example, the pressure increases toachieve more transparency throughoutthe end-to-end supply chain.

Focus on synchronising strategic andoperational levels of Sales Management

by establishing firm feedback loops

Although most participating compa-nies have a comparatively mature levelof Sales Management enablers andare capable of turning sales strategyto concrete activities, several initia-tives can be identified to improve thelink between strategic and operationallevels:

Target setting by involving salespeoplecreates higher commitment totargets and motivation to providefeedback.

Rolling planningshould be adapted

in sales forecasting to better sup-port corporate planning andbudgeting. It is equally importantto establish up-to-date feedbackloops to share the volume plansfrom sales to other functions suchas production, increase the salesforecasting accuracy, and create aforward-looking attitude instead offocusing on historical sales data.

Creating thorough customer plans forkey customersensures key account

managers prepare an action planthat they will follow.

Strategic sales plans should bereviewedduring the year to confirmif the assumptions made are stillvalid or if updates are necessaryand the budget allows. A clearprocess should thus be in place,preferably supported by a toolguiding the work. This enables theorganisation to integrate new infor-mation in planning and respond

more swiftly to changes in the mar-ketplace.

Communicating strategies widelyacross the organisation promotesopenness and reduces personalagendas. They are typically sharedwithin the sales organisation butshould also be communicatedacross functions, for example withmarketing.


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It is important to havethe right rhythm in Sales.Director Customer Relations,

Consumer Goods Industry

Additional insights

Besides the recommendations and findings mentioned, a number of interesting aspects were dis-

cussed in interviews with Sales Executives. Some additional insights from these discussions are:

Delegate decision making authority within clearly defined boundaries to lower levels of the

sales organisation which are closer to the operational issues on a daily basis.

Support salespeople in prioritising their work and in balancing their time spent on internal

versus external matters. Proper sales planning, prioritisation of customer segments and key

customers, target setting, and action planning are critical.

When conducting strategic development projects with customers to increase collaboration,

sufficiently support salespeople with additional project manager responsibility for cross-

functional teams, e.g. by coaching.

Implement tools supporting the sales management process from strategic to operational level,

and vice versa, e.g. for managing and maintaining documentation and follow-up on targets andaction plans.


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Introduction

Sales Performance Measurementis used to monitor how the salesorganisation is performing againstthe set targets. Performance meas-

ures are typically expressed as KPIs.Sales Performance Measurement isclosely linked to Sales Managementthrough the process of target settingand following up of performance.It is also connected to the area ofCompensation and Incentives, as theperformance measurement data typi-cally constitutes the basis for reward-ing.

Sales Performance

Measurement related findings

Companies tend to use few basic KPIs

Most of the interviewed companiesuse a small set of very basic KPIs.76% measure a maximum of six KPIs(see figure 8). Sales volume or valueis the most common one in additionto revenue, margin, and market share,but the drill-down varies.

Due to the focus on measuring finan-cial KPIs, the non-financial KPIs are

often overlooked. In fact, less thanhalf of the interviewed companiesuse non-financial measures to drive adesired sales behaviour (see figure 9).

What is more, the companies actuallyusing non-financial KPIs state that lessfocus is put on them vs. the financialones. The non-financial KPI mostcommonly used was the number ofcustomer visits. In general, compa-nies find it difficult to develop moreadvanced performance measures,because setting an appropriate base-

line for the metrics, especially for

non-financial measures, appears to bethe main challenge.

If non-financial KPIs are not followedup regularly and integrated into salesperformance measurement system,companies will be at risk of not focus-ing sufficiently on qualitative factors,such as customer satisfaction, timespent with customers, which may beimportant factors in strengthening thecustomer relationships.

In addition to typical financial KPIs,some companies also follow up otherparameters, such as planned activi-ties performed, variances in terms andconditions per deal, etc. These param-

eters are often secondary in impor-tance. Therefore, corrective actions arenot taken in case of deviations, as longas the primary KPIs meet the targets.

