Looking to increase your revenue while motivating your salespeople to be the best that they can be? It’s time you got started with sales performance management (SPM). In today’s competitive landscape, effective SPM will not only give you an edge when it comes to hitting your sales forecasts but will also help you retain your best-performing sales stars and help everyone in the team reach peak performance.
What is Sales Performance?
But let’s start with the basics: What do we mean by sales performance?
Sales performance is about the overall effectiveness of an organization’s sales team. It’s a measure of both individual reps’ performance and that of the sales team as a whole. Performance is assessed based on individuals’ and teams selling activities and how well they achieve their sales targets.
What is Sales Performance Management?
It’s one of the hottest topics in sales right now, but what does it mean? Essentially, sales performance management brings together everything you need to get the most out of your salespeople in a structured way.
From motivating and training your sales team to analyzing data, managing quotas, and spotting opportunities to improve, effective sales performance management is a blend of software and people management. It helps you fine-tune the processes and data you need to get the most out of your sales team.
Understanding the Importance of Sales Performance Management
It might seem odd to talk about the importance of sale performance management - surely it’s obvious: if sales are going up, and you’re hitting target, your team must be performing well. Equally, if they aren't hitting target, they aren't performing or doing a good job.
The situation is usually more complicated. While it's easy to kick back at the end of a sales year and say 'we blew our number of the water, we're the greatest,' the best sales managers will spend some time understanding why to give themselves the greatest chance of repeating the same feat next year.
Despite some teams being successful and others not, it isn't always clear why that's the case - otherwise, all sales teams would be successful, right? Assuming that capable and motivated salespeople staff all sales teams, the success of one team compared with another could be down to several factors.
One reason might be one team had a more realistic quota compared with another. If both teams have the same quota, but one targets a sector where order values are typically lower, then one team will have to work harder to be as successful. Equally, that sector might value a problem you can solve less valuably than other sectors, forcing one team to work harder than another. Maybe the difference is that one team has figured out how to engage more effectively with its customers.
While it may be easy - even gratifying for some - to say one team is better than another, the reality is that there may be a range of variables that need to be understood, especially the needs and interests of customers and how they buy.
Sales performance management can help you identify and resolve these issues so that you clearly understand why sales performance between teams and individuals may vary wildly. Sometimes it's down to the salesperson, and sometimes it isn't.
What are the Components of Sales Performance Management?
A sound sales performance management strategy is typically built on three priorities: where, how, and what to sell. And if all three of these priorities are thoughtfully defined and set up, you can look forward to impressive sales outcomes.
So, let’s explore each of them:
Sales planning is the way in which a business segments its target market and sets up its sales teams to align with it. Activities include organizing accounts, allocating territories, quota setting, and planning how many salespeople a team needs in different regions.
So, effective sales planning means staying ahead of market and human resource changes and using advanced modeling techniques to get the most out of every account and territory.
Sales incentives are the commissions that salespeople are rewarded with for selling specific products to specific customers. You can encourage your sales teams to focus on priority areas by tweaking your commission structures and attaching bonuses to them.
Bear in mind, however, that sales incentive structures need to be flexible enough so that they can be modified to accommodate changing market and customer circumstances and events.
Sales leaders use sales insights or metrics to gauge the effectiveness of their sales organizations and make the relevant updates and changes. Activities include pipeline management, pricing and discounting, sales forecasts, and other KPIs.
Today, advanced software gives sales leaders a way to collect and process data from the entire organization and present it to relevant stakeholders in a digestible format.
Now let’s take a closer look at some of the other compelling benefits of SPM.
Benefits of Sales Performance Management
When you embrace sales performance management, you’ll find that it has advantages for your business and your salespeople alike. In other words, it’s a win-win.
Implementing a structured approach to sales performance management makes the sales team more effective. In fact, companies who’ve embraced SPM generate three times more revenue than those who don’t.
Predict Future Sales More Accurately
Precise sales performance management tracking provides you with data that helps you forecast your future sales trends and reps’ compensation rates, especially those who are paid according to commission-based compensation structures.
Employee Training and Development
A sales performance management process allows you to put in place more structured and targeted people training and development initiatives.
More Accurate Sales Territory Assignments
The data that sales performance management surfaces allows you to assign sales territories to each sales rep based on their unique sets of skills and prior experience.
