2006 MEDIC Conference

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• 2006 MEDIC Conference
• Sales compensation getting a seat at the design
  table
• November 13, 2006

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Agenda

• Fundamentals of sales compensation
• State of current affairs
• Human Resource's value proposition

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Fundamentals of sales compensation
What are we really talking about when we say
sales compensation?
Short-term incentives are the focus of sales
compensation
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Fundamentals of sales compensation
What is the sales incentive program intended to
do?

• Support the company in its execution of its sales
  strategy and business objectives
• Align pay opportunities with business objectives
  by creating financial success for sales employees
  based on attainment of business performance
• Attract, retain and motivate sales employees
• Promote certain behaviors
• Create significant line of sight between pay and
  performance

Defining victory beyond attract, retain and
motivate is paramount
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Fundamentals of sales compensation
What are the key components of the sales
incentive program?
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Fundamentals of sales compensation
Understanding the factors that impact the type of
compensation strategy used is key

• Business growth stage
• Sales strategy and account segmentation
• Sales process and type of product(s) sold
• Territory definition and deployment strategy
• Salesperson prominence and influence
• Sales role definition
• Quota setting methodology

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State of current affairs
The sales organization is typically responsible
for designing the sales incentive programs1
Statistically, just slightly more than 1 out of
10 companies have HR leading the charge
1 Data from 2006 MEDIC Sales Compensation Survey.
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State of current affairs
And administering the programs as well1
Statistically, fewer than 1 out of 10 companies
have HR handling the administration
1 Data from 2006 MEDIC Sales Compensation Survey.
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State of current affairs
So what is the problem?

• The most expensive variable pay program within a
  company
• Is the program with the greatest line of sight to
  overall company performance and goal attainment
• Is reviewed or changed at least once a year, if
  not more frequently
• Is administered in spreadsheets
• Is subject to greatest amount of exceptions and
  out-of-plan adjustments

HR is on the other end of a phone call from a
disgruntled sales employee
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HRs value proposition
What can HR bring to the table?
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Getting to the Table

• Be involved early
• NBI was building a new sales force
• Research sales programs use your peers
• Work on closely with base pay and bonus budgets
• Build relationship with National Sales Director
• Built sales culture, values and mission together
• Distinguish NBI from Big Pharma

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At the Table

• Bring value early
• Listened to NSD, Regional Sales Directors and
  District Managers
• Proposed industry sales compensation consultant
• Brought ideas from recruiting pay on time, keep
  it simple, dont change the parameters
  significantly every quarter, be unique
• Bring others to the table Marketing, Finance
  Sales Mgmt/Ops
• Ask the tough questions and help identify issues
• Focus on the sales objectives short- and
  long-term
• Help design the Sales Bonus Policy

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Maintaining a Seat at the Table

• Be sure plan is meeting objectives
• Sales still in charge
• Developed individual territory and district
  metrics
• Responsible for collecting data running
  calculations
• Responsible for recommending adjustments
• Responsible for getting payout approvals and to
  payroll
• HRs Role
• Limit day-to-day involvement
• Design committee Ask the questions guide the
  team
• Payout committee Are the best performers being
  rewarded?

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At the Table

• Bring value early
• Listened to HR, Senior Sales Execs and Regional
  Managers
• Met with industry sales compensation consultant
• Brought ideas from experience pay on time, keep
  it simple, dont change the parameters
  significantly from norm, be unique
• Bring others to the table Finance Sales
  Mgmt/Ops
• Ask the tough questions and help identify issues
• Focus on the sales objectives short- and
  long-term
• Help design the Sales Bonus Policy

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Getting to the Table

• Be involved early
• Micrus was trying to align the sales focus to the
  companys
• Research sales programs use your peers
• Work on closely with base pay and bonus budgets
• Build relationship with Compensation team
• Built sales culture, values and mission together
• Align Micrus to be in the top 75 percentile of
  comp

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Maintaining a Seat at the Table

• Be sure plan is meeting objectives
• Sales still in charge
• Developed individual territory and district
  metrics
• Responsible for reviewing data calculations
• Responsible for recommending adjustments
• Responsible for getting payout approvals to
  payroll
• HRs Role
• Limit day-to-day involvement
• Design committee Ask the questions guide the
  team

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They cant do without you

• Table Setting
• Flexible Project Management
• Key Deliverables and Competencies

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Setting the table

• The prerequisites
• CEO believes HR is strategically vital
• CEO believes no organization is more important
  than Sales
• Head of Sales communicates absolute Dos and
  Donts

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Flexible project management

• Project management
• The process starts and ends with you
• Get all relevant parties involved from the
  beginning
• The marriage of Houdini, the mediator and the
  bulldog
• Establish the ground rules for decision making

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Key deliverables and competencies

• Key Deliverables
• Unqualified agreement on key business objectives
  and definition of success by all sales executives
• Unqualified agreement on key compensation
  objectives by all sales executives
• Competencies
• Facilitation of process and solutions
• Organizational agility
• Providing better value and service than Sales
  provides its customers
• Selective, timely and insightful analytics
• Knowledge of the profit drivers and leaks of the
  business youve made it when they forget you
  are from HR
• Dont sell the seller