KPIs are frequently measured but insuf-

ficient follow-up and corrective actions

are taken

The capabilities to utilise SalesPerformance Measurement data typi-cally depend on the frequency of meas-urement and reporting forums. This is

due to the fact that reporting forumsoften make the decisions concerningcorrective actions. Synchronising thesales performance measurement andreporting forums is a challenge: 86%of companies track KPIs on frequentbasis (see figure 10), whereas reportingand follow-up forums are held less fre-quently, monthly or often even quar-terly. Naturally, the frequency of KPImeasurement and follow-up is influ-enced by the length of the sales cycle,e.g. capital goods industry versus fastmoving consumer goods industry.


0%

10%

20%

30%

40%

50%

60%

70%

more than 97 to 94 to 61 to 3

Figure 8 Number of KPIs in use

Figure 9 Use of non-financial measures

0%

10%

20%

30%

40%

50%

StronglyDisagree


We use non-financial measures to steer and drivethe desired sales behaviour

0%

10%

20%

30%

40%

50%

StronglyDisagree


We track KPIs on a regular basis

Figure 10 Regular mesurement of KPIs


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Overall, it can be stated that compa-nies are ambitious when it comes tomeasuring but less keen in taking cor-rective actions and making improve-ments based on the KPIs.

Measuring and reporting problems isnot a mean in itself, the time shouldrather be spent on fixing the prob-lems.

Marketing & Sales Manager,


Another challenge mentioned by sev-eral Sales Executives is keeping thefocus on what lies ahead and whichproactive initiatives need to be taken.Following up on KPIs highlights the

results from previous actions and theExecutives experience that historicaldata has limited impact on how theyplan for the future.

Difficulties in developing an aligned set

of KPIs

Although Sales Executives are satisfiedwith their current set of KPIs, mis-alignment exists between short-termtactics and long-term strategy. Theconflict occurs due to the relative ease

of measuring short-term tactics, oftendone on activity level or by using sim-ple financial measures. Typically, thelong-term strategy is more challengingto measure due to less concrete objec-tives.

Balancing individual and collectivetargets is another typical challenge forSales Executives, as fulfilling individu-al KPIs does not necessarily equal thefulfilment of the companys overall tar-

gets. This limits managements possi-bility to steer organisational perform-

ance by putting efforts into makingindividuals achieve their goals. Due toinsufficient links between individualand company performance, there isalso a risk that individuals will losemotivation if the compensation is toodependent on the overall performanceof the company.

System support for performance meas-

urement and reporting is hard to effi-

ciently adapt

When it comes to system support forperformance measurement and report-ing, the situation varies dramaticallybetween the companies. The com-panies have either invested heavily

in large ERP systems with extensivefunctionalities for performance report-ing, or they still rely on manual rou-tines based on spreadsheet reporting.The problem with a large ERP systemis that it can quickly become complexto handle and demands time-con-suming trainings to understand thesystem. The spreadsheet reportingmodel is easy to handle but bearsseveral risks in terms of accuracy dueto manual input and management ofthe model. In fact, very few of theinterviewed companies appear to haveestablished an appropriate balance insystem support for performancemeasurement.

The main benefit of

having a clear set of KPIs

is that it sends the signal

that we follow-up on

important areas we want

to focus on.

Head of Marketing and Sales,

Transportation Industry


16/3016


improve Sales Performance

Measurement

Integrate leading KPIs to understand

the drivers of performance

Integrating the non-financial measuresin the Sales Performance Managementsystem is critical for understandingthe drivers of performance. To exclu-sively rely on financial measures is aninefficient way of measuring perform-ance, making it difficult to clearly seethe link to sales behaviour. Hence,additional leading KPIs need to beidentified to complete performancetracking (illustrated in figure 11).Since leading KPIs often are specific

to the industry, these kind of meas-ures should be identified by analysingthe behaviour of the best performingsalespeople. Measuring financial KPIsin combination with additional meas-ures allow managers to quickly adjustand take corrective actions on below-target performance.

