2013 APCBF SALES INCENTIVE SURVEY REPORT INDIA

Transcription

1 2013 APCBF SALES INCENTIVE SURVEY REPORT INDIA

2 Contents INTRODUCTION... 2 EXECUTIVE SUMMARY... 3 PARTICIPANT PROFILE... 7 SALES PLAN DESIGN SALES INCENTIVE PLAN DESIGNING FUNCTIONS COVERED BY PLANS VARIABLE BONUS SCHEME CATEGORIES DESCRIBING PLANS TARGET INCENTIVE CALCULATIONS INFLUENCE ON THE PAYOUT BASIS THE FACTORS SALES CREDIT SALES REWARDS QUOTAS HOW ARE QUOTAS DEFINED FORECAST METHODOLOGY QUOTAS REVISION MID-YEAR QUOTAS REVISION QUOTA MIX TIME PERIOD FOR SETTING QUOTAS FACTORS ON WHICH QUOTAS ARE BASED INCENTIVE PAYOUTS QUALIFYING CRITERIA FOR PLANS PAYOUT FREQUENCY INCENTIVES FOR NEW EMPLOYEES RAMP-UP FOR NEW EMPLOYEES GUARANTEED PAYOUT FOR NEW EMPLOYEES ACCELERATORS AND DECELERATORS IN SALES INCENTIVE PROGRAMS CAPS ON THE INCENTIVE PAYOUTS TO INDIVIDUALS CLAW BACK DRAWS FOR EMPLOYEES SALES RECOGNITION PLAN SALES CONTESTS ON TOP OF SALES INCENTIVE PLANS FREQUENCY OF SALES CONTESTS TYPICAL REWARDS USED IN SALES COMPETITION... 29

3 INTRODUCTION The global economy is expected to achieve a modest recovery in 2014, with strong growth predicted in emerging markets. This will require companies to effectively adjust to a different pace of growth in this dynamic economic environment. The International Market Assessment stated in its December 2013 Asia Brief report that Asia s key challenge and focus in 2014 will be to boost productivity from factory workers to newlyminted MBAs in offices. Companies' ability to innovate and to bring their products to market is critical given the speed of business today and the changeable behaviour of consumers The ability to attract, hire, and retain key talent particularly in sales is the key for growth. Recognizing this, Mercer has launched its first Consumer Goods 2013 Sales Incentive Survey for the APCBF members to provide in-depth coverage on sales plan design. The 2013 Sales Incentive Report covers key markets in Asia. This report provides HR and sales executives with insights on Sales Incentive design, market practice, and prevalence within the Consumer Goods industry. The report covers a wide range of design elements, such as quota setting, performance and payout, weightage, incentive structure, threshold, accelerators, caps, sales recognition and frequency of payments. Hope you will find the 2013 report both informative and insightful Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 2 of 30

4 EXECUTIVE SUMMARY India Economic Overview The GDP growth prediction for financial year 2013 is 5.6%. This is a significant fall from the numbers recorded in 2010 marking a gradual slowdown of economy over the years. Growth and progress of the country is currently restricted to certain industrialized pockets. Across the country, however, there is a larger trend of a slump. RBI Governor Raghuram Rajan has improved the monetary policy, lifted rates to curb inflation and launched a swap program with banks that pulled in USD25bn in foreign exchange. This action helped the Rupee to recover to around 62 for USD 1, from an all-time low of 68.8 recorded on August 28. But with the country going to the polls in May 2014, the Rupee s long-term prospects look poor until a new government takes office in New Delhi. A total of 10 organizations participated in 2013 Sales Incentive Survey for India. This survey covers sales compensation design and practice for the five key functions: 1. Account Management; 2. Channel/Field Sales; 3. Retail Sales; 4. Sales Administration; 5. Trade Marketing. The survey covers Executive, Management, and Para- career streams Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 3 of 30

