Phone Works Inside Sales Compensation Report - Q1 2003

Will 2003 be the year that the economy picks up again? No one can say for sure. Compensation planning can be challenging in the best of economic times, let alone in the face of continuing uncertainty. We wondered if companies would be tempted to pay less for telebusiness staff and management, given the number of people out of work. Or would they consider that lowering compensation could impede their ability to attract or maintain the best talent while negatively impacting the motivation of the team? When quota-setting for inside sales, how would management balance factors such as decreased spending and budgets, with the need to get revenues back on track?

Our 2003 Telebusiness Compensation Report shows how our survey respondents handled these tough questions.

Summary of Findings and Observations

Most companies decided either to not change or to increase compensation plans from last year. No one paid less for telebusiness talent.

More than half of the companies that responded changed quotas from last year and most of those changes were decreases. There seems to be a consensus that setting realistic and attainable goals for sales is imperative. Although the results are inconclusive, it appears the average order size has decreased.

Along with unchanged or increased compensation, we saw a decrease in telebusiness headcount. Some companies did away with their telebusiness departments – sales development or telesales - entirely. Others increased the ratio of lead-generating sales development reps to field sales reps.

Survey Background

Each year, in order to stay on top of the latest trends, Phone Works collects and compiles data from various SF Bay Area technology firms. Representatives of those firms are invited to participate either through an online survey or by filling out a written form.

Over 50% of respondents are members of the Telebusiness Alliance, an organization of telebusiness professionals representing leading companies in the SF Bay Area.

The following describes the companies that participated in the survey:

• Products sold are described as complex, Business-to-Business enterprise solutions.
• Both privately held and public companies.
• Products sell for an average of $168,000 and range from $3,500 to $400,000
• Number of employees range from under fifty to over one thousand.

A Word About Titles

Telebusiness titles can vary greatly from company to company, which can make comparisons challenging. One company’s “Senior Representative” would be considered entry-level at a different firm. In addition, in our opinion, some companies erroneously label sales development functions “telesales” or “inside sales”. Here is a guide to titles to help you understand our survey and its conclusions:

Sales Development (aka “Telemarketing”, “Lead Generation”, “Inside Sales”, “Business Development”)

• These groups and representatives contribute to sales by generating and/or qualifying leads (or appointments) to keep the pipeline full. They do not close deals.

Telesales (aka “Inside Sales”, “Account Management”, “Corporate Sales”)

• These groups and representatives carry sales quotas and close deals without traveling. Instead, they use the telephone and online tools such as email, the web, and web-based technologies.

Sales Development Results
Title	Base Salary	Total Package	Total Package % Change from 2002
Sales Development Representative	Average: $46K Range: $25-70K	Average: $76K Range: $46-120K	No Change
Senior Sales Development Representative	Average: $51K Range: $35-65K	Average: $91K Range: $54-180K	Up 12%
Sales Development Manager	Average: $72K Range: $55-105K	Average: $141K Range: $80-190K	Up 11%

The survey data showed us some key Sales Development compensation trends. They include:

• Sales Development Representatives have 1-3 years of experience while Senior Sales Development Representatives have 4 or more years of experience.
• Almost all companies linked Sales Development compensation to the number of leads, appointments, or online demo’s generated and less than half included a revenue component.
• Sixty-seven percent (67%) included stock options as part of their Sales Development representative compensation packages.
• Seventy-eight percent (78%) of Sales Development Managers received stock option compensation.
• Forty-six percent (46%) included Club eligibility as a perk for the Sales Development representatives.
• Fifty-six percent (56%) of Sales Development Managers were eligible for Club.
• For Sales Development Managers, the average number of direct reports was 6

Telesales Results
Title	Base Salary	Total Package	Total Package % Change from 2002
Telesales Representative	Average: $59K Range: $48-80K	Average: $104K Range: $80-135K	Up 17%
Senior Telesales Representative	Average: $70K Range: $58-90K	Average: $114K Range: $100-120K	Up 7%
Telesales Manager	Average: $88K Range: $66-100K	Average: $166K Range: $135-200K	Up 18%

While compiling the survey data for telesales departments, we spotted the following trends:

• The majority of Telesales representatives were responsible for both an individual quota and a team quota.
• Fifty percent (50%) of companies double compensate Field Sales in some way for deals closed by Telesales
• Telesales representatives averaged quotas of $1.3 million with the lowest at $485K and the highest at $3.5 million.
• Senior Telesales representatives averaged quotas of $2.7 million with the lowest at $600K and the highest at $4.8 million.
• Telesales managers averaged quotas of $7.3 million with the lowest at $3 million and the highest at $15 million.
• For Telesales managers, the average number of direct reports was 6.
• Sixty percent (60%) included stock options as part of their Telesales compensation packages.
• Seventy-five percent (75%) of Telesales managers received compensation packages that included stock or stock options.
• Sixty percent (60%) included Club eligibility as a perk for Telesales representatives.
• Sixty-seven percent (67%) of Telesales Managers were eligible for Club.

Compensation Plan Challenges and Phone Works Recommendations
Our survey includes a “common challenges” section, allowing participants to describe problems and issues that they face regarding compensation. We have taken the liberty of not only reporting these challenges but also offering our opinions and recommendations for how to address some of these challenges.

Sales Development Challenges

As in previous years, Sales Development representatives and managers continue to be frustrated by plans that link their compensation to deal closure. While Sales Development professionals are expert at finding and qualifying leads, they are not responsible for whether or not a deal ultimately concludes in revenue-generation. Thus, sales quotas and commission-based compensation are more appropriate for Field Sales or Telesales professionals, whose job it is to close deals. Our suggestion is to recognize the contribution of Sales Development to revenue generation with a bonus or other recognition program. But the primary indicator on which you should measure and compensate Sales Development staff performance is consistently delivered, detailed, high-quality leads.

Another challenge facing Sales Development is the decreased ratio of Sales Development reps to Field reps, as mentioned in our Summary of Findings above. Decreasing headcount budgets are squeezing all company departments, including Sales. However, it is easy to see how assigning one Sales Development rep to 4-7 Fields reps, as is commonplace today, can cause friction. There are only so many calls and contacts one person can make in a business day no matter how efficient the worker, leaving reps in the field with too few leads per person. We recommend a ratio of 1 Sales Development rep to no more than 3 Field Reps for maximum impact.

Furthermore, it is a mystery to us why a company would decrease the number of sales development reps (or do away with them completely) when they are the ones who kick-start the sales cycle by filling the pipeline. Relying on field sales reps to perform this early sales cycle function is not only much more expensive, but it is also much less effective, as evidenced by the many companies that removed or drastically reduced their sales development teams a year ago are now finding they need to re-establish them.

Most companies are fond of retaining Field Sales reps in favor of Sales Development reps because “they generate the revenue”. A simple analysis of the forecast and pipeline will point out what sales resources are most needed at a given point in time: those to follow up and close the leads already generated or those to fill up the “top of the funnel”. In our experience, it is the “pipeline-filling” function that is penalized more heavily than the “pipeline-emptying” resources to the detriment of a company’s top and bottom line results.

Telesales Challenges

The most common challenge reported by Telesales is how to effectively structure the sales model – and corresponding compensation – to maximize company revenues while minimizing internal sales channel conflict. Channel conflict management, and when and how to use “double compensation” most effectively, are complex issues that we will examine more thoroughly in a future issue of the Sales Advocate. Click here to add your name to our mailing list.

You can reach Phone Works at 510.749.9073.