In a recent survey conducted by CFO Research[1], CFO's were asked whether the finance function would play an increased role in sales incentive management (including plan design and administration). While many finance departments are already heavily involved, 52% of the respondents said they will get even more involved over the the next two years. It’s not surprising to see this interest
from Finance. In times of economic uncertainty,
compounded by the concern about negligible revenue growth, many CFOs are seeking
opportunities to improve margins. They
are no longer focusing just on cost reduction; rather they want to improve
margins by driving sales of the most profitable products and services, not simply
by selling more of the high volume offerings.
According to the survey, 61% of the Finance
team wants to see ‘more sophisticated
selling’ by their sales teams. Sophistication,
in the minds of Finance, means encouraging team selling, bundled offerings,
multi-year deals, cross selling, and increased selling of high margin products. They also want to see a tighter link between
the setting of quotas and the specific revenue goals of the organization. It’s frustrating to see the organization make
a strategic decision to try and drive business growth in one area, only to find
that the sales plans drive a very different behaviour. Reconciling the plans to the strategies can
often take over a year, which results in delayed execution of strategy and
missed opportunities.
From a Sales Operations/Human Resources
perspective, leading ‘experts’ on incentive compensation plan design are
encouraging organizations to simplify plans and make sure that incentive plans
have as few measures as possible (often stating that best practice plans have
no more than three measures).
Finance’s drive for more sophistication
versus Sales Operations and Human Resources drive for focus and simplification
of incentive plans appear to be at odds.
The best resolution is to get ahead of the curve. This is a great opportunity for all business
interests to converge and share their perspectives on the challenges and high
priority items for moving forward.
Successful organizations work with finance
to not only agree on the sales plans and drivers but to agree on time-lines,
decision making processes, constraints and any potentially conflicting
viewpoints on plan design, implementation priorities and targets. The combined group needs to come to consensus
and then communicate their shared goals across the organization. Failure to do this often leads to different
priorities and misaligned goals. In
turn this leads to inconsistent and often conflicting communications being
delivered to the sales organization. A coordinated effort leads to common
goals, sales alignment and increased performance.
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