Sales Performance Management Challenges & Technology Considerations

SALES PERFORMANCE MANAGEMENT CHALLENGES & TECHNOLOGY CONSIDERATIONS

This paper will provide an understanding of how SPM technology solutions can help resolve common challenges related to managing and paying sales incentives. By identifying general challenges, this paper provides feedback on how software can support organizations to be more operationally effective and potentially gain additional value from their incentive compensation spend. In addition to outlining where SPM technologies can help resolve common issues related to paying incentive compensation, each section will provide additional insights designed to help ensure the technology selected will be a good fit (highlighted in the “SPM Technology Alignment & Considerations” boxes in each section).

By combining research and client feedback with functional capabilites (being offered by leading SPM solutions), we have identified the following challenges for consideration. While there are other commonly known challenges, these have been identified based on their importance and how well the vendors can help clients resolve them.

The challenges addressed in this document include:

1. Increased Plan Complexity
2. Integrating Compensation, Territory Alignment, and Quota Management
3. Coverage model complexity, sales role specialization, and multi-crediting implications
4. Creative opportunities to include effective non-volume measures
5. Data Analytics and Insights
6. Access to Sales Performance Data and Reporting

CHALLENGE 1 | | Increased Plan Complexity

Developing trends across industries have led to more complex incentive designs, which include; the increasing complexity of the offering, growing number of decision makers involved, a longer buying process, and fluctuating demand.

Consider these scenarios:

• Multiple sales roles combining to accomplish a sale: in this case, there need to be role-specific pay mixes but common metrics.
• Account managers leveraging the specialized knowledge of other roles: in this case, there must be either split crediting or multiple crediting.
• Carryover leading to thresholds: when customers buy an expensive product or service from an account manager with whom they have developed a strong relationship, they are more likely to buy another from the same salesperson. As a result, a percentage of the quota is already won at the start of the year; this creates the need for thresholds.
• Presales incentives for technical sales support roles: this means more people will be credited for the same sale.
• Analytics-based quota setting methods: Quota setting is difficult in a landscape where sales may be unpredictable, so more companies are using more analytics-based quota setting methods such as weighted index and time series trending.

CHALLENGE 2 | Integrating Compensation, Territory Alignment, and Quota Management

SPM is a complex process. The integration of wider SPM functionalities – incentives, territory design, and quota-setting and management – is critical for effective motivation of the salesforce.

The territory landscape for many companies is generally complex, depending on multiple attributes like account segmentation and the volatility of the industry. Small to mid-market accounts are more likely to be volatile with monthly changes of account base and quota adjustment to maintain a fair, achievable challenge for the salesforce. Large, strategic or global accounts tend to be stable. For these accounts however, there may be multi-stage KPIs that need to be tracked and draw-down payment calculated against significant quotas.

Sales organizations are relatively complex with lead sales roles at the center, supported by specialist presales and specific technical support. In addition, there are lead generation roles and layers of sales management. Organizations may set quotas based on geography but also customer segmentation and by potential product groups. Changes to quotas can cause a ripple based on new products, for example, create additional competition.

CHALLENGE 3 | Coverage model complexity, sales role specialization, and multi-crediting implications

Some industries and companies often feature an extremely wide range of unique and nuanced sales roles. Complex products and customers necessitate complex coverage models. Companies commonly feature robust direct and indirect sales resources, while product specialization and complexity may necessitate not only technical specialists but product specialists as well. It’s common to find some organizations with 15 to 20 unique sales roles, if not more, which may include account managers, territory representatives, sales engineers, product specialists, inside sales, channel managers, lead generation representatives, customer success managers, renewal representatives, and more, as well as levels of sales management needed above each individual contributor role as well.

The wide range of roles and incentive plans require an efficient solution for tracking, assigning individuals to plans, and creating the necessary programming. Best practices suggest that sales compensation plans need to be considered for each unique role, while aligning around consistent compensation philosophies and plan frameworks. All of these roles and plans need to be diligently managed as well.

One of the greatest challenges involves the sales crediting model. In some cases, split crediting rules may be necessary, perhaps if direct sales resources jointly work a sales opportunity. But in most cases, best practices suggest that overlay resources will result in a number of sales resources intentionally receiving credit for each individual deal. Recent studies suggest that in enterprise sales environments, an average of 10 to 12 members of a sales organization may get credit for the same large deal. This may look like a direct account owner, product overlay, sales engineer, perhaps a channel resource or two, and sales management. In a past roundtable, an attendee from a Fortune 100 company identified a record of 132 people getting credit for a single massive deal. While perhaps extreme, it is understood that any SPM solution needs to feature an efficient, user-friendly, and accurate crediting engine with an appropriate hierarchy of crediting rules to bring order to what could be perceived as a chaotic situation.

CHALLENGE 4 | Creative opportunities to include effective non-volume measures

In some industries you’ll often find some usage of non-volume measures and the need to track them to determine payouts efficiently. In some cases, companies may prefer to include some desired non-volume measures but lack the administrative confidence to do so.

