October 11, 2011

Six Trends in Sales Performance Management

Sales Performance Management (SPM) solutions are proving to be incredibly valuable for organizations that adopt them.  According to research firm Gartner, organizations that implement compensation management solutions can expect to reduce errors by more than 90%, reduce processing times by more than 40% and reduce IT/Admin staffing by more than 50%.[1] 

SPM solutions are becoming attractive not only because early adopters are achieving success but also because there is increasing pressure on compensation teams to deliver more.  Organizations are demanding more than just accurate commission statements that are delivered on time.   They need visibility, analysis and oversight into the entire variable compensation process as they want to understand better what is working and what isn’t.   

While the majority of organizations still manage incentive compensation with home-grown solutions, or lots of Excel spreadsheets, more organizations are retiring these solutions in favor of a more complete packaged incentive compensation and sales performance management system. With this rapid SPM adoption new trends are starting to emerge.  This paper discusses the top six trends that are influencing organizations who are considering implementing new software solutions to help them improve sales performance and incentive compensation practices.

Over the next few weeks I will discuss each of the 6 trends.     

The first...

Trend 1:  Increasing Business Complexity 

In a recent study conducted by the Economist[2] an overwhelming majority of survey respondents (86%) think that business has become more complex in the past three years, many describing their businesses as chaotic.  This increasing complexity is often driven by the reality that organizations produce more products, sell in more markets, through more channels with more complex workflow processes.  These organizations also have an increased need for speed when it comes to getting results.  Adding to this challenge is that many organizations are struggling just to keep up with an ever-increasing volume of data.  Over the past couple of years organizations increased the amount of data stored by a staggering 62%[3].  With this hectic pace of change it is easy to see why existing technologies, plans and processes in sales compensation cannot keep up with new requirements.

Most organizations do not expect the rate of change nor the ability to capture data to decrease in the coming years.   Most home-grown and spreadsheet based systems were implemented years ago and were never designed to handle the volume of data, rate of change, expanding product lines and desire for increased analytics, modeling and reporting.  It is not uncommon to see that today’s compensation systems need to be able to efficiently handle millions of transactions a day in order to manage sales reporting and incentive compensation calculations.  

When considering SPM technology, evaluation teams must consider their requirements to quickly load data, calculate commissions and produce the necessary outputs.  They should also estimate, to the best of their ability, data volumes and complexity for the next few years to ensure that the application is capable of handling those volumes.  Organizations looking to implement new systems are well advised to try and determine their performance requirements and conduct a scalability and performance test when looking at acquiring new software.

[1] Gartner Marketscope for Sales Incentive Compensation Management Software, Michael Dunne, March 2010

[2] The Complexity Challenge, How businesses are bearing Up,  Economist Intelligence Unit, 2011

[3] EMC annual shareholders meeting presentation.

No comments: