Manufacturing Case Study

A Global Sales Comp Program with Regional Flexibility

Introduction

The company is a global provider of automation power, control and information solutions for the manufacturing industry. The company has enjoyed steady growth and profitability by capitalizing on its global reach and comprehensive product and solution offerings. The company wanted to solidify its sales compensation program by applying more consistent and aligned sales practices across business groups, geographies and job roles. A critical part of this process was to use best-in-class sales compensation principles to develop a cohesive and consistent global compensation framework.

Project Approach

The company approached Alexander Group to review its global sales compensation plans. To promote consistency across a global sales organization, as well as maintain some level of autonomy within the local regions, the company needed help developing and implementing a global sales compensation framework for key job roles found in most of its regions.

The core deliverables for this engagement included a complete global sales compensation assessment for all regions, a global design session playbook and an implementation guide to provide the company with the steps necessary to manage and implement the sales compensation program.

Key Findings

Industry Profile

Manufacturing is a mature industry. Markets are growing but volatile since they rely on selling complex automation systems to other manufacturers. Global growth is booming due to rapid developing country growth, with companies also trying to get their foothold in emerging economies.

Some key considerations are routes to market, global approach as well as the shift to solution selling. Companies go to market with a mix of coverage strategies balancing direct and indirect approaches. The relationship between the channel partners and end-customers at times hinders engaged direct contact with the end-user, which is a key focus area for manufacturers. Overall, manufacturers are looking to move towards a more solution-based selling approach shifting away from traditional sales tactics. The increased pace of technological change and innovation highlight the need for different sales tactics and roles. Finally, customers are buying on a global basis and need a global sales force to address their needs.

In response to the changing landscape in the industry, manufacturers have invested in sales operations and sales enablement tools to keep pace with changing buyer needs. They have changed the global account coverage model to ensure strategic account sellers pitch to C-suite decision makers. Additionally, the reliance on the one-time or one-product sell is no longer the path to revenue growth. There is a need to ensure a customer purchases a full portfolio of offerings and continues to buy on a recurring basis.

Products, Customers, Coverage and List of Jobs

The company has two business segments: control product and solutions, and architecture and software. The industry focus is consumer-driven industries, resource-driven industries and original equipment manufacturers (OEM). The company relies heavily on dedicated channel partners, as well as representatives, who target key end-user and OEM customers. Additionally, the company employs global/strategic account managers, who handle the largest accounts.

The company operates globally with operations in North America, EMEA, Asia Pacific and Latin America. The company’s position in the marketplace varies depending on the region. The market in Asia Pacific is a mix of developed and emerging regions. There are significant differences in market position by country. In EMEA, 70% of sales are direct while 30% are via the channel. Channel sales are a focus in EMEA because there is a push to expand distributor relationships. Latin America has a developed channel program with 80% of sales through channel partners; however, the focus is on maintaining its position in the market challenged by new entrants. In North America, sales via the channel, account for more than 90% of sales.

Customer segments include end-users, OEMs, global/strategic accounts and channel partners. Account managers are segmented by customer type, OEM or end-user. Strategic/global accounts are covered by a dedicated sales team. The company has several overlay roles ranging from technical specialists to solution architects to provide support to the core sales roles.

Differences in Market Position by Country

Sales via the channel in EMEA

Sales via the channel in Latin America

Sales via the channel in North America

Jobs

Account Manager Channel

Sells company’s products and/or services to existing named accounts within a geographic territory; maintains relationships with existing named accounts; may have own accounts or work on a team.

Primary measures (min/max weight)
1. Product and services billings (60–100%)
2. Total billings (60–100%)
3. Product billings (60 –100%)

Secondary measures (min/max weight)
1. Services and/or solutions billings (20–40%)
2. Teaming–all measures/initiatives–calculated one above direct line of sight (20–30%)
3. Strategic products (20–40%)
4. Conversion of dormant accounts (20–30%)

Account Manager OEM/End-User

Sells company’s products and/or services to existing named accounts within a geographic territory; maintains relationships with existing named accounts; may have their own accounts or work on a team.

