What is Sales Performance Management?
Companies invest a lot in their sales organizations. Unsurprisingly, there is a very sizeable expectation put on sales teams to deliver results – but they can’t do it alone. Successful sales performance management planning requires the collective effort and support of cross-functional teams, all working collaboratively toward the same organizational​ sales goals.
Before moving forward, let’s take a step back to define key terms and make sure we are all on the same page.
What is Sales Performance?
Sales Performance is the effectiveness of the sales team, both individually and as a whole, in selling activities; the ability to achieve sales goals. Sales performance metrics can be measured in a variety of ways depending on the sales role and sales environment, such as sales revenue, customer retention rate, or number of net new accounts.
So, then, what about sales performance management?
Sales Performance Management Definition
Sales Performance Management (SPM) is the range of interdependent, operationalized sales processes aimed at improving the effectiveness, efficiency, and overall performance of a sales organization. On a basic level, SPM improves operational efficiency and effectiveness of sales processes through automation, centralization, and more.
Why is Sales Performance Management Important?
Sales Performance Management (or “SPM” for those who are conserving their syllables) has been called a process, a discipline, an art, a science, a practice, and an approach – just to name a few. While there may not be widespread agreement on what to call SPM, it’s indisputable that with increasing business complexity, rapid pace of change, and mounting competition, SPM is an imperative for any organization seeking sales success. In fact, according to Gartner, the SPM market grew 13% to $950 million. But what is it? Read on.
If you Google “What is sales performance management?” you’ll get dozens of articles, each with a different definition.
According to Gartner, SPM capabilities include: sales incentive compensation management, objectives management, quota setting, management, and planning, territory optimization, management, and sales planning, advanced sales performance analytics (such as benchmarking, predictive/prescriptive and machine learning/cognitive), and gamification.
At OpenSymmetry, we’ve observed a common misconception among people, which is that SPM is all about the calculations of commission payments – something that a majority of companies still do using spreadsheets or a homegrown system. We offer the “SPM wheel” as a visual representation of our holistic definition of SPM. This wheel illustrates the multidisciplinary nature of SPM where there is a clear interdependence of business processes, all requiring an ongoing, iterative cycle to keep the processes running at an optimal level. Put this SPM wheel into motion and you’re on your way to having a best-in-class SPM solution that will improve day-to-day sales processes and operations – leading to a more productive sales force and increased revenue.
Why does SPM matter?
SPM supports organizations in maximizing the rate of return on their investment in sales. According to Simon-Kucher & Partners, an integrated SPM suite increases sales productivity by 12.5% and accelerates financial close times up to 50%. The value of SPM is recognized across an entire organization – among both end users and back-office personnel who enjoy improved sales performance expectations and operational efficiency. Consider how SPM can help address the following organizational challenges:
Sales
With greater transparency and reliable sales data, sales reps stay on track with revenue goals that are aligned to business objectives.
Fewer payout errors gives sales reps the confidence to focus on revenue-producing sales activities rather than wasting time calculating their own pay, also known as shadow accounting
Sales Operations
With a reduction in payout errors and drill down capabilities for sales reps to see details on commissions, exceptions, and adjustments, sales ops spends less time addressing questions and payout disputes from sales reps and can focus instead on adding strategic value.
Standardized processes and integrated, automated tools reduce operational complexity resulting in less time required to process sales compensation.
Finance
Automatic tracking tools allow for easy access to full payment history. This leads to reduced risk, higher compliance, and seamless security in the case of an audit.
With data-driven analytics, finance can enjoy improved accurate sales forecasting, advanced modeling capabilities, and faster, more informed decision-making.
By reducing over-and underpayment, finance can increase top-line revenue and sales margins.
Human Resources
Greater visibility into sales performance leads to more opportunities for HR to address performance needs and make coaching available for underperforming reps, resulting in higher employee engagement and employee performance.
Payment accuracy leads to more confidence and trust among sales reps, which increases employee retention within the sales force.
If considering SPM, where should we start?
As with almost anything, you need to know where you are in order to understand where you’re going and how to get there. A good starting point with SPM is to assess your organization’s current state and determine the desired future state. From there, you will be able to develop a roadmap that identifies the most strategic and cost-effective path to maximize the return on your sales investment.
Assess your organization’s current state by asking questions such as, “What kind of reporting is available for sales reps to understand their performance?” 12% of companies provide no reporting to their sales representatives. (Sales Comp Administration Survey, OpenSymmetry)
Not every organization is equipped to conduct a thorough assessment or develop an effective roadmap based on corporate objectives. This is when it’s time to consider seeking the help of an outside SPM expert.
Which department should own SPM?
Ask ten companies, “Who owns SPM operations within your organization?”, and you’ll likely get ten different answers. This is a question for which there is no straightforward answer as it depends on the organizational structure of a company and the skill sets of its people.
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While there is no best practice for SPM governance, the operational responsibilities tend to fall on one of these three departments: Sales Operations, HR, or Finance. Oftentimes, ownership is split among those three departments due to the cross-functional nature of SPM.
According to the Sales Comp Administration Survey, sponsored by OpenSymmetry, 49% of respondents indicated that Sales Operations owns sales comp administration. However, this only accounts for the administration component. Other components of an SPM program (e.g. overall program ownership, program management, etc.) could each have different owners.
The key to governance success is to assign the various organizational responsibilities to the most experienced and qualified resources within your organization. Building a dedicated SPM operations team requires you to first consider the end-to-end SPM process, and then evaluate the skill sets of the existing talent within your organization to determine who is most suited to deliver the results you expect. This structured approach will help you build an SPM center of excellence as well as identify any possible resource gaps.
With so many SPM technology options, how do I know who’s the best?
Selecting the right technology solution for your SPM program is no small task as the number of vendors selling award-winning technologies has increased over the years. While most leading solution providers have similar offerings for core SPM components, they often vary greatly when it comes to specialized requirements such as analytics, workflow, and modeling. So who’s the best out of them? There’s no right answer.
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The better question is: where do you start in terms of selecting the right technology vendor for your company? Before diving into the research pertaining to each SPM technology vendor’s capabilities, customer service scores, demos, and online reviews, begin by considering your organization’s business needs and vision. Here are three important steps to get you started on your selection effort.
- Identify current & future state needs for SPM. Have a clear vision of the future state you desire to achieve. SPM technology is the enabler, but the design, process, and approach need to be aligned to facilitate success.
- Establish a realistic business case. It’s not uncommon for organizations to have a platform that is more than what is needed to achieve desired results. To avoid this, carefully articulate your business goals and narrow your requirements based on business priorities.
- Have a rigorous selection process. This multiyear investment requires upfront planning. Evaluate SPM vendor capabilities against your business requirements and based on industry benchmarks and best practices. Prepare for demos by providing vendors with information to help them customize a demo to your specific business needs.
Keep in mind, SPM is not only about technology. Without addressing how your people and processes will support the technology, there’s a risk of doing nothing more than automating chaos. It’s only by uniting technology with people and process can SPM help companies motivate their sales force, simplify back-office tasks, make informed strategic decisions, and align sales efforts with business objectives.
Have more questions such as the following?
- How do I get executive buy-in for an SPM system?
- How do I know my sales performance management system is working?
- How do I hire for SPM?
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