5 SALES PLAN DESIGN of participating organizations indicated that only Business is responsible for the sale incentive plan design, while the other of organizations entrust sale incentive plan design to both, Human Resource and Business Departments. In the Sales Administration and Trade Marketing functions organizations have the same sales incentive plan across all career streams. Organizations with Account Management and Channel/Field Sales functions reflect a mix trend with regards to the sale incentive plans coverage. Additionally, employees in the Account Management and Channel/Field Sales are not eligible for variable bonus scheme. Most organizations in India, which have the same plan across their career streams, mostly have incentive plans wherein the target incentives are calculated as a percentage of base salary. The percentage of organizations having hybrid (incentive and commission) plans is very low. Sales credits are typically awarded at time of invoicing, followed by time of revenue collection. Organizations covering only the career stream are focused only on individual performance as the assessment parameter. QUOTAS Sales targets (quotas) can be defined for employees at level either annually, quarterly or monthly. However, at Management levels and above the quotas are defined only annually. of the organizations use a mix of existing and new sales to arrive at the quotas. Most organizations across career levels use the sales volume as the most frequent quota performance measure followed closely by sales revenue and new accounts. However, it is observed that these two last measures are mostly used for the career stream rather than for the others. Few organizations also use product mix and number of sales calls along with other measures. Historical trends and business growth strategy play equal part as forecasting methodologies for defining quotas for the next year. 60% of the participating organizations revise quotas in case of any major changes and the same percentage of organizations indicated that the Local Management has the authority to do mid-year revisions of the quotas. INCENTIVE PAYOUTS All the organizations surveyed have the qualifying criteria which define an employee s eligibility for the incentive payouts. Every organization has different parameters on how stringent the threshold targets are, with some organizations having their threshold targets at the level of 90%. The payout frequency is either quarterly or annually for the Management stream employees. However, at the lower career streams, it is observed that of the organizations have adopted a policy of monthly payouts. New employees are generally enrolled in the sales incentive scheme upon hire and are not provided any leeway in the form of ramp ups (period allowed for the new employees to build potential sales into pipe-line without negatively impacting incentive payout) or guaranteed payouts in the initial months. Percentage of organizations having accelerators and decelerators (different incentive rates applicable to different tiers of achievement) embedded in the sales incentive scheme is very low in India. Most organizations in India have not introduced any claw backs nor allow any advance payment against expected earnings or commissions. All organizations however have caps on the incentive amount paid to an individual with an average cap introduced at 75% of overachievement of the target Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 4 of 30

6 SALES RECOGNITION SCHEMES Around 70% of the organizations confirm that they have introduced sales recognition schemes which are over and above the sales incentive schemes run by the organizations. Such schemes are introduced at various frequencies depending on the organization, ranging from once a year (generally in the lean months to encourage employees to boost sales) to introducing such schemes on a regular monthly basis by some organizations. Smaller percentage of organizations, still provide cash incentives for rewarding the winner of sales contests, many other organizations have now moved to different and more creative forms of rewarding the employees Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 5 of 30

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8 PARTICIPANT PROFILE INDIA Participant list N=10 Organization name 1. Colgate Palmolive 2. Henkel Adhesives Technologies 3. Loreal India 4. Mars India 5. Mead Johnson Nutrition 6. Nestle India 7. Perfetti Van Melle 8. PepsiCo India Holdings 9. Pernod Ricard Asia 10. Reckitt Benckiser 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 7 of 30

9 BY INDUSTRY SUBSECTOR Figure 1. Participants by Industry Sector N=10 Food & Non-Alcoholic Beverages Household Products & Personal Care 40% Tobacco & Alcoholic Beverage 10% 0% 10% 20% 30% 40% BY REGIONAL OFFICE Figure 2. Is India your Regional Office? N=10 0 % 30% Yes No 70% TYPICAL SALES FUNCTIONS EXISTING IN AN ORGANIZATION Figure 3. Typical Sales Functions Existing in an Organization N= Account Management Channel/Field Sales Retail Sales Sales Administration Trade Marketing Presented by number of observations Some organizations indicated more than one answer 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 8 of 30

10 BY COMPANY SIZE Figure 4. Breakdown by Total Number of Employees N=10 2% 3% Account Management 4% Channel/Field Sales Retail Sales 25% Sales Administration Trade Marketing 67% The total does not equal 100% due to rounding. BY REPORTED REVENUE Figure 5. Sales Revenue 2012 and 2013 N=9 4 Number of organizations 2 0 <100 mln USD mln USD mln USD >1000 mln USD Target 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 9 of 30

11 SALES FORCE EXPECTATIONS Figure 6. What do Organizations Expect will Happen to the Size of Their Sales Force in 2013 N=10 Increase 40% Decrease Remain the same 60% Average increase reported by 4 companies is 12.3%, median is 12.5%. None of the companies reported a decrease Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 10 of 30

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13 SALES PLAN DESIGN SALES INCENTIVE PLAN DESIGNING Figure 7. Who is responsible for the design of the sales incentive plan in your organization? N=10 Business Human Resource Department Both FUNCTIONS COVERED BY PLANS Figure 8. Function(s) Covered by the Plan Management Account management Channel/Field Sales Retail Sales Sales Administration Trade Marketing Presented by number of observations Same plan N=5; Executive N=0; Management N= 3; N=7; Para N=2 Executive and Para levels not reported due to insufficient data Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 12 of 30

