2012 sales compensation practices survey for the high-tech industry

Copyright 2012 © WorldatWork and ZS Associates, Inc.

2012 Sales Compensation Practices Survey

for the High-Tech Industry

May 2012

This report is solely for the use of all direct recipients. No part of it may be circulated, quoted or reproduced

for distribution to any third party without prior written approval of ZS Associates and WorldatWork.


Introduction

Welcome to the 2012 edition of Sales Compensation Practices Survey for the High-Tech

Industry conducted by ZS Associates and WorldatWork.

The questionnaire used for this study was developed based on numerous interviews with

high-tech sales compensation leaders. The result was a study focused on the critical issues

facing sales compensation professionals today.

We hope you find the results of the survey beneficial and useful. If you have suggestions

for future surveys, please send an email to [email protected] or

[email protected].

Best Regards,

2

This report is published by the WorldatWork and ZS Associates, Inc. and contains information based on input from companies or individuals engaged in the development or

management of sales compensation plans

mailto:[email protected]

mailto:[email protected]


Invitations to participate in the study were sent out via email to selected high-tech

companies in February 2012.

Participants from 17 U.S.-based high-tech companies completed the online survey from

February through March 2012.

The survey was divided into the following categories of questions:

Incentive methods

Reporting and timing

Sales crediting

General sales force measurements

Incentive compensation issues

Respondents filled out the survey for different types of sales roles. These roles were

aggregated in four groupings:

Client relationship managers

Partner or channel account managers

Lead sales role

Technical specialists

Research Methodology

Please notes: n-sizes throughout the survey represent the number of responding companies, unless otherwise stated. Median values are not shown if fewer than five

responses were received; other values are not shown if fewer than three responses were received. Caution should be taken whenever values are based on small

response. 3


Participants*

Dell

Citrix Systems

Google, Inc.

IBM

EMC

GoDaddy.com, LLC

Motorola Mobility

CA Technologies

Microsoft

Wipro Ltd

CGI

AMD

Sonus Networks

Corning

BMC Software, Inc.

4

* Responses from two respondents that did not provide their company name are included in the analysis.


Section Page

Executive Summary 6

Incentive Methods 8

General Sales Force Measurements 17

Incentive Compensation Issues 21

Participant Profile 23

About ZS Associates, Inc. 26

About WorldatWork 27

5

Contents


Executive Summary

6


Executive Summary

7

Incentive Methods

• More than 3 out of 4 surveyed companies use some incentive method to encourage higher

price points for their products; specific methods vary widely

• Capping incentive earnings is not common for pure sales/hunter roles, but is more prevalent

for other sales roles

• The top performing sales representatives typically earn more than 2x the target incentive for

all roles

• The majority of respondents do not use any type of special incentives to encourage selling

early in the performance period

• Two-thirds of companies complement the sales incentive plan with a recognition program to

recognize and reward top performers; most utilize contests/SPIFFs to spur short-term

focused sales efforts

General Sales Force

Measurements

• Turnover rate (voluntary and involuntary combined) is less than 20% for most of the

companies surveyed, with a mean of 14%

• Most of the companies standardize compensation plans and roles across multiple countries

• Most companies do not spend more than 5% of revenues on sales compensation

Incentive Compensation

issues

• Accurate quota setting and overly complex plans are the biggest issues identified by surveyed

companies


Incentive Methods

8


In your last completed fiscal year, what methods did you use to incent

representatives to obtain the highest possible price levels? (check all that apply)

Vary the payout rate based on product/deal gross margin

Pay on gross profit dollars

Do not incorporate price into the plan

Pay on gross margin percent

Pay on net bookings

Pay on average selling price (ASP) achievement

Other

5

4

4

2

2

1

2

The majority of surveyed companies encourage higher prices with their sales

incentive plan, though the specific tactic varies widely.

Other responses include: •Price Floors •Based on revenue

9

number of respondents

n=17


For each of the following roles in your most recent fiscal year, did you use caps

to limit the amount of incentive pay earned?

Client Relationship Manager

(n=13)

Lead Sales Role (Hunter/Pure Sales)

(n=14)

Technical Specialist (Pre- and Post-Sales)

(n=17)

Partner or Channel Account Manager

(n=13)

Absolute cap on

incentive earnings

No cap and no

“decelerator”

“Decelerator” that slows

earning increases beyond a

specific performance level

“Per deal” cap applied to

each sale separately

Other

6

3

3

0

1

7

6

2

0

2

6

2

3

1

1

Capping incentive earnings is uncommon for the hunter / pure sales role, but is

slightly more common for the other sales roles.

