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Sales Performance Management
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Prepared for Institutional Investor Institute
Jason Brown
Principal, ZS Associates
617.557.5814 | jason.brown@zsassociates.com
Marketing Sales Ops & Technology
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er
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ce
Incentive Compensation is the largest practice in ZS by annual revenues
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Implement the leading 3rd party Sales Performance Management software solutions Outsourced business process support for 100,000+ reps across 50+ countries and
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Sales performance management observations
Introduction
Sales performance management is difficult—especially for institutional and key accounts teams
1
The best programs take a balanced view of the salesperson, the process, and the results
2
Failure to account for sales opportunity is the leading source of unfairness
3
Discretionary compensation is often too… discretionary
4
Commissions are often overused (as a % of total pay)
What is sales performance? (Audience poll)
A. Sales results (wins, losses, revenue)
B. Customer results (satisfaction, experience, perceptions) C. Sales approach or process (how the results were achieved)
D. Sales activities (specific tactics or events delivered during the process) E. All of the above
F. None of the above
Sales performance analogy: Pitcher Wins
Haddix’s competition was tough (Lew Burdette threw 13 shutout innings)
The team around him let him down (failed to score; error in 13
thinning)
Some bad luck, too (Pirates got 12 hits, but didn’t score)
Some consider this the best pitching performance in history… and the
result was a ‘loss’
Date IP H ER BB SO
July 5, 1959 8 9 4 0 7
Date IP H ER BB SO
May 26, 1959 12.2 1 0 1 8
Component Analysis (the process)
Outcome
L
W
The bad news
: We can’t wait a career to evaluate
performance!
Pitcher wins and underlying performance are closely
correlated when looking across a player’s full career career
1The good news: All these approaches converge over time
R² = 0.758 0 100 200 300 400 500 600 0 20 40 60 80 100 120 140 160 180 P it cher W ins
Component Analysis (Wins-Above-Replacement)
Component analysis versus actual wins
1. These data show wins-above-replacement (WAR) and wins for the top 500 pitchers (by WAR) in MLB history.
Sales performance evaluation criteria for Asset Managers
MeasurementSales “wins” • Few in number; volatility in win % over time • Individual contribution vs. team and brand AUM (total or growth) • Wide variance and volatility • Overstates salesperson’s contribution? Sales activities
(finals presentations, etc.)
• Activities don’t pay the bills • Measure activities, get activities Customer feedback
• Often qualitative, low sample size • Salesperson attribution issues
Observed competencies
• Competency without activity = no results • Risk of rater biases
Criteria
Draw
backs
Process Driven People Driven Results Driven
Process Skills Rewards Process Skills Rewards Process Skills Rewards
Focus on:
• Account planning • Coaching
• Sales activity reporting • ‘Solid’ performers
• Low compensation variance
Focus on:
• Hiring
• Mentoring & apprenticeship • Training and development • Long horizons
• High average compensation
Focus on:
• Incentives and goals • Hiring/firing
• Sales tools
• Individual autonomy
• High compensation variance
Distinctive
Adequate
Companies typically adopt one of three positions with respect to
sales performance management
Process Driven People Driven Incentives Driven
Process Skills Rewards Process Skills Rewards Process Skills Rewards
Distinctive
Adequate
Most asset managers use “People” or “Incentives”-driven
approaches
Measurement
Focus on:
• Account planning • Coaching
• Sales activity reporting • ‘Solid’ performers
• Low compensation variance
Focus on:
• Hiring
• Mentoring & apprenticeship • Training and development • Long horizons
• High average compensation
Focus on:
• Incentives and goals • Hiring/firing
• Sales tools
• Individual autonomy
An example of process-driven performance measurement
Each step in the process yields viable performance metrics
Comparison across salespeople yields insight
Useful as a diagnostic and coaching tool
Understanding opportunity (# plans on the market) is importantRFPs Finals Wins AUM
100
75
25
10
$50B
Sales Rep A 75% 33% 40% 50% share
Average Rep 60% 25% 25% 40% share
# of plans on the market
An example of people-driven performance measurement
Surveys and interviews can be used to capture these details
Push for detail, examples, and direct comparisons wherever possible
Be wary if results don’t match evaluations over a large sampleCustomer
feedback
Deal team
feedback
Sales leader
feedback
Standardized
tests
Work with again?
Recommend to others?
Ratings vs. peer group
An example of incentives-driven performance measurement
Illustration
A clear, direct approach for communicating expectations
Controls cost of sales
Sales opportunity across salespeople affects pay ‘fairness’
Undermines ability to ‘control’ or direct salesperson activitiesMeasurement
Pay mix Incentives 70%, base salary 30%
Metric 1
Commissions on 1st year AUM (or AUM growth, or net flows, etc.)
Metric 2 Bonus for achieving 100% of AUM sales goal (or AUM market share, etc.)
Please select all that apply
Which of the following are part of your salesperson incentives?
(Audience poll)
A. Commissions
B. Bonus for individual goal achievement
C. Bonus for company performance (e.g., sales or profits)
D. Objectives-based or discretionary bonus
Commissions can be powerful, and dangerous, incentives
Commissions are useful, but they shouldn’t be the only component within an Asset Manager’s
Advantages Disadvantages
Often functions as “hidden salary” Can discourage territory expansion Less adaptive to company strategy Simple
Timely
Controls cost of sales
Design
Best uses of commissions:
When launching a new product/offering
When outsourcing sales to a third party
When the salesperson contributes highly to the sale (low carry-over)Objective-based measures are ideally suited to institutional sales,
but they often fail in execution
Ob
jec
tiv
ity
is ke
y
Bad
Good
Conduct 20 in-person sales meetings Achieve finals presentations with X% of opportunities
Achieve high customer satisfaction Rate in the top X% of industry peers in customer satisfaction
Develop 10 key account plans Achieve X% of approved tactical objectives in account plans Design
Push
to
di
ffer
entiate
0 2 4 6 8 10 12 14 16 Bottom 10%Next 20% Mid 40% Next 20% Top 10%
Sales MBO
If your MBO ratings look like this…
Consider:
Relative ranking among
salespeople
Discrete levels (or goals)
Some closing advice
Conclusions