Just about any organization that sells anything these days engages in sales performance management (SPM) efforts to administer their sales territories, quotas and incentive compensation plans. The alignment between those efforts and the strategic business goals the organization is trying to achieve can make the difference between success and failure.
Rather than relying on spreadsheets and homegrown solutions, organizations can use an SPM solution to help streamline and automate their business processes. As SPM solutions become more sophisticated, vendors that continuously improve and enhance these offerings are providing organizations with the solutions they need to positively influence the behavior of their sales teams.
Of course, the biggest challenge facing sales managers and compensation managers today is achieving their goals without increasing administrative activities, and while still enabling their sales representatives to spend as much time with customers as possible.
Unfortunately, more often than not, sales managers struggle with conventional spreadsheets as they try to piece together sales histories without any version controls or traceability tools. In such cases, the SPM approach they’re using does not have the advanced analytics and reporting capabilities they need to succeed. The result is an endless cycle of extracting data into spreadsheets and reporting tools to continuously make adjustments to compensation plans before, during and after each fiscal year.
The capabilities provided by SPM solutions can address challenges in three distinct areas of sales management: establishing sales objectives, enhancing sales territory and quota management, and remaining flexible with the incentive compensation plan.
Establishing sales objectives
It’s the job of the sales operations team to process essential SPM functions in order to provide sales representatives with the motivation they need to effectively sell. That means making sure sales representatives have full confidence in the ability of the organization to recognize and reward their efforts. The only way that can truly happen is when all parties concerned have the appropriate level of visibility of how their efforts contribute to their own compensation and the overall success of the organization.
Setting and sharing accurate sales objectives is a critical first step in defining sales territories, quotas and the most effective compensation plans that drive desired selling behaviors. Organizations often overlook this first step. Organizational objectives and sales strategies should drive how the sales organization defines everything from sales territories and sales quotas to compensation plans. Without clearly setting sales objectives, the sales organization ends up blindly implementing sales plans based on a best guess.
Enhancing sales territory and quota management
Organizations of all sizes need their sales teams to sell the right products to the right customers at the right time. Achieving that goal not only means defining and setting up fair and equitable territories and quotas; it means ensuring that the incentive plans are driving desired selling behaviors that are in line with the sales strategy.
SPM solutions can help sales managers achieve that goal by identifying the following key categories:
- Existing customers that have purchased similar products
- The sales roles needed to support a particular product launch
- The most sensible geographic divisions for sales territories
- Products or services that require a product specialist to support the sales staff
- The market potential for each sales territory
Remaining flexible with the incentive compensation plan
Compensation plans should always be logical, fair and transparent. But, as with all things in life, unexpected changes occur. For example, new products can come to market in a way that sharply reduces demand. Instead of waiting weeks or months to make adjustments to incentive compensation plans, organizations need to be able to dynamically adjust to new realities in a way that doesn’t leave the sales force idly wondering what they should be focusing on next.
Of course, one of the primary reasons that it takes months to build these plans is that the necessary data is often highly fragmented across the organization. SPM applications can make it much simpler to aggregate all that information in a way that becomes more easily accessible.
The end result is a means to design incentive compensation plans that clearly identify eligibility rules, the metrics that will be used to calculate incentive payments and the roll-ups attached to any of the sales managers that might be entitled to incentive compensation if their sales teams achieve their quotas.