Conference ilbbak::us_sales_service

>>    The calendar and table on page 83-84 show that August 12th is the first
>>    time when 'Employee receives Incentive/Draw paycheck'.
  
As I understand it, we'll receive our non-recoverable draw concurrent with the 
introduction of reduced weekly paycheck.  This will be a monthly check, paid at 
the beginning of the month so as not to negatively impact our personal cash 
flow.

Bob

I got a glimpse of the new comp plan, and it looks good (at least it rewards
over-performance more than the old plan!).

Highlights:

All sales will be on 70/30, 80/20 or 90/10, depending on job.

Revenue is the key.

Using an example of a rep currently earning $62K:

	New "sales salary" =	49,600
	Performance Incentive = 12,400

	For each 1% of annual budget attained, rep gets $124 (1% of the $12,400)

	$2K bonus for reaching 100%
 
	From 101% to 120%, each 1% earns $248 (2% of the 12,400)

	From 121% and up, each 1% earns $372 (3% of the 12,400).

	NO CAP!!

	Periodic special incentive programs

So, this isn't a "commission" plan, but looks pretty good to me.  The only
problems I have with it are the fact that we're still tied to % of budget,
not profitability, and that the incentives are directly associated with 
salary (specifically, two reps with the same budget and performance will be
rewarded differently based on salary).  But, this is a great start and I see
an evolution that will make the plan more equitable over time.

Bob

    re -1
    
    Yeh, it looks good, but I hate to have my W-2 depended upon what my
    unit manager thinks should be booked in this area.  I still wish it
    were a simple % of what you sell.
    
    Ken

>>    Yeh, it looks good, but I hate to have my W-2 depended upon what my
>>    unit manager thinks should be booked in this area.  I still wish it
>>    were a simple % of what you sell.
  
Amen to that.  Also, the very wide skew we've seen in the past (at least in NY)
is amazing.  SEII's with <$1M; SRII's with as high as $6.5M  Even if the 
territories justified this, consider what each has to book to exceed budget and 
get the $/% incentive.

    Things change to stay the same - budget setting is still the key.
    
    Also, the percentage/salary bracket is key as well.  At first I thought
    having a 70/30 would be the worst and the 90/10 the best - at least for
    home budgeting purpopses.  But if you play out the scenario's as per
    .2's breakout, the higher the difference in base salary the better.
    
    I wonder if this is true or is it my imagination.  The higher the risk,
    the more the compensation?  I hope so and I hope we have a choice.
    
    My figures indicate that taking the same individual with a $62K salary
    with a $2,000K budget who does $2,500K actual or 125%:
    
    	$62,036			Bud 2,000			$62,036
    70%	 43,425			Act 2,500  		80% 	 49,629
    	 18,611 	$186	     125%	 $124		 12,407
    
    	  2,000		 100%			100%		  2,000
    	  7,444		  20%			 20%		  4,963
    	  2,792		   5%			  5%		  1,861
    
    	$74,272		 125%	Total Compen	125%		$70,860
    
    These figures are based on the information in .2 and nothing official,
    I am just speculating. 
    
    So, a $3,412 difference based on the plan this $62K person was on.
    
    How is the plan an individual is on, determined?  Any more information
    available?
    
    Thanks - Kevin

Kevin

Without checking your math, you're right that the 70/30 is better on the
"reward" portion of the risk/reward equation.

Your job classification will determine if you're 90/10, 82/20 0r 70/30.

Bob

    I just heard we would get bookings at 80% from the distributors vs net.
    
    Any confirmations?
    
    Ken

Rumors abound that DEC isn't ready to implement this new comp plan.  Hell, we 
haven't even SEEN a measurement report yet.

My own theory is that DEC senior management had no clue what they were getting
into when they decided to measure sales on revenue.  First, you gotta be a 
lawyer and a CPA to understand how DEC "recognizes" revenue (eg, many of us
felt shortchanged with that Q4 bonus program, due that the fine print in the
program).  Second, our internal systems are a joke.  We can't even figure
out how to accurately report "revenue" down to a district, much less to a 
sales rep level.

I personally would be VERY suprised if this program were implemented this FY.


Bob

    
    The big question in my mind is "How long will we be left twisting in
    the wind?" 
    
    The system is obviously not working, and every salesperson has money on
    the table.  How long can we leave these questions unresolved before
    people start taking charge of their own futures?

Russ Gullotti spoke at the FPPS sales event today and he told us that the
first reports are due shortly.  If they're not perfect, he'll extend the draw.


Bob

    Russ said in his DVN yesterday that the draw would be extended one
    month.  The reason for the extension is accuracy of the reports.  He
    was very high on the systems folks making their deadlines, but the data
    was only 90% accurate so far.
    
    He said that today-
    	35% of the sales force would make more money.
    	25% are even or 10% below
    	40% would receive 10-20% less
    
    He encouraged everyone to work hard to achieve the making money level.

>>       He said that today-
>>    	35% of the sales force would make more money.
>>    	25% are even or 10% below
>>    	40% would receive 10-20% less
  
If the reports are as inacurate as we see them here in NY, what's the basis
of this breakdown?  Wishful thinking?

