A new Key to Success for Sales Performance Management

I had the opportunity to present at a Sales Performance Management seminar in London, England a couple of weeks ago.   I was joined by Kevin Pilcher from Colt, who shared his thoughts and opinions on the topic of 'Keys to Success'.  I shared the list of Keys to Success that I have been gathering from SPM project sponsors over the past couple of years.  In general he agreed with their guidance and recommendations, but he also added one of his own.   (many of these are listed under the Keys to Success tab on this blog)

Kevin suggested that in order for an organization to really take ownership of an SPM implementation they need to get involved in the configuration and implementation of the project right from the outset.  He is a big advocate of training right at the outset of the project.   His view is that every organization has unique plans and processes and that their team should be intimately involved in all aspects of the implementation.  Kevin took his team and put them on training classes right at the outset of the project.  They knew the plans at a very detailed level and with the appropriate solution training they added a lot of value immediately. This combination of detailed plan knowledge married with product knowledge were a great asset during the system configuration portion of the implementation.   

There was an added benefit, in that after the configuration, the Colt team was able to be self-sufficient right from the outset, versus having to take on a big learning curve after the system was up and running.

In general  we see projects where the both the vendor and the customer are actively involved provides these benefits:

1.  shortens implementation/configuration times
2.  compensation teams are aware of advanced features and functions in the solution by working side-by-side with vendors experts
3. allows the organization adopting SPM to be much more self-sufficient and the application is much more likely to be business user owned.

Followup on Keys to Success Post

Ritu Thakur

I previously mentioned that I have been fortunate in that I have had the opportunity to work with a number of very knowledgeable people in the SPM space.  Ritu Thakur is one of those people.   (Follow this link to see her profile -  http://www.linkedin.com/in/rituathakur). She has worked on several SPM implementations in high-tech and large financial institutions.  We had an email exchange after my last Keys to Success post  (see the Keys to Success tab)

She agreed with the idea of ensuring the the incentive compensation team is trained and put on the project early, but she talked about another huge benefit that I wanted to pass on.

In addition to all the benefits that you have listed, I wanted to add one additional benefit of your new Key to Success. While the implementers have a lot of best practice experience, they are not as close to the intricacies of the client data and processes.  Despite the synergies across industries and function, there are always unique and specific requirements that can make or break a project.  Hence, having the client participate in the implementation brings those key details to the implementation effort.  It allows for an effective implementation, helps avoid gaps in design and reworking the project.

This makes a lot of sense, and just one more reason to ensure that your team has representation from the people who run the compensation process and know how it works at a very detailed basis.

New Michael Dunne White Paper and Webinar now available

Many organizations are working hard to improve their sales effectiveness.  Increasingly many of these organizations are turning to information technology to help improve the efficiency and effectiveness of their incentive compensation and sales performance management processes.  Many of these organizations are now in varying stages of rolling out Sales Performance Management (SPM) solutions.

During these deployments, organizations go through a number of distinct phases as they mature.  The first phase is to ensure that the processes they have in place are efficient and produce accurate results.  As organizations look 'beyond the numbers' they go through increasingly complex phases ending with business agility and overall SPM optimization. 

I asked Michael Dunne, X-Gartner analyst, and long-time veteran  of sales effectiveness and sales performance management to write a report, outlining these stages of evolution, and to provide some guidance for organizations who find themselves in different levels of  SPM maturity.


The result is a new report which provides great insight as to the evolution of SPM systems within an organization.  This is a must-read for anyone trying to educate themselves on the Sales Performance Management landscape.   I have also asked Michael to discuss this paper and answer any of your questions in a webcast. This is now scheduled for December 6th.

Click to download Michael Dunne whitepaper or to register for webinar Dec. 6th 

Six Trends document

On this blog, I have been writing about the 6 new trends in Sales Performance Management that I have observed over the past few months.  I have also had the opportunity to present these at  conferences and seminars.   Based on the feedback I have received, and some requests for a complete document,  I packaged up the list and put it in one document.    If you would like a copy it's posted at www.varicent.com  or leave me a comment here and I will forward it to you.

