In a recent survey conducted by CFO Research, 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.