The attached memo indicates that a policy change limits TOTAL compensation to
3X target income (ie, 3X 100% salary).  

While this is certainly better than the old SP2 programs, I have a problem with
ANY so-called commission program that limits total earnings.   Not the least
of which, this may tend to limit how much a rep is willing to sell in a given 
FY.  

I wonder why this cap was imposed.  Is Lucente afraid so hot-shot rep may earn 
more than he does?  You'd think that his objective is to MAXIMIZE the 
compensation of the sales force (achieved through over-achievement, of course).
Or maybe the whole budgeting process is suspect, making it easy for a few reps
with high salaries and low budgets to earn BIG incentives.





                  I N T E R O F F I C E   M E M O R A N D U M

                                        Date:     25-Mar-1994 03:00pm EDT
                                        From:     uscomp @mko
                                                  USCOMP AT A1 at MKOTS4 at MKO
                                        Dept:     
                                        Tel No:   

TO: See Below

Subject: EXECUTIVE BULLETIN #11                                      




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                            EXECUTIVE BULLETIN
                                    #11

                                 includes

                            EARNINGS INDICATORS
                     NEW INCENTIVE COMPENSATION GUIDE
                             Q1/Q2 UPDATE 
                      POLICY UPDATE-MAXIMUM EARNINGS
                  


EARNINGS INDICATORS:

Congratulations to those sales specialists and managers who have earned
bonus awards, and continue to earn at an accelerated rate under the 
incentive compensation plan.

          13% of the eligible sales specialists have earned the $2000 
              bonus for achieving 100% of budget. These individuals are 
              now earning at an accelerated rate on every order. 

          29% of the population has paid off draw liability with earned 
              incentives.

          18% of the sales specialists have earned bonuses OTHER THAN 
              the $2000/100% payment or Q1/Q2 Client/Server, for a total 
              of $432,737.

          45% of the eligible sales managers earned Q1 or Q2 Fast Start 
              bonuses.

          21% of the eligible sales managers earned BOTH the Q1 and Q2
              bonuses. 

              Total Fast Start bonus paid to date is $655,000.



Q1/Q2 BONUS UPDATE: 

Reports have been sent to eligible sales specialists and their managers.
Individuals with questions should call the Hotline at 8-264-0915 X2500.
Payment for reported eligible orders will be made AUTOMATICALLY on
March 31. See USCOMP Bulletin #14 sent last week for the process for 
resolving discrepancies. (The Hotline will forward a copy of the Bulletin
if required.)



NEW INCENTIVE COMPENSATION GUIDEBOOKS:

Within the next two weeks, a revised version of the U.S. SALES INCENTIVE 
PLAN GUIDEBOOK will be automatically distributed to all U.S. salespeople, 
sales managers, sales ops managers, and SMCs and SMAs. 

Significant Differences: 

Operating Policies: There is a new chapter outlining commonly used 
processes, such as adding an individual to the plan, and making changes in 
an individual's assignment. Included are responsibilities and due dates.  

Transfers, Reassignments, Adjustments, and Partial Years:  This chapter has 
been substantially expanded to cover performance calculation in the event 
of transfer from one sales assignment to another, for example, a transfer 
from sales rep to sales management. 

Sales Assignments: The list of sales assignments recognized in the 
Guidebook now numbers 65, including sales reps, supervisors, and sales 
managers. The sections referring to telesellers have been expanded. 


INCENTIVE COMPENSATION MAXIMUM:

EFFECTIVE MARCH 1, Sales Specialists and Managers will be able to earn 
up to three (3) times target earnings. This will be the maximum, and is a 
policy change. This change is being made in light of the multiple changes 
experienced in FY94, i.e., changes from certs to revenue goaling and 
crediting, assignment changes, changes in crediting rules, changes in 
selling model, and changes in budgets for many individuals.

At three times target earnings, the incentive plan continues to reward 
overachievement generously.


IMPLEMENTATION:    

Earnings for any SALES SPECIALIST plan participant inclusive of sales 
salary, performance incentive, Digital 100 $2000 bonus, and overachievement 
incentives, but not including other bonuses, will be capped at three (3)
times target earnings.  

Earnings for any SALES MANAGER plan participant inclusive of sales salary, 
performance incentive, Fast Start bonuses, and overachievement incentive 
will also be capped at three (3) times target earnings.  

IMPLEMENTATION (cont'd):

This is a policy change and affects earnings based on the fiscal month of 
March and the remainder of the fiscal year.

Example:  If the Sales Specialist target earnings are $62,000, then the 
individual's total earnings inclusive of Sales Salary, Digital 100 $2000
Bonus, Performance Incentives and Overachievement Incentives cannot exceed
$186,000.  Bonus earnings, such as bonus earnings for the Q1/Q2 
Client/Server Bonus Program, could bring total earnings over $186,000. 
 
Sales managers should ensure this policy change is reviewed within their 
organizations. 

MEASUREMENT GUIDEBOOK:  The next revision will be published in connection
with the FY95 plan.  

HOTLINE: The Hotline continues to support sales managers and reps at 
8-264-0915 x2500.

Regards, 

US Sales Measurement and Compensation Core Team