While volume measures are the most essential element of one’s compensation program, SPM requirements may need to consider the following:

• SPIF Programs: These special incentives are usually added in support of a core compensation program, in order to reenergize or refocus sales efforts. Studies by Better Sales Comp Consultants find that SPIF spend can represent between 1-5% of a company’s variable incentive budget. Frequent product launches often lead to the use of SPIFs, which are most effective when targeted at particular sales results over a
  defined period of time.
• Incentives for External Partners: In some cases, companies may offer targeted payouts to specific channel partners, and these need to be administered in some manner as well. An example could be a hardware company looking to clear out aging inventory prior to the launch of a new offering.
• Gamification: Companies vary widely in the usage of this incentive category, and usage depends on industry practices and the sales culture. The application may include leader boards, efforts to drive administrative activities, or other outcomes that are not captured well by core volume measures. These programs can sometimes create added seller motivation but may come with a disproportionately burden-some administrative load.
• Design Wins: Found most often in industries with long product development cycles. Design Wins and similar achievements capture the upfront sales or persuasion efforts that are essential, yet may have significant revenue lag ranging from months to years. In some cases, a Design Win measure can be the predominant or only plan measure, so ensuring a way to capture, track, and pay out on these results may be one important consideration.
• Event or Percentage Metrics: For certain roles, a company may need other creative or specific measures to capture performance. A lead generation role may need a metric for Qualified Sales, while a Renewal Sales Representative may feature a plan with Renewal Percentages, whether in account or dollar terms. Sales compensation plans should be designed for each specific sales role, and companies often want to
  include and track a wide range of important and potentially challenging metrics.

CHALLENGE 5 | Data Analytics and Insights

The challenges posed by manual or spreadsheet incentive plan administration affect not only the accuracy and efficiency of the program, but they also limit the utility of the sales and product data imbedded in the transactions.

Companies often find it difficult to assess the effectiveness of their programs for driving the right behaviors. To effectively analyze the efforts of the salesperson on overall sales performance, as well the influence of the incentive program on year-over-year plan performance, there must be access to current and historical sales and payout data to establish baseline performance benchmarks.

Missing data or the ability to analyze this data can create specific challenges when it comes to developing and designing sales compensation plans. Without readily accessible data, companies are left to manually extract and compile this information which can be time consuming or costly if you are depending on an outside consultancy to support this effort. Missing data can also create challenges in understanding territory performance and product performance, which should feed back into sales strategy design and territory or quota development efforts. Given the complexity of
some industries, this insight is invaluable.

It is virtually impossible to manually appraise overall program efficiency on a regular cadence without some form of performance automation that supports data and performance analysis. 

CHALLENGE 6 | Access to Sales Performance Data and Reporting

By nature, salespeople want to have things proven to them. They may not trust the sales incentive payouts or overall program just because they are told to do so. Salespeople want to have the ability to review the details, see the data, and understand the calculations. Similarly to other internal stakeholders, they want visibility at their fingertips, not at a later point in time. Without it, this skepticism in incentive calculations can lead to low morale and lost productivity. “Shadow accounting” is a common roadblock to becoming a high performing and productive sales organization.

Additionally, the best salespeople are often highly competitive and extremely driven. They want to know how they are doing now, how to do better, and what’s in it for them. They are money-motivated, so being able to understand the personal financial value of closing that next deal and putting in the extra work can help inspire them to achieve and exceed. A company that fails to provide visibility forgoes the opportunity to harness incredible salesperson energy and motivation.

Organizations that rely on spreadsheets to manage their sales compensation programs struggle to provide essential details to salespeople in terms of crediting and incentive payouts. Spreadsheets provide moment-in-time snapshots without drill-down capabilities for real-time insights, leading salespeople to be skeptical as to the accuracy of a single Excel view that may be outdated. SPM solutions can offer immediacy in terms of dashboards with product and customer results, and almost always provide better deal or transaction level drill-down. Performance tracking and visibility are essential to motivate salespeople to reach optimal results

SUMMARY

There are clearly unique sales-related issues and challenges that are faced in each industry that were not called out in this paper. However, Sales Performance Management systems enable sales organizations to meet all challenges set out in this paper and more including designing, managing, administering, reporting, and overseeing the incentive compensation program in a way that delivers superior sales results – key inputs to developing a world class sales organization.

Further, SPM solutions incorporate data that is essential for companies to evaluate their sales strategies. In an increasingly competitive sales environment, those who can motivate the right selling behaviors through transparency and strategic design will ultimately be successful.

Additionally, it is recommended to document the current state issues and challenges as well as to articulate future state needs. Solution providers need to show how their tool can integrate incentives with territory and quota requirements, calculate relatively complex incentives and provide transparent and compelling reporting to end users, administrators, and managers. All of this calls for the automation that comes with SPM solutions.