6 New SPM Trends - Trend 6 - Integration with More Applications

Traditionally a lot of Sales Performance Management Systems have been focused on the incentive compensation process.  While there can be many (occasionally hundreds) of input sources to an SPM solution, organizations generally consider outputs to be - commission statements, a payroll feed, and few summary reports.   

As SPM systems mature, it is more often the case that the SPM system houses the highest quality information in the organization about who is selling what to whom, at what price.  As commissions are paid of this data, it is normally the most scrutinized, up-to-date and accurate information in the company.  Organizations want to leverage this asset, typically by demanding new management reports.  This quickly moves to requests for more complex and broad-based reporting, often requiring new and different source data.  The natural evolution is then to make this information available to an even broader set of recipients.  This expansion generally requires feeding data to other systems.

 Some common examples are:

•          Feed information into a corporate data warehouse or business intelligence system
•          CRM integration between commissions and customer data
•          HR systems to integrate commission data with other payroll and compensation data
•          ERP system so that this information resides in the original system-of-record

Ensuring that your SPM system can pass data to other applications through standard interfaces like ODBC, web services and star schema generation allows compensation teams to provide compensation data in any format required by the receiving application.

6 New SPM Trends: Trend 5 - Transition to the Cloud

Much has been written about the advantages of cloud based computing.  It’s not that cloud computing is new in 2011, but rather that many large organizations had thought that cloud based computing was only appropriate for small to medium sized businesses.  They were concerned that cloud solutions:

·     Would not scale to their volumes

· Would take away the ability to control upgrade timings

·   Would fail strict security and audit requirements

·  Could not offer the flexibility to meet specific and demanding requirements of large enterprises

There are compelling arguments for why cloud based solutions do provide significant benefit.  These include:

·      Reduced burden on existing, overburdened IT staff

·      Faster project start times (avoiding hardware procurement process)

·      Reduced initial investment and shared risk pricing model

·      Improved vendor support  - as they manage the entire hardware/software environment

The good news is that cloud computing has matured; the early adopters have paved the way, and software vendors have expanded their capabilities, offerings and platforms.  There are more options available to meet the specific needs of today’s complex organization.  For organizations that don’t want to co-mingle their data, there is a single-tenant cloud solution.  For those with security and firewall concerns, there is a new movement towards private cloud deployment. With this flexibility and configurability in deployment options, most organizations are now choosing cloud-based options for new Sales Performance Management implementations.

With the increasing array of options and flexibility in SPM offerings, it’s not simply an on-premise versus cloud decision facing organizations.  It’s much more complex.  Project teams are well advised to make sure that they consider both their requirements, and the specific options offered by their short-listed vendors.

 

 

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.

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[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.

My perspective on CSO INSIGHTS 2011 Sales Compensation and Performance Management – Key Trends Survey

 

Jim Dickie and Barry Trailer of CSO INSIGHTS do a great job every year of taking the pulse of sales leaders and sharing their survey results and opinions.  The 2011 Sales Compensation and Performance Management – Key Trends survey is another good read from Jim and Barry, and as we have come to expect, their insights and observations add a lot of value to the raw results.  

A copy of the survey results is available at   http://bit.ly/pbvNHG

As I was preparing for a conference presentation next month, I was re-reading the results and I was struck by one chart in particular.  When the question was asked – What aspects of your comp plan would you change, and in what order?   

