New 2012 Sales Performance Management research report from Aberdeen

Peter Ostrow of AberdeenGroup does a nice job again this year with his annual SPM research. (click here to read the research -http://bit.ly/wb9VjH

The survey results show how the market is progressing and the report provides some good advice for guiding SPM initiatives.  I wanted to call out one thing in particular.  The survey shows that the goals, in priority order, that organizations have for their SPM implementations are:

1. Higher Sales Margins
2. Increase Management Visibility into sales force and channel performance
3. Better sales hiring process
4. Universal rep understanding of compensation or performance plans
5. Balance territories to maximize revenue
6. Reduce administrative time for sales compensation or territory management
7. Reduce sales turnover

Higher Sales Margins was viewed by practitioners as the most important. It is interesting to see the quantification of a trend that we have been noticing for some time now.  That is, it’s not just the desire to grow top-line revenue, but profitable revenue that drives a lot of sales performance and sales compensation initiatives.

Higher margin business often comprises of selling back to customers, bundling products, cross-selling, multi-year and multi-product sales and/or some combination of the above.  Motivating your sales force to sell high-margin business is a challenge for most organizations. There is the obvious first problem of trying to collect and process the data in order to calculate margin by customer, product and channel so there is visibility into what is high-margin business.

Secondly, if we assume that sales people are motivated by their commission plan, then the idea would be to introduce new components to their plan that rewards this type of selling.   According to Gartner, nearly 90% of organizations are using spreadsheets and home-grown solutions to manage the sales commissions processing.  Without some SPM technology in place Commissions teams today are already hard-pressed to meet demanding deadlines, reduce errors and try and find efficiencies with today’s plans.  Adding requirements to drive Margin-based plans, versus Revenue-based plans is a daunting task.   This should not be undertaken without a review of existing processes, data flows and technology.

Lastly, there is a concern is that adding new compensation plan components that reward these higher margin activities can result in making the plans too complex and disenfranchising the sales team.  Note that the fourth priority on the list was Universal Rep Understanding of Compensation or Performance Plans.

There is a lot of data out there that suggests that sales plans are already far too complex and many sales people do not understand their current plans.  Adding more complexity can exacerbate this problem.  If you are moving to margin based plans, it must be done by considering wholesale changes to the commission plans, and specifically considering what components could come out when these new ones are introduced.

For clarification, the survey was partially underwritten by Varicent, Xactly and Callidus, but the survey itself, and the interpretation of the results were all done by AberdeenGroup.

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.

New Quota Management Survey

I wanted to alert you to an interesting new study focused on quota processes and programs being conducted by the team over at BetterSalesComp.   This is timely study as companies have struggled setting quotas with the current uncertainties in the economic climate added to the fact that no one ever feels they do quotas all that well.  The results will provide some much needed insight into Quota Management processes.

This cross industry survey only takes about 15 minutes to fill out, and in return for your contribution BSC will provide all participants a copy of the results. 

The study will focus on:

• how organization go about setting quotas, who owns it, what systems and data sources are employed, and what methodology is being used
• quota changes and whether the economy has impacted this facet of quota programs
• gauging overall effectiveness of quota programs and perceptions from both the field and sales management

The BSC team will also leverage their years of experience to provide some expert opinion and guidance based on the results of the survey.   I encourage you to participate. Just follow this link - http://bettersalescomp.quota-study.sgizmo.com