Non-financial measures can alsobe utilised in establishing the linkbetween strategic objectives and the

drivers for fulfilment of the long-term

strategy, for example, measuring thenumber of launched products maybe a key metric for realising objec-tives such as reduce market risksby broadening the existing productportfolio.

Balancing the non-financial andfinancial measures is often critical toavoid suboptimal sales behaviour. Forexample, the sales volume should beintegrated with the number of strate-gic products sold to ensure that sales-people direct their activities towardsachieving the targeted sales mix.

Finding the right mix of measuresreally had a positive impact on how we

manage sales behaviour.Head of Sales and Marketing,

Transportation Industry

Align follow-up processes and perform-

ance measures

Typically, lot of effort is used to reportperformance on a frequent basiswithout dedicated follow-up respon-sibilities assigned that are operatingwith similar frequency. Standardisedprocedures can exist for escalating

large-scale deviations in performance,

whereas regular follow-up processestoo often constrain immediate cor-rective actions on more frequentdeviations of smaller scale. By usingpredefined early-warning indicators,companies can ensure quick and con-sistent actions for deviations requiringimmediate focus.

Increase focus on proactive measure-

ment

To ensure a more proactive approachto planning and executing correc-tive actions, the number of proac-tive measures should be increased.Currently, in many companies fore-casting is an underdeveloped area

driven by controlling units that merelyapply simple forecasts ratios. In moreadvanced forecasting models, meas-ures indicating future performance areused, for example number of dealsin a specific sales stage in the salesfunnel and probability of sales.The foremost purpose of using thesemeasures is to improve forecastingaccuracy. Effective use of forecasting isa key to take charge over time spenton sales, and also offers an instrumentto be used for effective coaching.

Figure 11 Difference of leading vs. lagging KPIs

Use of only lagging KPIs

Activity Performance

Reporting

Review

e.g.

revenues

Use of leading and lagging KPIs

Activity Performance

Reporting

Review

e.g.

revenues

Behaviour

e.g.

number

of visits per

week

Results

Lag

ging

KPIs

Results

Lag

ging

KPIsProcessLeadingKPIs


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Additional insights

Besides the recommendations and findings mentioned, a number of interesting aspects were dis-

cussed in interviews with Sales Executives. Some additional insights from these discussions are:

Best practice for driving the sales process forward is to have standard indicators for how much

time needs to be spent on a deal at each sales stage of the sales funnel. If the standard time is

exceeded, the deal will be followed up to identify the reasons for the delay and to ensure sales

funnel quality.

User-friendly system where all reported input leads to relevant and useful output (e.g. the output

can be used by salespeople to view a bonus forecast).

Systems integrating marketing and sales indicators and enabling root cause analyses of sales

drivers (e.g. average price development, purchase frequency, market penetration) are used to fine-

tune the KPIs.

An increased integration with customers allows joint measures and data sharing to further under-

stand sales drivers and track sales performance (e.g. point of sales data, collaborative forecasting).

There is a difference between

results and drivers. By only measuring

KPIs, such as sales volume, you are

not able to intervene quickly and takecorrective actions.

Head of Global Sales Operations,



18/3018

Introduction

Compensation and Incentives includemany different types of rewards (seefigure 12). The capability to accuratelymeasure performance is the basis of

creating an effective mix of rewardtypes. The alignment of differentrewards ensures the sales organisationis working as a one unit towards com-mon targets which are defined in theSales Management process. A culturaldimension is in many aspects relatedto Compensation and Incentives. Forinstance, there is often a higher accept-ed level of variable compensation inindividual cultures compared to moreteam-oriented ones.