The top three results were

• Management’s ability to judge plan effectiveness
• Management's visibility into sales performance
• Ability to model plan revisions

The bottom three, in terms of priorities were

• Managing credits, exceptions and adjustments
• Minimize inquiries and disputes
• Support compliance requirements

The complete list is good, and I am sure that anybody reviewing it could not disagree with it as a whole.  This list however, represents the perspective of sales leaders as it relates to compensation.  I wonder, if we asked CFOs, Compensation Teams, and HR leaders how they feel, would we get the same list and the same priorities.  My hunch is that while other groups wouldn’t disagree with any of the requested changes, they believe that the fast and accurate payment of commissions, and minimizing inquiries and disputes will increase sales job satisfaction and give the sales team more time to sell by reducing their administrative effort and shadow accounting efforts.  This could be argued as one of the biggest benefits of automating the commissions management process and therefore made the top priority for the compensation team.

I have often talked about the need for cross-functional organization alignment, around goals and priorities when implementing a Sales Performance Management System.  If the cross-functional team isn’t aligned as to what the short and long term goals and objectives are, then the projects are in risk of cost and time overruns and missing expectations of some group when it is delivered.   What this chart got me thinking is that it’s not enough to make sure that the list of goals is correct, but also that they are prioritized and agreed upon by the whole team.   Getting alignment from the start will save everyone a lot of time and effort in the long run.

SPM Keys to Success - Advice from Hertz

It’s always great when someone who has gone through the trials and tribulations of implementing an enterprise software application are willing to share their experiences.   I had the great pleasure of talking with, and then presenting with Lynn Ferrara, Senior Director of Global Compensation for Hertz at WorldatWork's annual TotalRewards conference in San Diego this week.  Lynn has just come through a roll-out of a new SPM solution across multiple business units for Hertz.  

Today's session  focused on providing some guidance for organizations who are just starting out on the Sales Performance Management journey.  As is often the case when I have these conversations I found her insight invaluable.  

 Lynn's advice can be summed up in four key points:

Reduce and Improve Reporting – I blogged about this earlier, but Lynn echoes the need to create mock-ups of the reports that you plan to produce and run them by your end-users.  Her advice to project managers is to do this early, at the very outset of the project.   In the end, it’s the reports that contain the value for management – you must make sure that the reports you design provide the value desired.  Lynn also advises that just automating the reports you have today, will often not meet the requirements of management.  If this is done early in the project, any mis-alignments are identified while there is time to adjust the project plan.  Agreeing on reports creates alignment, avoids disappointment, delays and cost-overruns later in the project. 

Allow Enough Time for Data Integration - different reporting systems can provide data on different time tables (i.e. Weekly versus monthly), in different currencies, converted at different rates, and from disparate manual systems.  Working to get a common, reliable set of input data often takes going back to source providers and working creating new or different extracts, schedules and formats.   This activity usually takes longer than most team allow.  

Consider Testing Requirements Early – when implementing a new system, you have to consider that a lot of things can change in the compensation system that will make testing a challenge.  One common example is that the source data has been updated since the compensation data was calculated.  This happens as people make corrections and adjustments to source data when errors are discovered downstream.  For most organizations it is nearly impossible to track all of the data changes to the source data.  This means that that data that was used to calculate sales compensation in the old system is different than the source data for the new system.   Add, manual overrides, currency fluctuation, errors in the current systems and processes and other data inconsistencies, and it is virtually impossible to come up with exact the same commission results for from the old and new system.  At the outset of the project, teams are well advised to think through a testing plan thoroughly, and setting realistic expectations.

Communicate, Communicate, Communicate – there are many interested parties when a new incentive compensation management system is implemented.  Constant communication with the payees, Information Technology groups, the executive team, Sales Management and the plan administrators are all key to ensure success in a Sales Performance Management system.  Lynn advises that project managers should allot more time to communications across the groups in order to both train them on the new system, but also sell the solution that you are building.

  

Again I want to thank Lynn for taking the time to share her thoughts with the SPM community.

What is Sales Performance Management?

Sales Performance Management has many different and broad definitions.   From a software perspective, Sales Performance Management (SPM) is defined as a comprehensive solution that helps organizations drive sales alignment from strategy through to execution, while improving efficiency, accuracy and timeliness of the associated administrative processes.  Implementing a Sales Performance Management solution ultimately leads to better management and utilization of sales resources. 

