Technologies for Turbocharged Sales Performance

A new breed of performance management tools can cut through the complexity of sales compensation plans and maximize returns from sales territories, quotas, and incentives.

Complexity is the bane of sales incentive programs. The difficulty of administering these plans rises exponentially as companies add new variables and pay rates. In a December survey of businesses with active sales compensation management (SCM) programs conducted by the Aberdeen Group, participants were asked to identify the major pressures driving them to improve their SCM processes. Seventy-three percent cited the need to reduce the time they spent administering incentive compensation, and 63 percent cited increasingly complex compensation plans.

Software that helps companies manage sales incentive compensation has demonstrated value in producing operational efficiencies, according to a July 2007 report from Gartner Inc. Yet most businesses continue to rely on spreadsheets or home-built solutions. Only 5 percent of sales organizations worldwide have deployed SCM technologies, the report notes.

And it’s a safe bet that an even smaller percentage are leveraging sales performance management (SPM) technology. SPM software complements SCM tools by integrating functions for planning, designing, allocating and managing sales territories, quotas and compensation plans. Gartner estimates that through 2010, enterprises will miss the equivalent of 5 percent to 10 percent of annual sales as lost opportunities that could have been captured through improved SPM processes.

A Business Finance online poll conducted in March uncovered significant weaknesses in companies’ SPM capabilities. When asked to rate their organization’s process for performing business analytics such as sales incentive performance, product sales performance, and territory performance, only 10 percent of respondents described it as “very efficient”; sixty percent chose “not at all efficient.”

Participants were clearly aware of the difference that improved SPM could make. They were asked whether automating the process of determining the potential of new sales territories and allocation and distribution of quotas would improve their organization’s sales performance strategy. Nearly two-thirds said yes.

Integrating sales compensation data with information residing in customer relationship management (CRM) systems can help companies drive desired sales behavior. Sixty-eight percent of respondents described that as an important or very important element of their organization’s SPM strategy.

Benchmarking tools are another powerful SPM capability. Sixty-one percent of respondents reported that benchmarking their organization’s sales compensation performance against industry best practices and peer-to-peer company comparisons would provide a competitive advantage.

In addition, SPM can be a way of building trust between finance and the sales arm of the organization, which can be sorely lacking. Less than one-third of respondents reported that their organization sees increasing confidence and trust between its finance and sales teams as a result of the way in which it currently manages sales compensation and sales performance.