Phone Works Inside Sales Compensation Report – Q4 2005

Survey Background

Every year in the fourth quarter, Phone Works conducts a compensation survey of inside sales professionals working in business-to-business technology companies. The majority of these businesses are based in the San Francisco Bay Area. Over half of the companies that responded to our survey this year are public. The number of employees ranges from under 50 to over 1000. You can read more about our survey respondents in the last section of this article, “About the Surveyed Companies”.

Survey responders participate by completing an online survey or written form. Forty-four percent of respondents are members of the Telebusiness Alliance, an organization of inside sales professionals representing leading companies in the San Francisco Bay Area, including EMC, Genesys, Network Appliance, and Macrovision.

Summary of Compensation Plan Differences From Last Year

Sales Development

• The majority of representative and manager compensation plans remained the same.
• Twenty-five (25) percent of companies reported higher compensation for representatives with an average increase of 15%.
• Thirty (30) percent reported higher compensation for managers, with an average increase of 15%.

Telesales

• The majority of representative and manager compensation plans remained the same while quotas increased by an average of 79% for representatives and 68% for managers.
• Thirty-eight percent of companies reported higher compensation for representatives, with an average increase of 8%.
• Thirty percent reported higher compensation for managers with an average increase of 9%.

Inside Sales Senior Executives

• The majority of executive compensation plans was higher with an average increase of 23%. Quotas also increased by an average of 26% for all executives.
• Thirty-eight percent of compensation plans remained unchanged.

Phone Works Guide to Titles

Every year we struggle with the industry’s lack of standardization when it comes to inside sales titles. Because titles can vary greatly from company to company, comparisons can be challenging. Our classifications fundamentally distinguish between those groups that generate leads and those that generate revenue. Our guide to titles will not only help you understand our survey and its conclusions but also give you a heads up on what’s “in” and what’s “out”.

Sales 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.
• Our respondents’ other names for this function include: Inside Sales, Lead Qualification, Lead Generation, New Business Development, Account Development, Direct Response, Contact Management, and Telemarketing.
• The most commonly-reported name for this function is Sales Development.

Telesales

• 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 internet-based technologies.
• Other names for this function include: Sales, Small-Medium Enterprise Sales, Inside Sales, Installed Base Sales, Regional Account Management, Corporate Sales, and Product Sales.
• The most commonly-reported name for this function is Inside Sales.

Sales Development Compensation

Title	Base Salary	Total Package
Sales Development Representative	Average: $50K Range: $32-67K	Average: $82K Range: $52-120K
Sales Development Manager	Average: $74K Range: $40-116K	Average: $128K Range: $60 – 200K

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

• While 15.5% of companies based bonus compensation on the number of leads delivered and 69% based compensation on both the number and quality of leads delivered, 15.5% of our respondents had a different formula for calculating incentive compensation. Of that 15.5%, most bonuses were based on a combination of traditional sales development metrics plus meeting quarterly objectives or closed business quotas (for which the field sales representatives are ultimately responsible).
• Seventy-five percent of companies included stock or stock options as part of their Sales Development representative and Sales Development manager compensation packages.
• Twenty-two percent included Club eligibility as a perk for the Sales Development representatives. Thirty-five percent of Managers were eligible to attend Club.

About the Sales Development Groups in Our Survey

• Thirty-three percent of groups are outbound only, while 63% are both outbound and inbound. Just 4% were inbound only.
• Group size average is 4 representatives with an average ratio of 1 sales development representative to 6 field representatives.
• Almost 80% of Sales Development groups reports to Sales.
• Sales Development initiated an average of 52% of total US revenue.