Primary measures (min/max weight)
1. Total billings (60–100%)
2. Product billings (60 –80%)

Secondary measures (min/max weight)
1. Product billings (20–40%)
2. Services and solutions billings (20–40%)
3. Teaming–all measures/initiatives–calculated one above direct line of sight (20–30%)
4. Strategic products (20–40%)
5. Conversion of dormant accounts (20–30%)

Global Account Manager

Sells company’s products and/or services to a single national/global existing account of strategic importance; maintains contact with account at a high, executive level, focusing on the strategic nature of the relationship; represents the organization to the customer and the customer to the organization; responsible for expanding and retaining named accounts while ensuring ongoing customer service.

Primary measures (min/max weight)
1. Direct solutions and service billings of assigned accounts (40–60%)
2. Assigned OEM billings (20–40%)
3. MBO (20%)

Sales Account Specialist (Solutions Architect)

Directs and guides the commercial and technical sales support activities for a limited number of specialized company products, accounts or services; develops new business opportunities and supports sales when opportunities are identiﬁed; guides the team as an expert to develop and present sales and support closure of complex technical sales; provides feedback to the business on market and competitor activities and future business needs.

Primary measures (min/max weight)
1. Primary assigned product/solution billings (50–100%)

Secondary measures (min/max weight)
1. Additional assigned product/solution billings (30–50%)
2. Teaming–all measures/initiatives–calculated one above direct
  line of sight (20–30%)
3. Conversion of dormant accounts (20–30%)

Technical Sales Consultant

Provides technical assistance directly to customers as part of a targeted sales effort; participates in application integration, proof of concept demonstrations and product sizing/selection to support the adoption of company hardware/software products; participates in sales and proposal presentations in addition to completing ongoing team account activities; identiﬁes additional product/services opportunities in customer organization.

Primary measures (min/max weight)
1. Billings (100%)

Sales Manager

Manages the activities of branch/area sales managers; attains sales objectives for district/region; manages the direct sale of products or services in a limited geographic area, or responsible for a limited industry or product line on a geographic basis.

Primary measures (min/max weight)
1. Total billings (60–100%)
2. Product billings (60–80%)

Secondary measures (min/max weight)
1. Product billings (20–40%)
2. Services and solutions billings (20–40%)
3. Teaming–all measures/initiatives–calculated one above direct line of sight (20–30%)
4. Strategic product sales (20–30%)

Region/Country Manager/Director

Two-levels up from the field sales team.

Primary measures (min/max weight)
1. Product billings (40–70%)
2. Services and solutions billings (40–70%)
3. Total billings (40–70%)
Secondary measures (min/max weight)
1. Product billings (20–40%)
2. Services & solutions billings (20–40%)
3. Teaming–all measures/initiatives–calculated one above direct
  line of sight (20–30%)
4. Region/country profitability/total gross margin (20–40%)
5. Product mix (minimum targets for core product and solutions)
  (20–40%)

Sales Manager

Primary measures (min/max weight)
1. Total billings (60–100%)
2. Product billings (60–80%)

Secondary measures (min/max weight)
1. Product billings (20–40%)
2. Services and solutions billings (20–40%)
3. Teaming–all measures/initiatives–calculated one above direct line of sight (20–30%)
4. Strategic product sales (20–30%)

Recommendations & Outcomes

Alexander Group created global sales compensation consistency across the regions, including implementing a program that aligns pay to seller performance, developing a mega-order sales compensation management process, eliminating individual commission rates (ICRs) and varied pay mixes in North America and pushing a migration away from flat commission in Asia Pacific.

