Despite dramatic changes to their compensation packages, many firms are finding that their salespeople are still underperforming, according to new research from Deloitte Consulting.
More than 60 percent of sales leaders responding to Deloitte's 2013 Sales Compensation Survey have changed their compensation plans, including adjustments to incentives, quotas, and rewards for top performers, within the past two years. But despite this trend, 45 percent of survey respondents said their sales teams are still falling short of their sales goals.
"What [firms] should be doing is taking a more strategic look at why the sales force is either unmotivated or incapable of achieving desired behaviors and results and investing in a more holistic program," says Samuel Tepper, senior manager at Deloitte.
This includes increasing training and development of the skills and behaviors that lead to success, increasing the ability to plan and prioritize opportunities and account activities, and investing in technology and infrastructure that reduces administrative burdens and manual processes, he says.
Many companies still use spreadsheets to administer their comp plans, leading to inefficiencies that can be far more costly than deploying automated solutions from companies like Xactly or Varicent, says Jim Dickie, managing partner at CSO Insights, a research firm benchmarking sales effectiveness initiatives.
"People are taking a look at plans and saying, 'Do they make sense?' but really, the number one thing we say is, 'What determines how people get paid?'" Dickie says.
Digging deeper requires a new level of sophistication, which isn't something a simple spreadsheet is designed to do, he argues. Conversely, aligning sales efforts with larger corporate goals, like increasing margins, zeroing in on cross-sell and up-sell opportunities, and increasing existing customer penetration, is made more attainable through automation.
Chris Cabrera, CEO of Xactly, says businesses haven't made a mass exodus to automated systems because of "an awareness problem."
"People don't realize there's data out there that they can rely on to make better comp plans," he says. "They can log onto their iPhones or iPads and see, 'This is how my comp plan is behaving and these are the behaviors they're trying to get me to drive if I sell this.'"
Sales organizations also continue to grapple with sales reps who discount or offer free services to close deals, essentially cannibalizing pricing and value integrity, Tepper maintains. Sometimes reps resort to discounts to reach short-term goals for the quarter, which is more revenue-based than profitability-minded.
To mitigate discounting and the domino effect it has within the sales organization Cabrera suggests linking compensation to percentage variables. Reps often round off discounts in "chunks of five percent, because the math is easy," he says, but tailoring an automated comp plan to present what a rep's payout would be based on incremental amounts could drive completely different comp outcomes and help offset steep discounting.
However, even the best-designed sales compensation plan can fall flat if it's not well-suited for a company's strategic needs, Deloitte maintains. For sales reps to understand and to sell in line with a company's market strategy and value proposition, they first need to understand their roles. An organization has to figure out if reps "should be order takers, solution sellers, or trusted advisors, for example," Tepper says. "Once they know this, they should analyze what it takes to be successful in their current or future state" and incorporate that technique across the employee life cycle.