Monthly Archives: December 2014

NE Companies Paying More for Performance in 2015 Compensation – by Tom Wilson


According to a recent study by the Wilson Group, Concord, MA, and the Bose Corporation, New England companies are expecting modest growth in their business.  Seventy-one percent (71%) of companies recently surveyed expected growth exceeding 4% in 2015; this compares to only 55% for 2014 actual growth.  Plus 50% of companies surveyed are planning to increase their staffing levels and 37% are planning no change in staffing for 2015; only one company in the survey indicated they were facing layoffs or staff reductions.

The survey, “Total Compensation Planning: Review of 2014 – Projections for 2015” was conducted in November, 2014 and was sponsored by the BOSE Corporation and the Wilson Group. It includes survey responses from 57 leading New England companies such as Constant Contact, Dana-Farber Cancer Institute, Eastern Bank, iRobot, and TJX. The survey is available at the Wilson Group website (www.wilsongroup.com).

The jobs with the highest hiring challenges are professional level positions in Information Technology, Engineering, and Sales and Marketing.  “This is not surprising given the knowledge based economy that characterizes New England market” says Tom Wilson, President of the Wilson Group.

“Merit pay increases are likely to be the same in 2015 as in 2014” stated Wilson.  The projected pay increase averages 3.0% for both years.  “But, the number of people not receiving a pay increase will be slightly higher in 2015 than 2014,” says Wilson.  The report sited that 4.5% of employees didn’t receive a pay increase in 2014 and 5.0% are not likely to get one in 2015 in these companies.

Bonus plans will continue to be a major element of compensation and virtually all companies in the survey have these performance incentive plans.  Over 88% of these companies reported making bonus payouts in 2014.  The average payout will be a little less than the target payout, with the median payout at 90% of the planned amount.  The range of payouts for most companies fell between 47% of the target and 130% of the target for exceptional performance.

“Few companies are planning any major changes to their stock/equity plans,” says Wilson. “Seventy-seven percent (77%) are planning just normal updates, and some are developing new guidelines for awards given the migration from stock options to restricted stock.”  Companies are changing the performance measures with bonus plans to reflect more emphasis on revenue growth and customer satisfaction.  “As the market heats up for talent, New England companies are ready to link rewards more closely to performance and to use a variety of tools to accomplish this,” concludes Wilson.

 

Sales Compensation: When to Stop Paying Hunters and Start Paying Farmers


The role of new account sales representatives or Hunters is focused on getting the organization new business. Account Managers, or Farmers, are responsible for growing and maintaining the revenue stream. At a point in time there is a “handoff” of an account from the one who generated it to the one who is going to manage it over time. The timing is dependent on the nature and length of the sales cycle, on who is the buyer and “administrator” within the client, and should the “Hunter” have any future dealings with the customer. In strategic partners or large accounts, these tend to be handled by a team, where the Hunter is only involved when there is an upgrade to the products or similar issues. The Farmer or Account Manager   handles all the day to day activities, renews the contracts, and looks for new opportunities. When new opportunities arise, he/she works out with the Hunter who will take the lead on the opportunity. The reason is that the Account Manager has a relationship with one person in the organization (the internal administrator or program manager) and the Hunter has a relationship with the decision maker or senior executive. There is a longstanding “rule” that an individual can usually only span two levels in an organization. If the Hunter starts working with the client’s administrator, he/she will lose contact and credibility with the senior executive who bought the contract/service. This is an important principle in dealing with large accounts. So, one guideline regarding the timing of the handoff in the sales organization is when the management of the account or service is transferred to someone lower in the client organization for ongoing management. This may take 3 to 6 months after the contract has been signed. The pay of the Hunter is for this period (or the contract’s value) and the Account Manager picks this up and goes forward, and may not receive any income until the time of the contract’s renewal or there are additional sales (upsells) within the account.

If however, the business model relationship is that the decision maker is the administrator, then the timing is dependent on how quickly the Account Manager can establish a relationship with the decision maker. In this case, the Hunter and Account Manager are seen by the client/customer as being at the same level, and the Hunter was the one who found and opened the opportunity, but the real company-customer relationship is forged with the Account Manager. In this case the Hunter is paid based on the contract value once it is invoiced (depending on how the invoicing works in a subscription model), or for some period of time for the sales effort to be adequately compensated. Then, the revenues, renewals and upsells, belong to the Account Manager. The Account Manager does not need to go and get new business, but needs to retain, renew, service (i.e., address problems, provide education, support the products applications, etc.) and upsell new opportunities. The Account Manager takes advantage of the growth of the business of the client as well as the use and expansion of the product/service within the client. The Hunter is off looking for new opportunities.