Findings related to Compensationand Incentives

Compensation models are not sufficient

to drive motivation on a daily basis

The intention of Compensation andIncentive programmes is to motivatesalespeople and thereby promote thedesired sales behaviour. However, morethan 50% of the Sales Executives com-mented that the compensation struc-tures used fail to promote the desired

sales behaviour, thus indicating a clearimprovement area (see figure 13).

Discrepancy can, for example, resultfrom the following factors:

Insufficient variable compensation.In most of the interviewed compa-nies, the variable part of the salaryamounts to approximately 20% ofthe total annual salary. Several SalesExecutives stated that this amountis not sufficient to make an impact

on a salespersons behaviour on adaily basis.

The variable part is not paid oftenenough.Typically, the bonus ispaid annually. This decreases theeveryday motivation, as the timebetween compensation and theactual performance is consideredtoo long.

Incentive programmes are often usednot only to motivate existing sales-people but to attract new employees.

Incentives have become more or less ahygiene factor needed to be on indus-try par rather than as an instrumentto drive sales behaviour.

Manager Marketing and Sales,


Since financial rewards often failto fulfil their purpose, the SalesExecutives stress the importance ofsystematically using non-financialrewards as a supplement.

If people are doing a good job, theyget more responsibility, better develop-ment possibilities in projects, and alto-gether more visibility. The monetaryincentives need to be complementedwith these rewards.

Head of Sales, Pharmaceutical Industry


Figure 13 Effect of compensations

0% 20% 40% 60% 80% 100%

StronglyDisagree


The compensations we use to reward the

salespeople drive desired sales behaviour

Figure 12 Overview of reward typesand examples

Compensation

Fix Variable

Fix monthly pay Variable part of pay(i.e. bonus based

on performance)

Incentives

Financial Non-financial

Trips

Dinners, event

tickets

Awards such as

Salesperson of

the year


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the way we see it


How could you possibly

understand your own contribution

to the Group result if its beingremarkably reduced due to

depreciation of goodwill?

Director Business Sales, Telecom Industry


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Risk of suboptimal compensation

individual versus group performance

Some of the interviewed compa-nies have started to move towardsmore individually driven incentives,

whereas others use group perform-ance-based compensation models.These are mostly based on geographi-cal criteria, such as district or country.Such incentives could encourage teamwork contribution but at the sametime reduce individual ambitions.Balancing the individual and the teamcompensations is an ongoing chal-lenge, as approximately 40% of thecompanies are lacking compensationmodels that would reward both(see figure 14).

Group-based incentive structures helpto put focus on overall corporate tar-gets and collaboration. Nonetheless,the Sales Executives stated that com-pensations and incentives insufficient-ly linked to individual efforts preventthis very purpose, i.e. as instrumentsto motivate a desired sales behaviourand drive the performance of the indi-vidual salesperson.

Recommendations to furtherimprove Compensation and

Incentives

Optimise the mix of and increase the

focus on individual compensation and

incentives

The variable part of the total compen-sation is often too low to truly impactmotivation. The link to individualperformance has to be clearer to steerthe behaviour of the salespeople.

However, increasing the variable partlinked to individual performanceshould be considered very carefullybased on industry requirements toavoid hampering teamwork. Acrossindustries, companies should strivetowards a model where a compara-tively low proportion of compensa-tion and incentives is directly tied tocompany performance. The individualsalesperson perceives the own influ-ence on the companys performance asrelatively low, and hence will feel lesscommitted to contributing to com-pany results. Instead, it is preferableto pay compensation on individualperformance, which should ultimatelybe clearly linked to company results.

To avoid suboptimal results, it isimportant to align the compensationwith the company values and the tar-gets of other functions. One way ofmaintaining the focus on teamworkis to conduct competitions for salesteams (where applicable).