Telesales Compensation

Title	Base Salary	Total Package
Telesales Representative	Average: $57K Range: $35-110K	Average: $107K Range: $75-183K
Telesales Manager	Average: $91K Range: $55-135K	Average: $165K Range: $68-230K

Trends in telesales departments included the following:

• Average quota for representatives is $4.5 million with a high of $36M and a low of $150,000. For managers, average quota is $21.4 million with a low of $500, 000 and a high of $205 million.
• In 61% of companies, representatives are eligible for Quota Club. Sixty-six percent of managers are eligible for Club.
• In 72% of companies, representatives are eligible for a bonus in addition to sales commissions. Thirty-two percent of managers have a bonus program.
• The bonus, if included, is based on a wide variety of objectives, including: over quota performance, achieving quarterly revenue goals or MBO’s, consistent performance, early bookings, total team annual bookings, and compliance with non-quota related activities that help other departments and the company as a whole.
• In 82% of companies, telesales representatives are eligible to receive stock or stock options. Managers are eligible for this perk in 80% of companies.
• In 40% of companies, telesales has a team quota with the Field.
• In 69% of companies, the Field representative gets paid on what a telesales representative sells.

About the Telesales Groups in our Survey

• Seventy-eight percent of telesales groups are both inbound and outbound while 22% are mostly outbound.
• Eighty-five percent of companies reported having a Field Sales organization in addition to Telesales.
• The average telesales representative to field representative ratio 1 to 3. The ratio ranges from 1:1 to 1:10.
• The average telesales group size is 9 with a high of 55 and a low of 1.
• Telesales is responsible for an average of 42% of U.S. revenues with a high of 100% and a low of 10%.
• The average order size of a telesales deal is $22,000.
• The average telesales cycle is 3 months.
• The price range of products sold by Telesales is $500 – 500,000.

Telesales Versus the Field

In companies where a telesales group is present, it is important to clearly differentiate what Telesales sells from what the Field sells to eliminate or reduce the dreaded “channel conflict”. Figure 1 below shows what Telesales sells. Figure 2 shows whether the Telesales/Field split is by revenue amount, separate products, geographic territory vs. named accounts, customer base versus new business, or a combination of these.

Figure 1. What Does Telesales Sell?

Figure 2. How is Telesales
differentiated vs. the Field?

Inside Sales Senior Executives

Our survey included a separate section for Senior Manager, Director and Vice President-level managers in Inside Sales. We did not, however, distinguish among Vice Presidents, Directors or Senior Managers; anyone with other managers reporting to them is represented in this section.

Title	Base Salary	Total Package
Sr. Sales Executives	Average: 107K Range: $45 – 180K	Average: $206K Range: $145 - 300K

For Senior Sales Executives, we found:

• Average quota is $63 million with a low of $1 million and a high of $267 million.
• Ninety-two percent receive stock or stock options.
• Seventy-eight percent are eligible for Quota Club.
• For executive-level respondents, the average number of people in the department is 22 and the average number of direct reports is 3.
• There is no apparent correlation between size of quota, number of direct reports, or number of employees in the department, and compensation.
• Managers of just one function, such as Sales Development or Telesales do not have lower target compensation than managers of both functions.

Figure 3: Inside Sales Executives’
Departments Include

About the Surveyed Companies

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

Figure 4. Companies’ Headquarters Location

Figure 5. Number of Employees

Figure 6. Public or Private?

Figure 7. What Does the Company Sell?

Figure 8. Sales Channels

Figure 9. Average Deal Size for Company

Inside Sales Compensation Plan Advice

In conclusion, we offer a few words of advice, based on the challenges reported and our fifteen years of experience building or restructuring Inside Sales teams for hundreds of companies.

• Align compensation and incentives with measurable company and department goals.
• Pay as often as is feasible. Given the nature of Inside Sales, monthly commissions or bonuses are ideal. At a minimum, provide for a quarterly incentive payment.
• Base the incentive compensation on metrics or goals that are achievable, consistent and easily tracked. Offer additional compensation for over-quota performance. There is nothing less motivational than having an un-achievable target or “capped” compensation.
• Do not base the majority of incentive compensation on goals that a representative or manager cannot directly control, such as deals closed by another sales organization or product availability. Additional bonuses for the inside sales team or the sales organization making quota are OK.
• Build a plan that clearly and fairly articulates the Inside Sales charter versus the Field’s to manage channel conflict.
• Keep your plans in line with industry standards to avoid losing good performers.

We welcome you to contact us throughout the year to check on compensation trends that we may see emerging in between annual surveys.

You can reach Phone Works at 510.749.9073.