Q4 2009 VP Sales Compensation Report

Survey Background

2009 was an unprecedented year for the US economy. Succeeding, growing, maintaining customers and employees, and selling products and services in a recession proved to be difficult challenges for all types of corporations across all industries. Phone Works customers have been looking back on their experiences in 2009, and asking if they have the right strategies in place for 2010.

In our annual Phone Works Chief Sales Officer compensation survey, we asked a wide range of sales leaders what is on their minds, and how their business and incentives are looking as they close out 2009 and look to 2010. In the pages that follow, you’ll discover key highlights and trends in sales and important insights that can help you formulate 2010 plans and understand where your organization stacks up.

The companies we surveyed represent both east and west coasts, and a representative sample of companies of all sizes. 80% of the companies surveyed are smaller companies (under $100M or 500 people) and 20% were large corporations. Most are global, with 72% of our respondents having global sales responsibility.

Total Compensation Varies By Seniority; Quotas declined in 2009 as Goal-Setting Proved Challenging During Difficult Economic Condition

Table 1, below, displays the average base salary, commission, total package and average quota in both public and privately-held companies. Base salaries and total compensation increased slightly in 2009 for all levels, 4% and 2% respectively. However, the most notable findings were that the quotas across the board were down significantly year over year. Quotas declined 45% for all survey respondents, ranging from -18% for SVP’s to -47% for VP’s. We believe this data will be an outlier for 2009, as the unpredictable economy created unprecedented difficulty in setting the right quotas.

Table 1: Average compensation and quota

Title	Base Salary	Commission	Total Package	Average Quota
All Respondents	Avg: $192k	Avg: $130k	Avg: $346k	Avg: $35m
	Range: $165k - $225k	Range: $50k - $200k	Range: $270k - $450k	Range: $5m - $160m
SVPs/EVPs only	Avg: $250k	Avg: $145k	Avg: $363k	Avg: $17m
	Range: $200k - $225k	Range: $50k - $200k	Range: $275k - $450k	Range: $5m - $50m
VP Only	Avg: $186k	Avg: $113k	Avg: $339k	Avg: $39m
	Range: $165k - $210k	Range: $90k - $175k	Range: $270k - $430k	Range: $3m - $160m
Field Reps	Avg: $101k	Avg: $98k	Avg: $201k	Avg: $2m
	Range: $65k - 150k	Range: $50k - $175k	Range: $130k - $275k	Range: $500k - $4m

Moderate Increases in Compensation for Hosted Application Sales, but Quotas on the decline

With the emergence of selling Software-as-a-Service (SaaS), we wanted to see how compensation varies for Senior Sales executives selling hosted applications (63% of all respondents). Our findings indicate average compensation levels rose slightly, with base salary and overall compensation increasing 5% and 1% respectively. However, quota levels were down considerably, on average 55% in hosted environments. We believe there will be a correction in 2010, as most survey respondents expect quotas to increase this coming year.

Table 2: Average compensation and quota in SaaS companies

Title	Base Salary	Commission	Total Package	Average Quota
All Respondents	Avg: $192k	Avg: $129k	Avg: $344k	Avg: $29m
	Range: $165k - $225k	Range: $50k - $17k5	Range: $270k - $430k	Range: $5m - $150m
VP Only	Avg: $201k	Avg: $98k	Avg: $321k	Avg: $46m
	Range: $180k - $225k	Range: $50k - $150k	Range: $275k - $400k	Range: $5m - $150m
SVPs/EVPs only	Avg: $188k	Avg: $151k	Avg: $358k	Avg: $18m
	Range: $165k - $200k	Range: $123k - $175k	Range: $300k - $430k	Range: $3m - $70m
Field Reps	Avg: $100k	Avg: $92k	Avg: $196k	Avg: $1.5m
	Range: $65k - 150k	Range: $50k - $125k	Range: $130k - $275k	Range: $850k - $3m

Bonuses and Stock Compensation are Important Motivators

In addition to commission, more than 60% of senior sales executives receive additional bonuses of either cash or stock for:

• meeting sales goals
• meeting profit targets
• achieving key corporate objectives
• customer satisfaction and recurring revenue
• personal MBOs

The average bonus is $58K, consistent with last year’s findings, ranging widely from $20K to $100K. Stock and stock option grants remain a strong component of executive compensation, predominantly representing 1% of the company and under.

Figure 1: What percent of the company do your stock options represent?

The number of options ranged from 8,000 to 8,000,000 with an average of 858,577, up 300,000 from last year’s average. Vesting periods are typically over four years (90% of respondents). 82% of the companies we surveyed provide full or partial vesting upon change of control of the company.