Another important aspect of thecompensation mix is to consider howhigh performers can be exposed. This

could be done in many different ways:formally, by enhancing the employeesresponsibilities, through salespersonof the month awards, or informally,for example through exposing suc-cessful sales employees in newslettersor by promoting best practice stories.Regardless of the method used, astructured approach towards recognis-ing good performance is importantand helps to define role models forthe targeted sales behaviour

An efficient compensation

structure should have a high

variable part, allow exposure

of performance, and contains

a close follow-up structure.

Head of Global Sales Operations,


Figure 14 Individual and team basedrewards

0% 20% 40% 60% 80% 100%

StronglyDisagree


We have a good set of compensations that reward

both the individual and the team


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the way we see it


Additional insights

Besides the recommendations and findings mentioned, a number of interesting aspects

were discussed in interviews with Sales Executives. Some additional insights from thesediscussions are:

If the variable pay is connected to the company results, communicate the results on a

monthly basis to motivate the individuals to further contribute to the company results.

A high exposure of performance can be a motivator without additional financial rewards,

e.g. monthly publication of sales results with a traffic light status encourages salespeople

to try harder to avoid receiving a red light.

Combine incentive trips with learning purposes, e.g. reward good performance with a

trip to another national sales company within the group to share best practices.

Incentives are all about the right timing. What is more, even small signs of appreciation

are extremely important.

Allow the employees to choose whether they want to take a higher risk, e.g. by accept-

ing a lower fixed compensation in favour of an even higher variable part upon high

performance.

Use more frequent incentive intervals

to drive everyday motivation

Many companies pay variable rewardson an annual basis. However, defin-ing incentives on a quarterly or half-

year basis helps to more clearly linkindividual performance and incen-tives, and thus promotes the targetedbehaviour among the salespeople(for practical reasons, pay-out canstill be made on an annual basis).One Sales Executive expressed thatannual bonus is something one takesfor granted, a notion that can beaddressed by more frequent bonusintervals. However, to maintain aconstantly high level of motivationthroughout the year, establishing

structures preventing the salespeoplefrom being fully satisfied upon fulfill-ing their targets within the first quar-ters is essential. This can, for example,be achieved by using incentives thatincrease gradually throughout the year.


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Introduction

Sales coaching provides individualguidance, support and feedbackthrough interaction rather thaninstruction. Trainings help to develop

skills and competence through typi-cally standardised course format. Incombination with that, coaching isan efficient way of encouraging sales-people to adopt the training contentin their daily work. Together withthe management process and clearlydefined sales targets, sales coaching isa crucial element to drive desiredsales behaviour:

One of the most important factors insales governance is to ensure that sales

resources develop the right competence,create motivation and develop the rightsales behaviour

Sales Manager, Media Industry

Findings related to Sales

Coaching and Training

Sales coaching is an important instru-

ment to enforce desired sales behaviour

Sales coaching is seen as an impor-tant method for developing adequate

competences, motivation and salesbehaviour. 95% of the respondentsrank coaching as important or veryimportant for managing and drivingthe desired sales behaviour of thesales organisation (see figure 15). Inthe interviews, sales coaching andtraining were often referred to as themost important elements of the SalesGovernance Framework.

Coaching is an essential componentin sales governance. Coaching is a key

factor to support performance. This isbecoming more and more important

Sales Director, Energy Industry


It was emphasised that standardisedtrainings should be complementedwith individual coaching on a regularbasis to ensure a lasting effect. Salescoaching should not only be limitedto specific trainings.

In companies where sales perform-ance cannot be measured easily (e.g.in cases of indirect sales, or whensales is driven more by market-relatedfactors than sales performance), it wasmentioned that coaching can be espe-cially important. In these cases, salescoaching can compensate for the lackof traditional KPIs used to drive salesbehaviour.

Few companies have a structured

methodology to accomplish sales

coaching and training

Despite its importance, Sales coach-ing is still the area within the SalesGovernance Framework where thepotential for improvement appears tobe most apparent: 48% of the respon-dents rank sales coaching as the mostimportant element to improve in thecoming three years (see figure 16).

