Sales Performance Management Challenges & Technology: Considerations for the Telecommunications Industry

SALES PERFORMANCE MANAGEMENT CHALLENGES & TECHNOLOGY: CONSIDERATIONS FOR THE TELECOMMUNICATIONS INDUSTRY

By:Elliot Scott, CSCP, Owner of Elliot Scott Consulting LLC
& Mike Noto, Senior Principal Consultant at OpenSymmetry

The telecommunications (Telco) industry has long been one of the most competitive, dynamic, and complex industries. Rapid, ongoing changes in technology mean that the frequent introduction of new products and digital services are essential to growth and profitability. However, revenue growth is elusive as new services often cannibalize their predecessors. With the changes in technology come entirely new competitors from software and high tech, along with a rapidly evolving partner and channel ecosystem. Furthermore, buyer behavior is rapidly evolving due to adoption of digital solutions, app-based, and multi-channel sales and services, requiring sophisticated data management and dramatically different sales processes and skill requirements.

With the ongoing need to push the envelope to stay competitive, the telecommunications industry is among the most sales-oriented. Telecom companies invest in sales training and sales management and build high-performance sales cultures, staffed with true sellers who are particularly focused on maximizing sales incentive earnings. In this environment, it is critical that sellers know exactly what they will be paid for their results and why. When that does not happen, shadow accounting, disputes, de-motivation, and turnover quickly ensue, resulting in steep erosion of revenues, market share, and profitability.

So, it is no surprise that telecommunications companies have been enthusiastic adopters of sales performance management (SPM) technology, to manage the complexity and pace of change of the telecom industry, allowing them to pay salespeople accurately, transparently, and in a timely manner. Yet many companies have struggled to get the expected value from their SPM systems. It is particularly critical in telecoms industry to select an application that is best able to accommodate the key business challenges of each organization, set up data feeds optimally and with consideration of how they may evolve, and understand how each application can manage ongoing changes without a full-time staff of programmers.

By identifying specific issues and needs, this paper will provide feedback on how a software solution can close performance gaps and improve operational efficiency. These and other issues should be considered when reviewing various SPM options and solutions to ensure a positive outcome. We have included particular feedback in the “SPM Technology Alignment & Considerations” sections. In this paper, we highlight five prominent challenges to sales incentive compensation in the telecommunications industry and offer insights into how SPM can help address them. These insights should shed some light on the most important considerations for selecting and properly implementing the best application for your needs.

1. Designing and Modeling Sales Compensation Plans
2. Accurate and Efficient Sales Crediting
3. Motivating and Managing Sales Performance
4. Managing Change for Products, Personnel, and Plans
5. Auditing Results

CHALLENGE 1 | Designing and Modeling Sales Compensation Plans

An effective sales compensation plan should do two things well:

1. Align with the financial and strategic objectives of the company
2. Align with the specific behaviors and results needed from each sales role

If the results expected from a sales role are unclear, or if it is unclear how and when a seller will be paid for sales results, the motivational impact of the plan is undermined. Furthermore, the longer the delay between the sale and the incentive payment, the lower the impact.

Some challenges for designing and modeling effective sales compensation plans for alignment specifically for Telco include:

• Broad range of sales roles. Telecommunication companies have a broad array of sales roles, often collaborating on a single sale or client. Depending on the customer and products being sold, these resources may be field-based, telephone-based, or embedded in retail stores.
• Interdependence of sales roles. Sellers should be paid on the results they directly control. However, in telecommunications sales, it is often impossible to objectively parse out the influence of each role. Double crediting and credit splitting are pervasive and fraught with complexity.
• Balance of individual and team measures. Plan designers must strike the right balance between individual and team measures so that motivation is strong, while keeping the plans transparent and manageable.
• Rapidly changing products and services. As new product and service offerings move through the lifecycle from cutting edge to commodity, the sales effort needs to change, often by assigning different resources or channels over time. This means the incentive plans must be highly adaptable to align with the revised objectives and priorities in each channel. This also includes constantly changing rebates and offers for different products and services.

CHALLENGE 2 | Accurate and Efficient Sales Crediting

Accurate and efficient sales crediting may be the top challenge to effective plan administration in the telecommunications industry for the following reasons:

• Multiple roles that may need to be credited on a revenue stream
• Dynamic services as customers add or subtract services and capacity as their needs evolve
• Wide array of products and services that may need to be credited differently
• Products and services that generate revenue based on different metrics over different time periods

For the last point, one scenario may be that certain services might be billed by monthly subscription, and others based on usage, perhaps with volume-tier pricing and contract minimums, with ultimate value of a sale unknown for months or years after the sale. This may require complex rules as to how contracted sales will be valued and then credited, with various claw-back or credit adjustment rules. In addition, quotas may be changed based on seasonality and changes to measures. On-network contracts may also pay initially for a sale and adjust as the network project is deployed and users are added.

