If you do business in California, you are likely aware of the recent (in effect as of January 1, 2013) changes to the state’s compensation laws, but just in case, here’s a brief summary:
Employers who pay regular commissions must provide employees with an executed written contract setting forth both the formula for calculating commissions, as well as the method of payment. Failure to comply with this new law may subject an employer to penalties under California’s Private Attorney General Act (“PAGA”) in the amount of $100 for each affected employee for an initial violation and $200 per employee for each violation thereafter. The term “commissions” does not include: (1) short-term productivity bonuses such as those paid to retail clerks; (2) temporary incentives that increase commissions; or (3) bonus or profit-sharing plans, unless they are based on a fixed percentage of sales or profits.
Link to the actual documentation: http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_2651-2700/ab_2675_bill_20120930_chaptered.pdf
Overall what are the implications for employers here? It tightens up the process, but ultimately the changes simply reinforce the fact that you need a better handle on your compensation practices and your system(s) for managing them. Have any questions or insights about how this may affect businesses? Contact us or leave a comment.
After years of collaborating with CFO Research to track the pulse of finance leaders, we recently approached them to conduct a different kind of study. This year, we wanted to answer three key questions:
And rather than conduct a broad, data-based study, we asked CFO Research to facilitate a series of conversations with executives who have first-hand experience with the power of SPM.
The big question? Why don’t more companies use their variable compensation plans as management tools? Simple: many of them don’t have the flexibility to modify their plans so they can capitalize on opportunities or address emerging threats.
Want to find out more? Download the CFO Research report here: varicent.com/cforesearch
WorldatWork’s 2012 Spotlight on Sales Compensation took place August 29th – 31st in Chicago. The Spotlight is unique in that it is arguably the only conference dedicated to the end-to-end topic of sales comp. After spending nearly two decades in the sales effectiveness and incentive compensation arena, in many ways it was like a coming home party. I’ve had the pleasure of knowing a significant number of the attendees and sponsors as clients, colleagues, mentors and friends over the years. Over the course of the three days everyone had a chance to experience thoughtful and engaging speakers, share ideas and challenges, great food and lots of dancing. Ok, maybe not so much dancing, but the networking event sponsored by Varicent was a big hit and thanks to everyone who joined us for dinner on Thursday night.
The sales compensation domain is entering an interesting period. The quality of sales compensation leaders and the practices employed are more sophisticated than ever. As an over-generalization, topics of conversation and interest seem to have moved from “how do I design a good plan” to “what’s the best strategy to address this specific business issue for this particular population under this set of circumstances?” It’s no longer enough to be happy to help or to know when to use a ramped commission or a matrix; the best sales compensation leaders are proactively influencing a range of strategic and tactical sales management decisions.
2012 is also a time when the principles of simplicity and line of sight are running head first into an environment of more diverse coverage models, new buying processes and accelerated shifts in priorities. All of this change manifests itself as increased pressure on SPM and incentive compensation processes and systems. And there’s nothing to suggest the pace of change is going to slow.
Sales Performance Management technologies have evolved in parallel with the growth of the sales compensation function. Sales compensation leaders now have access to solutions that were but a glimmer in their eye as recently as ten years ago. The technologies are going to continue to improve. However, while some vendors are somewhat narrowly focused with their view of SPM, in our opinion the industry is going to evolve across three dimensions. At Varicent, we agree with the idea that sales organizations will have more solutions to support the full range of sales performance and sales operations processes. We also see dramatic improvements in the depth of functionality available within a particular area. For example, the robustness, flexibility and scalability of solutions available to support territory management. And we see the central concepts of performance management continuing to spread across the enterprise – from sales and finance, to operations, marketing and other functional areas. It’s a great time to be an SPM solution provider and an even greater time to be a SPM customer.
Thanks again to WorldatWork for putting on a great conference. We look forward to seeing everyone next year.
Is there such a thing as too much data? We asked Varicent’s Mike Meisenheimer, Industry Solutions Group, and Kerry Sokalsky, Director of Worldwide Sales Enablement & Tech Sales, their thoughts…
Kerry Sokalsky: There’s no one answer, but the key is that you need to be free to make decisions based on accurate and accessible data. The bigger issue is that you need to move your compensation teams away from manual processes, and be in a position to redeploy your resources to focus on higher value activities.
Mike Meisenheimer: It’s usually less about how much data, and more about what you do with it. Managing the data is important, and turning it into information you can use even more so.
Overall, yes. There’s too much data. So it’s important to be thoughtful about what you do with it, how you communicate it and how much time is spent with people on how decisions are made.
SPM automates the data collection, giving organizations the information they need, making it easier to access and easier to organize, freeing up time and resources. But let’s say that Employee A is one of the top performers. Through my SPM solution I am able to pull the data to support that. Now… what’s next? What do we do with it? How do we use data to set better quotas?
Alternatively, organizations pull the data they think they need, but don’t know how to interpret the results and subsequently don’t know how to make decisions based on the data in question.