Based on the interviews it seems thatthe desire to improve sales coach-ing is closely linked to a general lackof clear coaching guidelines. In thesurvey, less than 30% say that theyhave common principles to ensuresalespeople are coached in a consist-ent manner (see figure 17). SalesExecutives also mentioned that coach-ing initiatives often rely on individualefforts rather than company efforts.

Figure 15 Impact of coaching

0% 20% 40% 60% 80% 100%

Very LowLowHighVery High

Impact of coaching to drive desired sales behavior

Figure 16 Top three improvement areas

0%

10%

20%

30%

40%

50%

Clearly defined

sales targets

Clear salesmanagement

process

Salescoaching

Figure 17 Coaching guidelines andculture

0% 20% 40% 60% 80% 100%

We have a strong coaching culture in our company

We have common guidelines and principles that ensureefficient and consistent coaching of salespeople

StronglyDisagree



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the way we see it


Sales coaching should be

happening all the time, not in one

single session. This is a critical

part of sales.

Sales Director, Consumer Goods Industry


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Only a minority of companies reportthat they have established a strongcoaching culture in their company. Atthe same time, the Sales Executivessay that they want to prioritise thisarea in the time ahead.

The current coaching approach isindividually driven by each salesmanager. Today we lack a commonapproach to coaching, but this willbe one of the areas to develop for theyears to come.

Director Business Sales, Telecom Industry

In general, there are large differencesin the sales coaching and trainingapproaches. Some companies have a

strict structure for competence devel-opment that is based on standardisedtrainings. Other companies applya learning-by-doing approach andstandardised methodologies are metwith mistrust.

Evaluating effects of sales

coaching is a major challenge

Evaluating the effects of coaching isa prerequisite to ensure continuousimprovement and alignment of sales

targets and strategic objectives. Themajority of companies find it difficultto measure the effects of coaching (seefigure 18). Some companies evaluatesales competence in exams, certifica-tions or employee surveys. Theseevaluations do not capture the effectsof sales coaching. Many companiesobserve the positive effects of coach-ing without formalised measurementmethods. Others have no awarenessof any positive long-term effects ofcoaching.

Most companies are unsure of theactual effects of sales coaching. Or as aSales Director in the consumer goodsindustry put it:

We are not certain of the effects of

coaching. Generally it increases motiva-tion, but people tend to go back to oldbehavioural patterns in the long run

Sales Director, Consumer goods Industry


improve Sales Coaching and

Training

Implement a structured model for sales

coaching and training

Companies should promote and devel-

op sales coaching and training initia-tives according to a structured model(see example in figure 19). It shouldbe used as a means to ensure continu-ous improvement and the developmentof the sales organisation. To realisethe effects of the underlying layers,companies should develop a commoncoach training programme and useindividual coaching to enforce desiredsales behaviour and improve sales forceefficiency.

Emphasise continuous feedback and

improvement

Together with individual career plan-ning and target settings, Sales coachingneeds to be integrated in the commonframework for core sales competencedevelopment. Individual coachingshould be used to increase motivationamong salespeople, encourage desiredsales behaviour and ensure long-termeffects of competence development.

The model should emphasise continu-ous feedback and the improvement of

Figure 18 Measurement of coaching

effects

0% 20% 40% 60% 80% 100%

We follow up on coaching initiatives to make sure that

these results in actual effects

StronglyDisagree


Coaching should be

done, but measuring its

effects can be difficult.

Vice President of Sales,Consumer Goods Industry


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the way we see it


different training components. SalesManagers should be given sufficientsupport to make use of coaching. Thiscan be supported by creating a forumfor exchanging best practices.