4

5

3

1

1 Other responses include: •Cap and decelerator •Discretionary

10

number of

respondents number of

respondents

number of

respondents number of

respondents


For each of the following roles, how much incentive pay (as a multiple of the

target incentive) did your company plan as payout for its top performing sales

representatives (top 10%) in your most recently completed fiscal year ?

Client relationship manager

n=10

Lead sales role (hunter/pure sales)

n=11

Technical specialist (pre- and post-sales)

n=13

Partner or channel account manager

n=11

2.6

2.6

2.1

2.5

Top performing sales reps typically earn more than 2X the target incentive.

Mean Multiple of Target Incentive

11


What incentive methods do you use to encourage reps to sell earlier in the

performance period (not wait until the very end of the period)?

We do not incent our salespeople to sell

earlier in the year/period

MBOs

“Fast Start” bonus for sales early in the

period

SPIFFs early in the period

Pay some upside earlier in the period for

over performance up to that point

9

3

3

1

1

More than half of the respondents do not use any type of special incentives to

encourage selling early in the performance period.


n=17

12


How do you reward reps for selling multi-year service arrangements?

Multi-year deal results in a

kicker/accelerator on base earnings

Reward reps for the first X years in the

contract (e.g., 3)

Reward reps for all revenues in the

contract

MBOs

Other

6

4

3

2

2

Companies usually reward for multi-year service arrangements but the method

for rewarding varies.

Other responses include: •Use of a signings element when appropriate •We do not comp on multi-year deals


n=17

13


In addition to the sales incentive plan, what other types of reward vehicles has

your company used in your most recent fiscal year for sales representatives?

(check all that apply)

Recognition plan (annual plan to recognize top

performers, President’s Club, etc.)

Contests/SPIFFs

Spot awards (management discretionary awards)

Long-term incentives (includes stock options and stock

grants)

Profit-sharing/gain-sharing/company-wide plans

Other

None of the above

12

11

11

8

2

1

1

Companies tend to complement the sales incentive plan with additional incentives to

reward and recognize top performers (recognition program) and to reward short-

term initiatives (contests/SPIFFs).

Other responses include: •Limited Incremental Incentives


n=17

14


What percent of earnings are received at each of these points in the order

process? (responses must sum to 100%)

On average, earnings are split evenly across various stages in the order process.

n=15 Note: 2 respondents

excluded from analysis.

perc

ent of earn

ings (

mean) 21%

25%

23%

12%

19%

0%

5%

10%

15%

20%

25%

30%

When an order is booked

When an order in invoiced

When an order is shipped

When an order is paid

When revenue is recognized

15


How do you split sales credit when multiple reps work on a single sale?

We do not split sales credit

By percent sold in different geography

Fixed split percentage based on rep involvement

Manager’s discretion

Based on rep product responsibility

8

3

3

2

1

Half of the companies do not split sales credit and instead either double quota/double

credit or have a sales process which gives one individual sole accountability for a sale.


n=17

16


General Sales Force Measurements

17


What was the total turnover rate (voluntary and involuntary combined) for sales

roles at your company during the most recently completed fiscal year?

Turnover rate (voluntary and involuntary combined) is less than 20% for most

participants, with a mean of 14%.

1 1

0

7

8

0

1

2

3

4

5

6

7

8

9

40+ 31-40% 21-30% 11-20% 0-10%

Turnover Rate Distribution

n=17

nu

mb

er

of re

sp

on

de

nts

Turnover rate (percent)

turnover rate percent

Mean 14%

75th percentile 18%

Median 12%

25th percentile 7%

18


Which of the following do you standardize across multiple countries?

(check all that apply)

Compensation plans

Roles

Pay mix

Leverage targets (the ratio of the top performers’

incentive pay to average incentive pay)

Inconsistent. Several countries have standard

features and some countries do not have shared

or standard features

We do not manage sales compensation across

multiple countries

14

12

8

8

3

1

Most of the companies standardize compensation plans and roles across

multiple countries.


n=17

19


What was the total sales compensation cost of sales (base salary + sales

incentives) as a percentage of revenue for your most recently-ended fiscal or

calendar year?