Sales Quotas and Number of Direct Reports

Table 3, below, displays the average annual quota, size of sales staff and average deal size. The annual quota figures have declined considerably from last year (50-60% on average). This may be attributed to economic realities and a deliberate retention strategy, ensuring that sales leaders and their team members are provided with achievable quotas and in order to maintain morale. Similarly, average deal size fell 20% year over year. We believe these adjustments are also symptomatic of the economic climate and the flexibility companies have shown in trying to win business and retain customers via discounting.

Table 3: Sales Quotas, size of staff, and deal size vary by title

Title	Annual Quota	Size of Sales Staff	Number of Direct Reports	Average Deal Size
All Respondents	Avg: $35m	Avg: 44	Avg: 7	Avg: $132k
	Range: $5m - $160m	Range: 4-300	Range: 4-14	Range: $15k-1.3m
SVPs/EVPs Only	Avg: $17m	Avg: 35	Avg: 8	Avg: $291k
	Range: $5m - $50m	Range: 8-45	Range: 5-14	Range: $15k-1.3m
VPs Only	Avg: $39m	Avg: 47	Avg: 7	Avg: $70k
	Range: $3m - $160m	Range: 4-300	Range: 4-10	Range: $20k - $325k

Majority of Vice Presidents of Sales are Seasoned Executives; Proven Success in First 2 Years is Key

There is a fair amount of turn-over for this position. However, most VP’s of Sales have extensive career experience, 56% of survey respondents have been VP’s of Sales for over 10 years.

Figure 2: Tenure with current company

Figure 3: Overall experience

Multiple Sales Channels Help Make Quota

Inside Sales and Field Sales channels are the most prevalent; however there are many different channels used including Sales Development (Lead Qualification), OEM, Resellers, and VARs. The biggest growth will occur in VAR Channels. 15% of respondents plan to add this channel in the near future.

Figure 4: OEM and VAR channels will grow in 2010

Functional Responsibilities

In addition to overseeing the generation of revenue via field sales and telesales, the Vice President of Sales is often responsible for a host of additional functional areas. The additional responsibilities are most likely to include Customer Acquisition and Renewals, System Engineers, and Sales Development.

Figure 5: Sales VP’s have wide range of responsibilities

Compensation Plan Challenges

When asked, “What is the top challenge of your compensation plan?” The most common issues reported were:

• Plans do not provide rewards for exceeding targets; Exceeding target is unrealistic
• Achieving quota and growth expectations
• Hiring enough of the right sales talent and getting them on-boarded and productive quickly
• Uncontrollable external economic factors make it difficult to achieve quota
• Plans are not delivered in a timely fashion
• Balancing new and renewal business
• C-level executives understanding the difficulties of selling in this economic climate

Companies that offer SaaS solutions, reported challenges in:

• Establishing effective targets
• Balancing revenue growth, new customer acquisition and customer renewals
• Overachieving/upside are difficult to achieve.

Looking Ahead to 2010

As we head into 2010, Sales VP’s are faced with a variety of new challenges. At the top of the list is new customer acquisition, year over year revenue growth, and taking market share from competitors. Customer retention and transforming the sales model are also important elements of the 2010 strategy, requiring companies to rethink how they reach more customers effectively and economically, and best service those customers for driving up renewals and customer satisfaction.

Figure 6: New Customer Acquisition is the top challenge for 2010

Figure 7: Planned headcount increases for 2010

Survey respondents optimistically cited that they do not foresee decreases in any sales functions in the year ahead.

Figure 8: Quotas are expected to increase in 2010

The majority of survey respondents believe quotas will increase in 2010, perhaps reflecting a belief in a strengthening economic climate (….or anticipating the inevitable?)

Figure 9: Compensation will likely remain flat in 2010

Most survey respondents believe that while quotas will be increasing, their compensation will remain roughly the same. 28% believe that their compensation will increase in the coming year. Similar feedback was provided on the outlook for rep compensation, with the majority stating that compensation will likely stay roughly the same, and approximately one-third of respondents citing that rep compensation will increase in 2010.

Figure 10: Compensation will likely remain flat in 2010

About the Surveyed Companies

The following graphics show an overall picture of the companies that responded to our survey.

Figure 11: Survey respondents sell multiple products

Figure 12: Company revenues

Figure 13: Total employee population

Help Us Improve Future Surveys

We’d like to hear your suggestions or questions on the information reported here. Are there survey questions you would like to see included? Clarifications on data reported? Other ideas on how to make the survey more useful? Send an email to info@phoneworks.com and let us know what you think.

This survey is provided as a complimentary service from Phone Works, LLC, the San Francisco Bay Area’s leading sales strategy and implementation consulting firm. Phone Works helps technology and B2B firms selling complex products increase revenue, shorten sales cycles and implement successful, repeatable sales models. We are known for our special expertise in Sales 2.0, inside, hybrid (inside + field), and Software-as-a-Service sales teams.

You can reach Phone Works at 510.749.9073.