Follow up on coaching initiatives to

ensure they result in actual effects

Effects of sales coaching and trainingare difficult to quantify. Qualitativeeffects on employee retention, sick-ness absence, customer churn andsatisfaction can be quantified, e.g.in various employee and customersurveys. Because of a potentially largeerror margin, the measurement ofthe coaching success should be sup-

ported by employee interviews and360 degree feedback to further securequalitative effects.

Self-realisation

Individual career

plans

Sales behaviour

Industry and customer specific

competence

Basic sales competence and methodologyMaturityofSalesCoachingandTraining

Individual coaching/feedback/

mentoring

Appraisal interviews,

collaborative target

setting and planning

Practical training

Certification

programmes

Onboarding/

fundamental

courses

Individualised sales competence

Contin

ousfe

edback

and

improve

ment

Figure 19 Model for sales competence development

Additional insights

In addition to the recommendations and findings mentioned, a number of interesting

aspects were discussed in interviews with Sales Executives. Some additional insights

from these discussions are:

A common methodology for a sales coaching culture is established throughout the

sales organisation using a coach-the-coach programme.

Creation of a common platform for core sales competence and methodology - while

allowing for personal career development based on individual preferences and indi-

vidual potential.

Dynamic coaching model: the coaching methodology is continuously improved based

on customer and employee feedback.

Sales coaching is an integrated part of a common certification scheme.


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Sales Governance is used rather

for controlling purposes than for

driving the continuous improve-

ment of sales performance

Even though the levels of maturity

of Sales Governance and its differentelements vary between the companiesand industries investigated, a commonpattern exists for Sales Governance.

From the Sales Governance compo-nents, the Nordic Sales Executivesranked sales coaching, clear salesmanagement processes and clearlydefined sales targets as the mostimportant factors to drive the desiredsales behaviour. At the same time,sales coaching and clearly defined

sales management processes werealso identified as key improvementareas. Financial KPIs were consideredthe least important component todrive desired sales behaviours. Thisshows that measuring performancealone is not a means to ensure highperformance. Rather there must be anoptimum balance between differentKPIs to drive the business. This bal-ance should not be static, but evolveaccording to business objectives.

The study results indicate that mostcompanies use Sales Governance ele-ments as controlling mechanisms.Generally, Sales Governance is seen asa passive, rather administrative andrigid method for controlling the oper-ations instead of an actively evolving,adaptable and flexible governancemodel. Only few companies use anelaborative governance model as away to truly drive sales effectivenessand high performances.

Summarising discussion and way

forward

Taking Sales Governance to the

next level

All Sales Executives stated that theimportance of sales governance willgrow in the future. In fact, 86% of

the Sales Executives believe that theirGroup Management will focus moreon Sales Governance-related questionsin the coming three years.

Overall, leading companies in theNordic region have the potential tofurther develop and improve theirSales Governance models. As men-tioned, forerunners have acknow-ledged that continuous improvementis key to ensure competitiveness. Butto succeed with change and improve-

ment initiatives and to take SalesGovernance to the next level, threemain principles should be kept inmind:

1. Integration of the Sales Governanceelements byadapting a holisticperspective on governance andstrengthen the links betweenthe four elements. In particular,the elements Compensation andIncentives as well as Training and

Coaching should be tied closertogether with Sales Managementand Sales Performance Measure-ment. Understanding that sepa-rated elements will lead to sub-optimal results is key to ensure thesuccess of improvement initiatives.Bringing the Sales Governance ele-ments together will create sustain-able motivation for salespeople.The old management rule onlywhat gets measured gets donestill applies in the context of driv-


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the way we see it


ing the right sales behaviours.Sales Coaching and Training sup-port the way how this is done inthe daily business. Compensationand Incentives together with theother elements will keep sales-people motivated. Overall, SalesManagement sets the frame for theother elements and will be rein-forced by them if done efficiently.Integration is also important withineach of the Sales Governance ele-ments, e.g. defining the right mixof different KPIs, rewards, coachingand training components and syn-chronising the strategic and opera-tional sales management levels.

