Why Sales Is Ripe for Performance Management

With customers shaken by a jittery economy, the pressure is on for sales departments to step up and defend their company's profitability. To help them do so, organizations are increasingly turning to sales performance management, a discipline that Pleasanton, Calif.-based advisory firm Ventana Research defines as "a coordinated and integrated set of sales-related activities, processes, and systems that help organizations meet customer revenue goals and objectives."

It's not hard to see why. Sales compensation plans are complex and unwieldy, as we noted here. And aligning incentives with specific business outcomes is problematic. Sales people want to be conservative in their planning so that they can be seen to outperform. Management, in contrast, seeks aggressive but realistic goals that will elicit the sales department's best efforts. Sales performance management can help organizations create sales incentive plans that align sales behavior with overall goals.

To respond to fluctuating business conditions or new opportunities or in the marketplace, the sales function needs accurate, timely data and the ability to analyze it quickly. Yet many organizations find themselves sitting on a trove of customer- and sales-related data that they fail to leverage effectively.

Take revenue data, for example. It's integral to any number of key performance indicators, and companies keep a close eye on their revenue stream, as a new Business Finance online poll confirms. When asked how frequently revenue is published and monitored within their organization, more than half of respondents (56 percent) said that the data is available on a monthly basis. But a respectably large segment had access to more timely data. Twenty-eight percent reported that the information is published weekly, and 11 percent said it's available daily.

But having access to up-to-date revenue numbers is one thing; using that data effectively to fine-tune decision-making is another. At most organizations, planning is an annual exercise. Only about one-third of large organizations in the United States use a rolling forecast, according to The Hackett Group. And while many companies say they would like to improve their ability to reforecast, relatively few have taken positive steps in that direction by investing in technologies to enable it.

An April 2008 study from the Aberdeen Group, a Boston-based technology research firm, found that spreadsheets are still the most widely adopted technology in the planning and budgeting process. They're used by 88 percent of best-in-class organizations (which Aberdeen defines as the top-performing 20 percent) and 90 percent of all others.

Companies that want to shift their sales organizations into top gear might take a leaf from the high-performing organizations in Aberdeen's sample, which typically adopted the following best practices:

• Formal and documented sales processes
• A centralized repository of data (customer, account, prospect and sales)
• Defined performance metrics to measure effectiveness
• Executive-level support for sales productivity tools
• Clearly measurable performance goals.