Aligning pay to seller performance

Developting mega-order sales comp management process

Eliminating individual commission rates and varied pay mixes in North America

Moving away from flat commission in Asia Pacific

During the assessment phase, Alexander Group documented the company’s current sales compensation plans in place across the globe. This exercise confirmed the need to move to a more global standardized model because Asia Pacific had more than 100 sales compensation plans while EMEA had 30 plans following a regional framework. During the design phase, Alexander Group helped guide the company to a more standardized plan framework structure. Rather than provide each role with the same pay mix and measures across the globe, Alexander Group provided pay mix range and a “pick list” of acceptable measures and weights so the regions could have some autonomy while designing plans and still adhering to a global standard. In North America, the account manager pay mixes were significantly different than the stated target pay mix, ranging from 70/30 to 30/70. The previous method of setting the target incentive amount was based on an individual commission rate (ICR), but ICRs were in turn based on legacy territories and a prior flat commission plan. Due to this methodology, the targeted pay mix varied from the actual stated mix. Alexander Group recommended that the company honor the current pay mixes for affected roles but migrate towards more pay mix consistency over time and eliminate ICRs. This would drive consistency across similar roles and eliminate the administrative burden of maintaining an ICR program.

Prior to Alexander Group involvement, the company’s plans were “safe” plans. There was a link between pay and performance; however, the bottom percentiles still earned incentive while the top performers were not earning much more for exceeding goals. Alexander Group recommended moving towards a pay-for-performance culture by incorporating two key concepts: thresholds and ramps. Second, Alexander Group moved to incorporate themes from the company’s design principles outlined with leadership prior to the engagement. The company stated principle on leverage for top performers should have a 3x plan. The design team moved to increase the leverage in the plan from 2.5x to 3x contingent on modeling and budgets. By adding the thresholds and ramps to the plan, Alexander Group was able to fund the desired upside.

Finally, Alexander Group helped the company address the issue of mega orders. Historically, if mega orders came in, salespeople received credit according to their regular incentive program, which led to issues with quota setting and unusually large payments. Alexander Group introduced the concept of paying mega orders on a different schedule. Alexander Group developed two options to handle mega orders: 1) Remove the mega order from the quota and pay using a separate commission mechanic and 2) Allocate the mega order to quota and adjust quota down the following year to prevent representatives from having unattainable goals. The company elected to keep both options and allow the regions to decide which option to use.

Summary

The project deliverables included an assessment of the current state, a framework to serve as a foundation for plan design while still retaining flexibility for geographic variances. The framework allowed for the organization to design competitive sales compensation plans to attract and retain top talent.

Performance Metrics

Billings (Products, Services, Solutions)

Total sales or products, services or solutions. Core measure for main roles.

Teaming

Calculated one level above direct line of sight. Included due to country/regional variances.

Conversion Accounts

Accounts the company has not worked with in the
past two years.

Direct Solutions and Service Billings of Assigned Accounts

Measure for a global account manager.

Assigned OEM Billings Based on Assigned Industry-Aligned OEMs to Serve as a Proxy for Indirect Revenue

Measure for a global account manager.

MBO

Measure for a global account manager. Specific initiatives or product specifications for targeted accounts.

Strategic Products

Sales of a strategic product. Drives product focus. Used at the account manager and manager level.

Region/Country Profitability/Total Gross Margin

Provides a rollup of the territory. Management level metric.

Product Mix

Minimum targets for core product and solutions. Deters “cherry picking.”

Alexander Group has helped thousands of clients.

Our expert leaders assess, align, design and implement powerful sale compensation programs. Alexander Group has helped organizations realize the full benefits of effective sales compensation programs to attract, retain and reward best-in-class sales talent to profitably grow the business.

We can help with all elements of your sales compensation program.

About Alexander Group

Alexander Group understands your revenue growth challenges. Since 1985, we’ve served more than 3,000 companies across the globe. This experience gives us not only a highly sophisticated set of best practices to grow revenue—we also have a rich repository of unique industry data that informs all our recommendations. Aligning product, marketing, operations and finance efforts behind a successful sales organization takes insight and hard work. We help the world’s leading organizations build the right revenue vision, transform their organizations and deliver results.