14 VARIABLE BONUS SCHEME Figure 9. Are Sales Employees that are Eligible for the Sales Incentive Plan, also Eligible for the Variable Bonus Scheme? Employee category Career stream Account management Channel/ Field Sales Retail Sales Sales Administration Trade Marketing Yes No Yes No Yes No Yes No Yes No No. of responses Same plan across career stream Executive Management Para Presented by number of observations Executive, Management and Para levels not reported due to insufficient data CATEGORIES DESCRIBING PLANS Figure 10. Categories which Best Describe Plans 100% 75% 25% 0 Incentive plan Commission plan Hybrid Plan Other Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 13 of 30

15 TARGET INCENTIVE CALCULATIONS Figure 11. Ways in which Target Incentives are calculated 33% 17% 25% 25% 0 As a % of base salary As a % of sales revenue As a dollar value (per unit pay out) Other Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data Other includes: - For existing products historical sales trend is taken into consideration. For New Product its calculated based on the volume that s been decided. - Set amounts for % target achievement. e.g.: INR 5000 for 95% - 100% achievement - Fixed value is defined for points gained on set performance target of the month and based on achievement % the incentive is given. INFLUENCE ON THE PAYOUT BASIS THE FACTORS Figure 12. Influence on the Payout: Average Employee category Same plan across career stream Average Individual Team Business Unit Organization No. of Responses 90% 5% 5% 0% 4 Executive Management % 0% 0% 0% 6 Para INFLUENCE ON THE PAYOUT BASIS THE FACTORS Figure 13. Influence on the Payout: Median Employee category Same plan across career stream Median Individual Team Business Unit Organization No. of Responses 100% 0% 0% 0% 4 Executive Management % 0% 0% 0% 6 Para Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 14 of 30

16 SALES CREDIT Figure 14. At what point are sales credited (i.e. recognized as a sale)? 57% 14% 29% Management 33% 33% 33% 33% 33% 33% 0 At time of purchase order At time of invoicing At the time of shipment At the time of revenue collection Other Same Plan N=3; Executive N=0; Management N=3, N=7; Para N=2 Executive and Para levels not reported due to insufficient data The total does not equal 100% due to rounding. Other includes: It is done whenever anyone of his team member makes a sale. SALES REWARDS Figure 15. Do Organizations Reward Selling an Established Product Differently from Selling a Newly Launched Product? 17% 83% 0% Yes No Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 15 of 30

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18 QUOTAS HOW ARE QUOTAS DEFINED Figure 16. How are Quotas defined? Employee category By sales volume By sales revenue By new accounts By product mix By number of sales calls By number of referrals By geographical area Other No. of responses Same plan across career stream Executive Management Para Presented by number of observations Some organizations indicated more than one answer Executive and Para levels not reported due to insufficient data FORECAST METHODOLOGY Figure 17. Forecast Methodology to Define Quotas Employee category Same plan across career stream Historical trends New product launch Business growth strategy Net revenue Other No. of responses Executive Management Para Presented by number of observations Some organizations indicated more than one answer Executive and Para levels not reported due to insufficient data Other includes: Based on how the team has performed in the past the quotas are set Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 17 of 30

19 QUOTAS REVISION Figure 18. Quotas Revision in Case of Major Changes 75% 25% 0% Yes No Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data MID-YEAR QUOTAS REVISION Figure 19. Mid-Year Revisions are Done by 33% 17% 100% 0% Local Management Regional Management Global/ Corporate Management Same Plan N=3; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 18 of 30

20 QUOTA MIX Figure 20. Quota Mix: Average Employee category Same plan across career stream New Sales Average New and Existing Sales Existing Sales Only Other No. of Responses Executive Management 5% 63% 28% 3% 3 16% 70% 12% 1% 7 Para Other includes: On hitting the numeric reach distribution. QUOTA MIX Figure 21. Quota Mix: Median Employee category Same plan across career stream New Sales Median New and Existing Sales Existing Sales Only Other No. of Responses Executive Management % 100% 0% 0% 7 Para TIME PERIOD FOR SETTING QUOTAS Figure 22. Quotas are set by: 17% 33% 25% 75% 0 Fiscal Year Fiscal Quarter Fiscal Month Other time period Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 19 of 30

21 FACTORS ON WHICH QUOTAS ARE BASED Figure 23. Quotas are Based on: Employee category Same plan across career stream Individual Assignment Team Based Product Career Level Historical results Expected opportunity and growth No. of responses Executive Management Para Presented by number of observations Some organizations indicated more than one answer Executive, Management and Para levels not reported due to insufficient data 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 20 of 30

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23 INCENTIVE PAYOUTS QUALIFYING CRITERIA FOR PLANS Figure 24. Do Organizations have Qualifying Criteria for Plans? 100% 0% Yes No Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data QUALIFYING CRITERIA DETAILS Participant answers: - : "Good performance, over achievement of the target" - Minimum Target Achievement is specified beforehand (threshold - 90%), payout starts at 95%. - Minimum volume achievement to be able to earn the Sales Incentive - Employee need to earn minimum points on the performance parameter. - Market share gain of key brands, Merchandising, S&D and other processes compliance 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 22 of 30