So, rather than too much data, the arguably bigger issue is that people don’t know how to interpret the results, or know what decisions to make based on the data (i.e. what to do). So, the key questions to ask around data:
This doesn’t answer the “what do we do with it afterwards” question, but it makes it more likely that the information you’re gleaning from the data in question is usable. What are your data issues? Let us know by commenting below.
In determining where Sales Performance Management fits into most operational discussions we had a chat with Varicent’s Mike Meisenheimer, Industry Solutions Group, and Kerry Sokalsky, Director of Worldwide Sales Enablement & Tech Sales.
Varicent Marketing: What has the most impact on the success of sales teams, and how does SPM factor into it?
Mike Meisenheimer (MM): There are always different perspectives and different focus areas, depending on the organization in question, and the person you’re talking to.
Overall, there are a lot of things that always have to be considered in a sales operation: The people, the various software systems involved, and all the other tools that make things work.
SPM’s role is to help set goals and objectives, and to help align all the behaviors involved. It’s a critical support component.
Kerry Sokalsky (KS): I agree. SPM helps to align activities with corporate goals, which isn’t always easy to do. At a more granular level, it’s about enabling sales teams. Providing them with the confidence that they’re getting paid correctly. SPM pulls all of the applicable data and puts it into one place.
SPM’s biggest advantage is that it provides visibility… it turns all of your data into actual information. Normally, there’s a lot of data, in a lot of different places.
Most organizations likely have enterprise resource planning (ERP) and customer relationship management (CRM) software in place, and maybe even a point of sale (POS) system… that’s a lot of data coming from at least three different places. SPM pulls it all together and effectively becomes the system of record to help manage, maintain and, ultimately, turn that data into information.
MM: The primary message that needs to be sent? “SPM can support that.” Compensation success is a conversation organizations and sales teams are having. SPM helps elevate the discussion.
How are your people getting paid? How can you model changes to your compensation plan? What will the impact of those changes be? SPM not only allows this discussion to take place, but it is a decision-making tool that helps answer the questions.
Do Mike and Kerry’s answer resonate with you? Do you have questions you’d like to ask? Let us know by commenting below, or contacting us here.
Watch for more Q&As with Mike and Kerry in the following weeks.
Jay Johnson, Director, Sales Operations at Office Depot will be a premier panel speaker at the 2012 Spotlight on Sales Compensation by World at Work, August 29th – 31st, 2012 in Chicago. Mike Meisenheimer, Director of Industry Solutions with Varicent, an IBM Company, had a chance to sit down with Jay and get his thoughts on the state of sales compensation in 2012.
Mike Meisenheimer: As the economy moves out of a very difficult period and continues on a slow growth trajectory, a lot of people are asking whether this is the new normal. What impact is today’s economy having, if any, on how you think about sales compensation?
Jay Johnson: The economy has had a significant impact on how we view sales compensation. There has been a lot more focus on making sure that our incentive dollars are in line with business results and are driving the right behaviors. Achieving the delicate balance between keeping the sales team motivated and keeping our expenses in line has the topic of many discussions.
Mike Meisenheimer: Are there any lessons learned or guiding principles you might offer people who are trying to motivate and retain folks in today’s environment?
Jay Johnson: As always, a guiding principal we continue to focus on is to keep the plans simple to understand and administer. There is a tendency in organizations to try to add components, gates, kickers, etc. to the plans in order to solve every issue that arises thus adding complexity to the plans. We have to reinforce the concept that incentive plans should support the selling strategy and cannot be the answer to everything.
Mike Meisenheimer: What role do you see technology playing in the motivation and retention of sales professionals in 2012?
Jay Johnson: When we implemented our ICM technology 1 ½ years ago it was the first time that our sales team had access to their incentive compensation results on a daily basis. Previously, they received their results four times a year, after we completed the quarterly calculations. This was a huge change and has become a key driver in our motivation strategy. We have to continue to make sure that the daily results they have access to are accurate and we work automate our non-monetary recognition programs.
Mike Meisenheimer: Are there any trends you’ve observed in the administration of sales compensation? For example, any data, process, pace of change, reporting requirements, etc. that didn’t exist a few years ago or have changed as a result of business conditions or priorities.
Jay Johnson: More requests are coming from Senior Management for summarized reporting on the sales plans, such as averages payouts, attainment distribution, etc. by position. These results are then correlated with the overall business results and employee retention to help gauge the effectiveness of our plans.
You can learn more about the 2012 Spotlight on Sales Compensation August 29 – 31, 2012 here.
By Kevin Gray
Last week, we discussed where the function of territory management typically resides within an organization. In Part 2, I thought we should address another question that I often get asked: “How does territory management and crediting become so complex in sales organizations?” While it seems simple on the surface, like anything else it becomes increasingly complex when you drill down to the details.