Total sales compensation cost of sales (base salary + sales incentives)

as a percentage of revenue for most recently-ended fiscal or calendar year

n=13

n=4

No

Yes

Companies tracking sales force compensation

cost of sales (CCOS)

Most companies do not spend more than 5% of associated revenue on sales

compensation.

n=11*

n=17 Note: two outliers were

removed from the analysis.

nu

mb

er

of co

mp

an

ies

0%

1%

2%

3%

4%

5% 75th Percentile

4.8%

25th Percentile

1.1%

Median

3.0%

Mean = 3.9%

20


Incentive Compensation Issues

21


Which of the following are the five most difficult sales compensation problems

for your company at the moment? (check all that apply)

Quota setting fairness

Sales forecast accuracy

Incentive plan complexity and/or field comprehension of the plan

Data availability to accurately assess performance

Effective communication of the incentive compensation plan

Incentive compensation payouts not aligned to corporate performance

Efficient incentive compensation administration

Adequate upside opportunity to motivate and retain top performers

Incentive plan not motivational enough, or motivating incorrectly

Competitiveness of total pay levels with the market

Compensation adjustments to reflect localized differences 2

2

3

4

5

5

6

8

8

10

13

Accurate quota setting and improving plan simplicity are the biggest issues identified.


n=17

22


Respondent Profile

23


At the end of your most recently completed fiscal year, how many sales people

(FTEs) were in each of the following roles?

Roles Total across all

companies surveyed

Number of

companies with

the role

Average number of

sales people

Client Relationship

Manager 20,005 13 1,539

Lead Sales Role

(Hunter/Pure Sales) 9,230 14 659

Technical Specialist

(Pre- and Post-Sales) 23,652 17 1,391

Partner or Channel

Account Manager 6,644 13 511

24

n=17


Service provider

Software – enterprise

Telecommunications manufacturer

Computer hardware manufacturer

Internet information provider

Semiconductor manufacturer

Which of the following best describes your company’s industry segment?

1

2

2

3

4

4

25

Note: information was not received from

one respondent


n=16


About ZS Associates

ZS Associates is a global management consulting firm specializing in sales and marketing strategy,

operations and execution.

Founded in 1983, ZS has grown into a firm of more than 2,000 professionals delivering expertise across

much of the sales and marketing spectrum. Our core practice areas include go-to-market and sales

organization strategy and extend to the deep tactical levels required to effectively implement those

strategies.

The breadth and depth of ZS offerings combine to enable a unique client partnership—both in the

development of effective strategies and in their execution. We have pioneered an approach to sales and

marketing consulting that is fact-based, analytically rigorous, and drawn from our many innovative

methodologies, processes and decision support tools.

Our client base is comprised of a diverse mix of companies, ranging from global market leaders to

entrepreneurial start-ups, across more than 65 countries. The customized solutions we deliver for our

clients extend from issue-specific at one end of the spectrum to large-scale, multinational business

transformations at the other. In all cases, we combine our strategy, operations and execution expertise to

ensure that the solutions we develop will work, and to help our clients successfully implement them at the

tactical level.

For more information on ZS Associates, please visit our website www.zsassociates.com.

26

Copyright 2012 © WorldatWork and ZS Associates, Inc. 27

About WorldatWork

WorldatWork (www.worldatwork.org) is a not-for-profit organization providing education, conferences and

research focused on global human resources issues including compensation, benefits, work-life and

integrated total rewards to attract, motivate and retain a talented workforce.

Founded in 1955, WorldatWork has nearly 30,000 members in more than 100 countries. Its affiliate

organization, WorldatWork Society of Certified Professionals®, is the certifying body for the prestigious

Certified Compensation Professional® (CCP®), Certified Benefits Professional® (CBP), Global Remuneration

Professional (GRP®), Work-Life Certified Professional™ (WLCP®), Certified Sales Compensation

Professional™ (CSCP™), and Certified Executive Compensation Professional™ (CECP™).

WorldatWork has offices in Scottsdale, Arizona, and Washington, D.C.

http://www.worldatwork.org/

http://www.worldatwork.org/seminars/html/seminars-home.jsp

http://www.worldatwork.org/waw/conference/html/conference-home.html

http://www.worldatwork.org/waw/Content/research/html/research-home.jsp

http://www.worldatworksociety.org/society/home/html/home-entry.jsp

2012 sales compensation practices survey for the high-tech industry

Documents