2. Cross-functional alignment.It iscrucial that other business func-tions understand their roles in the

sales value chain, i.e. how theycan contribute and why they areimportant. Also, the role of Sales inintegrating the customer view (e.g.Product Development) is of centralimportance, especially in prod-uct-driven companies. The SalesGovernance model needs to bealigned with other organisationalunits such as marketing and deliv-ery. Furthermore, aligning the SalesGovernance model with customers(where applicable) will strengthenstrategic partnerships and promotea culture of information exchange.

3. Keeping a clear focus on the ben-efits.Sales Governance spans awide area and improvement objec-tives need to be clearly defined tostay focused and succeed with the

Key recommendations for each of the Sales Governance elements

Based on the findings of the study, the following recommendations are suggested to further improve each of the

Sales Governance elements.

Sales Management

Focus on synchronising strategic and operational sales management levels by establishing firm feedback loops to

increase the internal efficiency Facilitate effective and flexible cross-functional cooperation to meet the increasing customer demands


Combine lagging financial KPIs with additional measures to understand the true performance drivers

Increase the focus on proactive measurements to be able to take corrective actions in advance

Align follow-up processes and performance measures to avoid over-administration and inconsistent corrective actions


Optimise the mix of and increase the focus on individual compensation and incentives to motivate the salespeople

Increase the frequency of incentive intervals to drive the motivation of salespeople on a daily basis


Follow up on coaching initiatives to ensure they create actual effects

Implement a structured model for consistent trainings and coaching

Emphasise continuous feedback and improvement to drive long-lasting competences

implementation. Sales Governancesupports efficiency gains, e.g. byfocussing the salespeople on themost important targets and neces-sary actions and stopping thoseactions that do not create value. Intimes of economic downturn, salesgovernance facilitates the quickadjustment to market changeswith modified targets using leadingKPIs and sales coaching. In addi-tion, a balanced Compensation andIncentives element that includesnot only individual financialrewards but also recognition of theindividual and groups, make thesales organisation more stable andhence, less vulnerable to changing

market situations.


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About Capgemini Consulting

Capgemini, one of the worlds foremost providers of consulting, technology

and outsourcing services, enables its clients to transform and perform through technolo-

gies. Capgemini provides its clients with insights and capabilities that boost their free-

dom to achieve superior results through a unique way of working the Collaborative

Business Experience and through a global delivery model called Rightshore, which

aims to offer the right resources in the right location at competitive cost. Present in

36 countries, Capgemini reported global revenues of EUR 8.7 billion in 2007 and

employs over 83,000 people worldwide.

Capgemini Consulting is the management consulting discipline of the Capgemini Group.

Our Marketing, Sales and Service practice has extensive experience with helping com-

panies to improve profitability through enhanced marketing, sales and customer service.

Our knowledge covers strategy development as well as process-, organisation and IT

development in a wide range of industries globally as well as in the Nordic countries.

More information about individual service lines, offices and research is available at

www.capgemini.com.

About Capgemini and Collaborative Business Experience


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the way we see it


Contact us

Sweden Claudia Nylund [email protected]

Peter Nilsson [email protected]

Norway Bettina Fossberg Johansen [email protected]

Geir Mortensen [email protected]

Finland Hanna Aho [email protected]

Antti Tapionlinna [email protected]

Project teamHanna Aho, Charlotte Andersson, Anne-Cecilie Bentsen, Louise Bergqvist,Mikkel Jonsson, Philip Konopik, Peter Nilsson, Claudia Nylund, Antti Tapionlinna

Design: Fresh Design


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www.capgemini.com

Sweden

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161 24 Stockholm

Telephone: +46 8 5368 5000

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Capgemini

Office address:

Hoffsveien 1D, 0275 Oslo

Mailing address:

Pb. 475, Skyen

0214 Oslo

Telephone: +47 2412 8000

Finland

Capgemini

sales governance study 2008

Documents