CSO Insights' recent Sales Compensation and Performance Management study yielded some interesting, yet paradoxical facts. Of the 700-plus firms that we surveyed, 95 percent told us that there was a variable pay component (commissions, bonuses, etc.) in the pay packages for their sales teams. The reason behind this is that most companies believe in the power of leveraging compensation to drive sales behavior.
Yet when we asked the study participants to tell us how they managed those compensation plans, 69 percent said they either did manual calculations or used spreadsheets. Really? Why, in the era of continuous CRM innovations, are the vast majority of companies choosing to stay in the Dark Ages regarding sales performance management (SPM)?
After we looked at those numbers for a while, the words of TV pundit Dr. Phil came to mind: "So how's that working for you?" To start to explore that question, we segmented the study data to analyze how the calculator/spreadsheet crowd was handling key SPM tasks. As we see in the graphic here, the answer is not very well.
If leveraging compensation and sales performance plans is really key to the success of a sales organization, the green part of the bar chart is way too small, and the blue part is way too big.
There are a lot of aspects of effective selling that ineffective SPM hinders: Salespeople get unclear messages about what the company wants them to do; they spend valuable selling time trying to make sense of error-prone commission reports; finance teams waste time and resources fixing payment mistakes; inaccurate information is used by sales management to make decisions on strategic direction—the list goes on. And none of these problems need to exist.
Over the past few years, there has been a lot of innovation coming out of the SPM segment of the CRM 2.0 space. Vendors including Callidus, NICE Systems, Synygy, Varicent/IBM, and Xactly offer robust solutions that companies of any size can use to optimize compensation plan creation, financial modeling, incentive plan implementation, and sales performance reporting.
These SPM solutions remove the barriers to effectively performing the key sales performance management tasks seen in the graphic.
- They allow sales management to create robust compensation plans to drive precise selling behaviors, such as closing new accounts, increasing customer satisfaction, improving margins, increasing upselling, etc.
- They integrate directly with other corporate systems to provide real-time access to information on sales activities.
- They can virtually eliminate payment mistakes that result from using shadow accounting via spreadsheets.
- They have comprehensive analytics capabilities that give managers reliable metrics to use in planning.
- They do all of this much more cost effectively than calculator- or spreadsheet-based SPM.
So if you are part of the 95 percent who believe in variable compensation in sales, and are stuck in the Dark Ages when it comes to managing those plans, take the time to see what the new reality is for SPM. The benefits are too great to ignore.
im Dickie is a partner with CSO Insights, a research firm specializing in benchmarking CRM and sales effectiveness initiatives. He can be reached at firstname.lastname@example.org.