Fair and Rewarding Compensation Structures
Sales performance management systems mean you can avoid either over- or underpaying your salespeople and keep them focused and motivated. Additionally, they ensure that your compensation structure is aligned with your overall business objectives.
Five Keys to Successful Sales Performance Management
Transparency is a topic we all talk about providing. Often this is directed inside the organization. Its target is inside your company for the Finance, HR, and Sales Operations Teams. We want data to be something they can quickly put their fingers on. But let's not forget the sellers.
A salesperson is actually getting paid compensation based on this data. Giving them visibility into their plans is critical to success. Salespeople need to be able to see what they're making, clearly understand how they're getting paid, and when they're going to get paid.
And that's the essential point of maintaining a motivated salesforce. This transparency confirms that opportunities have closed, the PO processed, and that paperwork is complete. Each sales team needs to understand precisely what they're making. Sellers need to know how they're making it or what it takes to meet their quotas, goals, and key performance indicators. This is what allows them to stay motivated. It’s the leverage a healthy incentive compensation plan brings to the organization and a key contributor to successful Sales Performance Management.
To maximize the return on investment for your incentive compensation spend, it’s in your best interest to ensure your team understands how they're getting paid. Transparency into variable compensation keeps sellers motivated and driven to continue to do their best for your company.
2. Payment Timeline
To motivate your sales team successfully, you need to pay early and often. By early and often, we mean pay as soon after the deal closes as possible. Monthly is better than quarterly. Annually and semi-annually seem to have less of a motivational impact. The goal is to build a level of confidence and accuracy that is repeatable. To pay regularly or as often as possible for your organization is a good start. From there, consider the next year and where you can improve these timelines. Frequency and accuracy keep your team engaged.
Another consideration that is motivational is to remove "caps" from your program. When a salesperson knows there’s a limit to revenue recognition on a product line or in a timeline, it will be demotivational. Sellers want to earn as much as they possibly can. Putting limitations in front of them will stagnate the motivation for some of the most significant opportunities.
3. Smart Quotas
By smart quotas, we mean developing specific quotas specific to a seller. These could be in consideration of a territory, individual capabilities, or the ability to hit a particular number. Quotas need to be easily measurable. Ask yourself how many components you can track from a quota, what makeup that that quota is, and we’ll tell you that it's likely too complicated. Quotas need to be relevant to a particular objective or a specific territory, attainable, and smart.
You want to make your incentive compensation plan impact the behavior of the sales team to align with the goals of the company. These key performance indicators (KPIs) align with the company goals and the organizational vision. They need to work down to the detail of the territory for the seller.
You may have worked at companies where everyone had the same quota – a trend for a while to "simplify" the compensation plan. In our experience, quotas are based on a particular territory's capabilities. If your territory is the Great Lakes, that’s going to have a different potential of opportunity than the southeast, or Canada, or Europe. Some of these territories have longer lead times, more red tape, less potential, or regional challenges. Sellers might think, "Maybe I should have a bigger quota even though he has more states than I do." Or, "He has a larger geographical location than I do." The grass seems awfully green over there. It's a distraction from selling. The balance of these areas needs to be found in plans, territories, accelerators, or a mix of them all.
This mixed blend is the alignment of the company goals and vision carried down to the territory level expressed in the incentive compensation plan that takes into consideration all the knowledge and nuances needed to motivate the seller: fair and reasonable equity in success.
5. Analytics and Evidence
Analytics is the ability to take all this data and make it into something understandable. There’s this data-driven path we are on today. That being said, we have too much data and need to sort through it all to find the right information to take action. The data is historical, regional, market-driven, and comes from both inside and outside the organization. Data helps us to move away from gut decisions to fact-cased decisions, and when we add context to the data, we’re able to formulate proof that can support decisions.
If we look at analytics as the ability to take data into something more understandable, “evidence” allows for the ability to predict and forecast based on a synthesis of what makes a company unique.
It’s the continuous investment in and evolution of the first four keys that make this fifth one more powerful. If you can shape and groom the data that results in the first four, Analytics and Evidence can be your best friend. Transparency allows the seller to see and understand the connections in place for the territory, goals, and vision. Timely and accurate payouts create positive reinforcement.
All of these keys aren’t static; they’re dynamic. They’re moveable objects that have to continually be looked at and analyzed and designed according to the current state of the organization. Follow these five, and you’ll get sales performance management right in your organization.