Additionally, the proliferation of MAC (move, add, change) orders and the need to correctly credit them is a challenge that can seldom be met without an automated system able to handle complex rules.

CHALLENGE 3 | Motivating and Managing Sales Performance

The primary function and benefit of any SPM program is to help motivate and manage sales performance. However, a prevalent issue for telecommunications firms managing large volumes of sales-related data within an ever-changing environment is being able to effectively deliver sales-related information in a timely manner to payees, managers, as well as senior team members responsible for managing plan design performance. Without this visibility, the companies struggle to ensure both engaging their sales force and effectively monitoring the health and effectiveness of the sales compensation plans.

Reporting needs for managers can be especially complex. They need to see what their teams are seeing, and they need to quickly identify performance issues and opportunities, with dashboards that show performance by product, geography, and customer segment.

Here are examples of challenges that may result from an ineffective reporting/analytics platform, by user:

• Sales Rep: Without access to timely detailed data, front line sales reps struggle to understand how they are being paid. As a result, they spend selling time developing and managing a personal accounting system to confirm they are being paid accurately (see shadow accounting on page 1).
• Sales Manager: Lacking summarized data with drill-down capabilities by teams, regions, and product types can inhibit management’s ability to accurately assess the performance of the sales force. Without the data to drive strategic decisions and ensure the execution of the sales strategy, it is not uncommon for management teams to miss critical coaching opportunities to help improve sales performance or adjust to changes in their ecosystems.
• Administrator: Admin teams are distinctly vulnerable when SPM programs cannot deliver or provide access to mission-critical data. Common issues arise when admin teams do not have the data they need to respond to sales leadership inquires or assess the performance and alignment of the sales compensation plans, which can create significant issues for an organization.

Too often, firms underestimate the need to tailor reports and dashboards to individual roles. If a business intelligence strategy for sales compensation is not embraced by the field, it will fail. SPM can deliver the right balance of the need for conciseness and actionability with the need for detailed backup.

CHALLENGE 4 | Managing Change for Products, Personnel, and Plans

Telecommunications companies must take into account product change, turnover of personnel, and the frequency of plan changes necessary to create an effective SPM system. There is always a risk that plan changes will result in unintended consequences if they are not modeled or planned for quickly and accurately. The need to utilize historical data in modeling changes and evaluate the likely performance and pay implications of plan changes, is often a challenge with not only the change but the timing of that change. Historically, this is one of the most under-utilized features of SPM applications. Because of the number of moving parts, it remains challenging to make the modeling process intuitive.

Keep in mind that each plan change involves some level of approval. The more significant the change, the more approvals are required. Handling and tracking approvals through email is time consuming and inconsistent. One great benefit of SPM systems is their approval and escalation workflow, which shortens approval time significantly and results in more consistent and auditable decisions.

CHALLENGE 5 | Auditing Results

Sales compensation auditing is a fact of life at any large company. First, finance needs to know how much to accrue for future incentive payments. In telecommunications, this can be trickier than in other industries because of the variety of types of revenue streams and how they are treated for sales crediting purposes. When incentive payments to budget exceed revenue to budget, as happens when contract sales are growing, the finance department needs to know why.

Business leaders need to validate that incentives are being spent wisely and in alignment with financial and strategic priorities and with maximum objectivity and transparency. So, when SPM alternatives are being considered, both finance and HR need a seat at the table.

Here are illustrative examples of challenges that may result from an ineffective reporting/analytics platform, by user:

• Will the application be able to efficiently provide the information they require?
• Can the application accommodate, or hopefully improve upon, current accrual and auditing procedures?
• What are the critical reporting needs, and how are they likely to change?

SUMMARY

We expect that this paper has provided valuable insights into the unique telecom industry challenges of designing and managing sales compensation plans in the telecommunications industry and how SPM solutions can help. Because of the complexity and dynamic nature of telecommunications sales, SPM solutions are critical for this industry. A successful implementation for SPM requires detailed planning, including defining specific needs and priorities up front, involvement of all key stakeholders, and thorough training on how to get the most from the SPM system.

In an environment as competitive and quickly evolving as telecommunications, where sales agility can separate the winners and losers, SPM is becoming less of a differentiator than a baseline requirement.