Sales management: What your numbers should be telling youby
22nd Oct 2012
While devising an effective plan is a complex undertaking, there are three fundamental rules that sales management must always bear in mind, says Christopher Cabrera.
Sales compensation is traditionally a numbers game – Did my reps get paid? Were the payments correct? However with today’s advancement in analytics, simply worrying about payment details isn’t enough. Sales managers now have the ability to turn sales compensation data into a competitive advantage.
Now armed with insight into their most profitable customers and the ability to determine if and how compensation is impacting on sales behaviour, managers can spot problem areas where people are out or underperforming. This piece discusses the benefits of applying advanced analytics to sales data and the key areas of information sales should be looking at to transform their operations.
Incentive compensation plans are among a company’s most powerful strategic business tools and need to reflect precisely what the business wants its sales representatives to do. While devising an effective plan is a complex undertaking, there are three fundamental rules that sales management must always bear in mind:
1. Keep their eyes on the prize
Incentive compensation is a double-edged sword. Get it right, and it drives desired sales behaviours. Get it wrong, and you cut the legs out from under your quarter. With this in mind, make sure your incentives are:
- Straightforward –Make it easy for reps to understand how they'll be paid. Don't confuse them with plans that try to do too many things. If a plan has more than four variables, it’s probably too complex.
- Intelligent – Design plans to motivate sales reps to continue going after prize even after they have met quota. But be careful about how much incentive you provide as you don't want to be paying needlessly. You need to ask: “Am I going to get more out of the rep if I provide a 25% accelerator, or more from a 50% accelerator?” If in fact they aren't going to work any harder at 50% versus 25%, you're throwing money away by giving them 50%. Historical and industry datat can help you to understand what works and what doesn’t.
- Transparent – Reps need constant and ready visibility into compensation plans and attainment in order to keep focused on the prize. This is impossible to provide if you are managing compensation using spreadsheets. It takes an automated system to provide real-time compensation visibility via the Web, just as your CRM system provides real-time visibility into opportunities.
2. Tailor incentives to the team
Today’s sales teams can be fairly diverse – different roles, different ages, different values. To get the most from this diversity, make sure you:
- Mould rewards to sales roles and their specific objectives – Motivate appropriately. Don’t send people off pursuing rewards and objectives that have no bearing on their “real” job.
- Align incentives to age groups – Boomers, GEN X, GEN Y and Millennials: you might have them all on your team, and what motivates one group often falls flat with another. So be prepared to incent not just with money, but with acknowledgment, career development, responsibilities, etc. to get the most out of every individual on the team.
3. Be agile… but guard against risk
Faster product release cycles, non-traditional competition, sudden new market opportunities, an out-of-the-blue acquisition all add challenges to the sales process. Compensation plans need to adapt to fast changing corporate objectives and market realities in order to encourage the right behaviours. This means possessing the ability to:
- Add accelerators and incentives mid-stream – You want to be able to make changes and additions to plans to drive both short- and long-term behaviours, and get them quickly into production for individuals, groups or the entire team.
- Model plans and plan changes – Prior to implementing new plans it’s crucial to model them and plan for change, determining cost, benefit and, most importantly, risk. Modelling is the best risk mitigation tool there is, particularly when the capability is baked into the compensation management process/system.
- Accurately forecast commissions expenses – Inaccurate forecasting can result in sizable expense shortfalls. Be prepared to do this during plan creation, and with any change to the plan. This is primarily a finance exercise, but sales management is a stakeholder.
There are many more variables to designing an effective compensation plan, but when you have these three fundamentals secured, you are well on your way to incenting the positive behaviours you want from your sales team.
Christopher Cabrera is the CEO and founder of Xactly Corporation, a leading provider of incentive compensation and sales performance management offerings.
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