24 PAYOUT FREQUENCY Figure 25. Payout Frequency 33% 17% 25% 25% 0% Monthly Quarterly Half yearly Annually Other Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data Other includes: Payout twice (100% of Other responses) INCENTIVES FOR NEW EMPLOYEES Figure 26. When is New Employee Eligible to Receive Incentives? 100% 25% 25% 25% 25% 0%Upon hire Dependent on start date and minimum performance criteria (e.g. at least 3 months prior to end of performance cycle) After 3 months After 6 months Sales execution Other Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data Other includes: After one month of joining 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 23 of 30

25 RAMP-UP FOR NEW EMPLOYEES Figure 27. Is there a Ramp-up for New Employees? 100% 100% 0% Yes No Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data GUARANTEED PAYOUT FOR NEW EMPLOYEES Figure 28. Is there a Guaranteed Payout for New Employees? 100% 100% 0% Yes No Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 24 of 30

26 ACCELERATORS AND DECELERATORS IN SALES INCENTIVE PROGRAMS Figure 29. Do Organizations have Accelerators and Decelerators Built in their Sales Incentive Program? 33% 17% 75% 25% 0% Both accelerators and decelerators Accelerators only Decelerators only Neither accelerators nor decelerators Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data CAPS ON THE INCENTIVE PAYOUTS TO INDIVIDUALS Figure 30. Is there a Cap on the Incentive Payout Amount to an Individual? 100% 100% 0% Yes No Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data Average cap as a percentage of target incentive reported by 3 companies is 177% 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 25 of 30

27 CLAW BACK Figure 31. Is there a Claw Back? 17% 83% 0% Yes No Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data DRAWS FOR EMPLOYEES Figure 32. Do Organizations Practice "Draws" for Employees in their Plan? 100% 100% 0% Yes No Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 26 of 30

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29 SALES RECOGNITION PLAN SALES CONTESTS ON TOP OF SALES INCENTIVE PLANS Figure 33. Sales Contests on Top of Sales Incentive Plans 67% 33% 75% 25% 0% Yes No Same Plan N=4; Executive N=0; Management N=2, N=6; Para N=1 Executive, Management and Para levels not reported due to insufficient data FREQUENCY OF SALES CONTESTS Figure 34. Frequency of Sales Contests 100% 33% 33% 33% 0 At least once a year 2-4 times a year 5-12 times a year More than 12 times a year Other Same Plan N=3; Executive N=0; Management N=1, N=4; Para N=1 Executive, Management and Para levels not reported due to insufficient data The total does not equal 100% due to rounding Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 28 of 30

30 TYPICAL REWARDS USED IN SALES COMPETITION Figure 35. Typical Rewards Used in the Sales Competition: Same Plan across Career Stream N=3 Public Announcement of achievements Trophy/plaques/certificate/letter of thanks Holiday Packages 67% 67% 67% Vouchers (e.g. movie, dining) Merchandise/free company products 67% 67% Employee of the month 33% Cash 33% 0% 20% 40% 60% 80% Some organizations indicated more than one answer; therefore the total exceeds 100%. Executive, Management and Para levels not reported due to insufficient data 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 29 of 30

31 TYPICAL REWARDS USED IN SALES COMPETITION Figure 36. Typical Rewards Used in the Sales Competition: N=4 Employee of the month Public Announcement of achievements Trophy/plaques/certificate/letter of thanks 75% 75% 75% Holiday Packages Cash Vouchers (e.g. movie, dining) 25% Merchandise/free company products 0% 0% 20% 40% 60% 80% Some organizations indicated more than one answer; therefore the total exceeds 100%. TYPICAL REWARDS USED IN SALES COMPETITION Cash is determined by: : - As per the management and business decision : - It is a fixed amount decided by the Management - There is fixed amount for monthly Top performers 2014 Mercer LLC 2013 APCBF SALES INCENTIVE - INDIA 30 of 30

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33 For further information, please contact: Mercer (Singapore) Pte Ltd. 8 Marina View #09-08, Asia Square Tower 1, Singapore Nitya Kapur Norman Chin Tel: Tel: Fax: Fax: nitya.kapur@mercer.com norman.chin@mercer.com or visit our website at: Argentina Australia Austria Belgium Brazil Canada Chile China Colombia Denmark Finland France Germany Hong Kong India Indonesia Ireland Italy Japan Malaysia Mexico Netherlands New Zealand Norway Peru Philippines Poland Portugal Saudi Arabia Singapore South Africa South Korea Spain Sweden Switzerland Taiwan Thailand Turkey United Arab Emirates United Kingdom United States Venezuela Copyright 2014 Mercer LLC. All rights reserved IS