Now, let’s move onto the next critical requirement of effective SMP: software.
What to Look for in Sales Performance Management Software
Sales performance management is not just about software – but software can certainly play a major part in making it happen.
Quite simply, with the right technology, you’ll gain faster, more targeted insights that help boost your business, as well as making your salespeople’s lives a great deal easier.
If your organization has been bumbling along with nothing more than a bunch of spreadsheets and a tangled web of emails, you’re missing out on a powerful management tool. A key part of any sales performance management strategy, technology can help you build a strong sales pipeline, improve communication and help you make accurate forecasts – all in one place.
Here are some features to look for when selecting your sales performance management software:
With software, you can make sure that commission payments are calculated accurately and automatically paid on time – a boon for both salespeople and managers. When your team has visibility of their upcoming pay and how it was calculated, they’ll become more engaged and have confidence in the process.
For managers, meanwhile, automated payments mean fewer mistakes and none of the costs associated with continually correcting under- or overpayments.
Software makes it easy to handle disputes and misunderstandings.
Whether it’s messaging through the software platform or using a chatbot to answer common queries, sales management software lets you say goodbye to all the email chains and games of phone tag that used to characterize compensation conversations, making the process more streamlined – and altogether more pleasant – for everyone.
Need to figure out who should be responsible for certain geographical areas or customer groups, and how to calculate their targets fairly? Some sales territories can be more challenging than others,
which makes planning potentially complex to navigate.
With effective SPM software, however, you’ll have all the data at your fingertips so that you can keep your teams and territories in balance and maximize everyone’s potential.
It’s all very well generating a ton of data – but you have to put it to work.
With real-time reports on sales across products, categories, territories, and individual salespeople, you’ll be able to see if your results are aligned with your forecasts and make any necessary tweaks along the way.
Don’t know where to start with sales targets? It’s important to get quotas right: set them too high, and your sales team will quickly become disheartened; too low, and you’ll be paying out higher-than-expected commission costs.
With the right sales performance management software, you’ll have access to all the data you need to make an informed decision and set realistic sales targets. Plus, of course, you’ll have all the necessary data at hand when you need to adjust your targets throughout the year to keep your cash flow on track.
Implementing Sales Performance Management in Your Organization
There are a range of technology solutions that can help you start your SPM journey. Let's explore some of the capabilities you can make use of.
Integrated Data Management
The data analytics that is central to delivering SPM requires a central database integrated into a range of data sources that can help you understand the dynamics and trends that underpin your sales performance. These applications likely cover your CRM platforms, eCommerce systems, finance systems, and other applications that can be used to provide the insight you need.
Effective SPM demands high performance data analytics to capture and synthesize the complete picture of all the issues that impact your sales performance. This analytics process is the ultimate search for a needle in a haystack exercise, as the insight will be spread among millions, if not billions, of data points. This demands scalability, which means extensive automation for several reasons. It’s often the sales managers, sales operations teams, and marketing teams that lead SPM projects. These employees are rarely trained data scientists, so automation is a critical way to bridge the gaps between their commercial experience and the deep expertise needed in SPM data analytics. They don't need to be subject matter experts in data analytics, but they need to be able to look in the right places and ask the right questions to get the answers that will help them improve their sales performance quickly and cost-effectively.
SPM is rarely a project managed and delivered by one person, however experienced and senior. To get the right results, you need several perspectives. Sales operations teams will see the world differently than the marketing team, while the sales leadership team will have an eye to making the final management decisions.
It’s critical that everyone can review the results, annotate them, manipulate them, and share them so that a consensus view of a company's challenges and opportunities can emerge. Easy-to-use and easy-to-configure workflow tools make delivering this key capability a dream, without the need for technical expertise or coding skills.
Step Ahead on Your SPM Journey
Now that you know more about Sales Performance Management and why you need it, it’s time to put your knowledge into action. Step ahead with improving your SPM today with Varicent.
Varicent provides a single, integrated platform to manage the end-to-end processes of all aspects of sales performance.? Our full suite of SPM solutions enables you to plan territories and quotas effectively, improve revenue operations to capture missed pipeline opportunities, and leverage the fastest and most flexible way to pay sellers accurately and on time.
*Editor's Note: This post was originally published in February 2020 and has been completely revamped and updated for accuracy and comprehensiveness.