Sales Performance management is about putting timely and accurate data in the hands of decision makers in order to aid them in making more informed decisions.  Who sold what products at what price last month?  What are our top selling products by region?  Are commissions payouts in-line with expectations? Are my territories all covered effectively?  How many reps are over 70% of quota and now on accelerators?   These are just some of the questions that sales management ask every day.  In most organizations there is no simple, consistent and accurate way to get the answers to those questions.  The ERP has some of the information.  The CRM has some of the information.  The HR system has some of the information.  Much of the rest of data is in emails, spreadsheets and legacy systems.  Analysts who are charged with finding out the answers to these questions generally resort to a combination of extract files, Microsoft Access and Excel to pull the data together to provide the answers.  Often the resulting report or analysis is incomplete, late, and suspect in terms of accuracy.  The burden of pulling it all together makes even the simplest of requests a daunting task.  When it comes to managing, processing and reporting on territory assignments, plan eligibility, quota attainment and commissions calculations the process looks much the same.

Sales Performance Management (SPM) help organizations understand and improve the performance of their sales organization by offering a complete solution to manage incentive compensation, roster management, territories and quotas.  Most common sales performance systems provide capabilities to:

·         Integrate data from a variety of disparate source systems (commonly ERP, HR, CRM, spreadsheets and legacy systems.)  This eliminates a lot of data duplication, expensive and error-prone custom ETL routines, multiple and inconsistent versions of the data.

·         Calculate results – the ability to take all the input data, and then match source data with eligibility rules, territory assignments and the plan components to derive accurate commission calculations.

·         Create custom reports – with an embedded reportwriter. These include the ability to capability to generate personalized and branded commission statements, operational and management reports and analysis.

·         Automate workflow processes – to ensure that all operational aspects of the commission management process are documented and effectively executed.

·         Provide complete audit trails -  The ability to track all of the actions, data changes and resolutions involved in Sales Performance Management processes.  This includes plan acceptance, dispute, inquiry and resolutions, calculation expectations etc.

Organizations looking to implement a Sales Performance Management System should look for the following benefits: 

•  Aligning sales resources to organizational goals and strategies 
•  Providing timely, accurate and actionable sales information in order to improve decision making
• Streamlining the administration of incentive compensation management processes in order to reduce errors, costs and time 
• Provide increased visibility into the compensation process for audit, compliance and management oversight

The definition of Sales Performance Management differs slightly depending upon the perspective and background of the individual or organization.  I have included Sales Performance Management (SPM) definitions from a few of the more popular sources and experts below.

 

Ventana Research

Ventana Research defines Sales Performance Management[1] as a coordinated and integrated set of sales-related activities, processes and systems that help organizations meet customer revenue goals and objectives.  Only those sales organizations that integrate people and processes tightly with information and technology are able to maximize their effectiveness, from top management, through finance and operations to the sales representative on the front line.

Ventana believes that Sales performance management today remains more art than science. They also believe this must change. Advancing the maturity of sales and thus its effectiveness and contribution to company success requires not just improved processes but ensuring that the people associated with those processes are evolving to become the sales talent that represents the best of your company. One of the essential underpinnings of this evolution is complete access to information about sales activities and to the metrics that most significantly track the performance of the sales organization.

 

Gartner

According to Michael Dunne, VP Research of Gartner, in his note - Introducing the Concept of Sales performance Management[2], SPM represents the next generation of best practices for sales. It establishes a strong foundation for improving sales execution. Use this concept to better organize sales territories, quotas and compensation plans to increase sales.

Wikipedia[3]

SPM solutions provide executives and sales management with a clear view of critical sales data, such as what products were sold where, by whom and to whom, that enable quick and informed course correction to ensure the alignment of sales strategies to desired business outcomes. These solutions are unique in their ability to solve the “one-two punch” of insight and action (i.e., knowing what business strategies need to be changed and having the tools to make the required changes). Together, these products and services offer medium-to-large enterprises in a multitude of industries the ability to transform their incentive payment systems into strategic business weapons to drive profit growth.