In my May 2nd Webcast: Bringing Order to Complex Sales Organizations, we took a look at the complexity of territory management and crediting, outlining three roles (Territory Manager, Account Manager and a Product Specialist). These job profiles quickly illustrated how complex territory management and crediting can get at the simplest level. But what does your organization do when you take into account the following factors?
• Dozens of job roles
• Hundreds of people in each job
• Thousands of exceptions
• Hundreds or thousands of products, and
• Millions of sales transactions that need processing
Not to mention the sheer number of on-going changes in the sales organization:
• New roles being introduced
• Sales people are hired, leave the company, move to a new location or are promoted
• Territory definitions are realigned to keep up with the market
• Product hierarchies change where may products are groups into further categories or market segments
• New products are introduced maybe on a monthly and sometime weekly bases
• The Market is segmented to include Enterprise and SMB account with different selling strategies
• And, there is a strategic goal mandated to obtain strategic accounts – maybe 5 hospital accounts with a transactional sales greater than 100 thousand
How does all of this get managed? If you haven’t already, please take a look at my May 2nd Webcast: Bringing Order to Complex Sales Organizations. The 45 minutes spent will not only aid in determining how complex your sales organization is and how that pertains to your territory management and crediting practices, but it will outline how Varicent Assign can make it easier for both Sales Operations and Compensation teams to navigate those complexities.
Please feel free to contact me or comment below with any questions.
By Kevin Gray
A Gartner research study found that companies investing in Territory Management software capabilities will gain 1-5% more revenue than they otherwise would have achieved. Varicent has been working with large enterprise organizations to provide solutions to this complex business problem for several years.
In a recent webcast I delivered (“Bringing Order to Complex Sales Organizations“) highlighting the Varicent Assign product, I was asked, “Kevin, where does the function of territory management typically reside within an organization?” It depends. Several users have distinct requirements to access territory information from both sales operations and the compensation team… a sales manager may need to manage temporary coverage of a specific territory while one of her account representatives are on vacation or a territory manager may need to override a credit to an account representative and split another sales transaction to credit a product specialist that was brought in to help close a deal. Compensation administrators need access to territory data to process commissions in alignment with the territory definitions while compensation analysts are creating reports to analyze the territory performance.
With many successful customer implementations, we have identified four key processes where the responsibilities are either shared or segregated between sales operations and the compensation team:
1. Strategy & Plan Design
2. Plan Setup & Administration
3. Compensation Processing
4. Reporting & Analytics
These four key processes are discussed in detail in the webcast and if you did not have an opportunity to join us, you can access a recording of it here.
The 45-50 minutes spent watching Bringing Oder to Complex Sales Organizations will help you to determine if your sales organization has this kind of complexity in territory management and crediting and how Varicent Assign can make it easier for both Sales Operations and Compensation teams.
Another question that I often get asked is “How does territory management and crediting become so complex in sales organizations?” Check out Part 2 next week for the answer!
Originally posted on Brian Hartlen’s SPM Blog on April 10, 2012
By Brian Hartlen
I had the opportunity to present at a Sales Performance Management seminar in London, England a couple of weeks ago. I was joined by Kevin Pilcher from Colt, who shared his thoughts and opinions on the topic of ‘Keys to Success’. I shared the list of Keys to Success that I have been gathering from SPM project sponsors over the past couple of years. In general he agreed with their guidance and recommendations, but he also added one of his own.
Kevin suggested that in order for an organization to really take ownership of an SPM implementation they need to get involved in the configuration and implementation of the project right from the outset. He is a big advocate of training right at the outset of the project. His view is that every organization has unique plans and processes and that their team should be intimately involved in all aspects of the implementation. Kevin took his team and put them on training classes right at the outset of the project. They knew the plans at a very detailed level and with the appropriate solution training they added a lot of value immediately. This combination of detailed plan knowledge married with product knowledge were a great asset during the system configuration portion of the implementation.
There was an added benefit, in that after the configuration, the Colt team was able to be self-sufficient right from the outset, versus having to take on a big learning curve after the system was up and running.
In general we see projects where the both the vendor and the customer are actively involved provides these benefits:
Looking for more? How about…
Bringing Order to the Overwhelming Task of Territory Management & Crediting (whitepaper)
Varicent SPM (datasheet)
To date, in our experience short videos and demos are the easiest ways to display the value of our software solution… or any complex product offering that has layers of functionality. A datasheet (Varicent SPM), whitepaper (6 Trends in SPM) or analyst research (Survey Findings: Driving ROI Through Sales Operations Excellence) are all very effective at relaying value and highlighting features. But actually seeing the solution in action and getting a deeper dive into how a user actually takes advantage of it in their day-to-day work life is what compels people to find out more. THEN you can take a look at that whitepaper or datasheet to further inform your experience.
What are some of the most effective demos you have seen? What has been the most compelling purchasing influencer you have experienced?
We’d like to hear from you. In the mean time, please take a look at Varicent SPM in action!
Varicent SPM Demo (A form must be filled out in order to view)