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[1] Ventana Research,  website - http://www.ventanaresearch.com/spm/spm.aspx?id=2384

[2] Introducing the concept of Sales Performance Management,  Gartner Research Note (G00141067), Michael Dunne, Research Vice President Gartner, 2006

[3] www.wikipedia.com – Sales Performance Management Definition

Look for more than improved efficiency when implementing a Sales Performance Management System

I am often asked about the drivers of Sales Performance Management projects.  What specifically are organizations looking to accomplish?    How do they determine the Return on Investment (ROI) on their Sales Performance Management initiative?  What are the first priorities?

While every organization is unique and they each have their own challenges, perspectives and priorities there are three categories of benefits that are common across Sales Performance Management projects. 

They are:

·      Efficiency gains

·      Business enablement

·      Reduced risk

One of these goals normally takes precedence over the others and tends to get most of the focus from project teams.  Organizations are well-advised to look at the opportunity for business gains across all three drivers.  

Efficiency Gains

Organizations often start projects with the goal of looking for efficiency gains.  The pains associated with high commission error rates, delays in processing times, and significant effort and administrative burden are tangible and it is relatively easy to quantify the benefit of gaining improvements in this area.

Improved efficiency is about doing more with less.  The expected gains are in area of reducing the time and effort it takes to process and manage commissions, quotas, roster and territories.  Reducing effort to maintain the current systems, reducing the number of days to process month ends, reducing errors rates in commissions are all common themes.  This makes a lot of sense as industry analysts cite that organizations implementing a Sales Performance Management System (SPM) can reduce the administrative and IT staffing effort by more than fifty percent.  They can also expect to reduce incentive compensation calculation errors by over ninety percent.   Organizations looking for a hard ROI can generally find find ample evidence of organizations than have had major successes in processing efficiency.

Business Enablement

The second area of benefit that most organizations find is in enabling the business to do something that was previously too impractical if not impossible to do.  Many organizations are unable to implement certain types of components in their plans as their current systems, processes and technology preclude them from doing what they want.  Common examples include implementing margin-based versus revenue-based plans, introducing quarterly SPIFs, and incentives to drive certain packages or bundled offerings.   Being able to adjust to market shifts and implement changes quickly can help organizations take advantage of new market opportunities and react to other market shfts quickly.  The overall result is that incentive compensation plans drive the desired sales behavior and help with organizational alignment.   The inability to do this has long been the frustration of many sales leaders.   Modern SPM systems provide sales leaders with the speed and flexibility to drive the sales organization the way they want, ultimately driving increased revenue, increased margins, and increased organizational alignment.

 

Risk Reduction

The third driver of interest in Sales Performance Management software is risk reduction.  According to the respected analyst firm Gartner, approximately ninety percent of organizations with over one hundred sales reps are using home-grown or spreadsheet based solutions to manage incentive compensation.   While these 'systems' lead to many of the inefficiencies and create roadblocks to improved effectiveness that I referred to earlier, it is often the case that there is a compliance or audit driver that is behind putting in a new Sales Performance Management software solution. 

From a compliance viewpoint the challenge is to provide a holistic view of commissions from an overall view down to individual performance.  Increased checks and balances, multiple approval levels, tracking down exceptions and other compliance requirements tend to put a burden on home-grown and spreadsheet based systems that slow them down and create more rigidity - exactly the opposite of what is required.     Modern Sales Performance Management solutions provide built-in complete audit trails, plan approvals, dispute resolution and compressive reporting on exactly how and when territories, quotas, plans and commissions were changed.   For many organizations this increased visibility replaces error prone and time consuming email chains and voice mails.  Payees appreciate the clear and consistent view of their commissions, administrators save significant time and effort tracking down reasons for adjustments, and sales compensation administrators are much better prepared for both external and internal audit and compliance requirements.