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Five Best Practices for Sales Performance Management
December 18, 2007
Sales performance management means more than CRM. Here's how to maximize the effectiveness of both pre- and post-sales processes to drive sales and profits.
By Christopher W. Cabrera
In most companies today, sales performance management means incorporating a CRM application to automate and manage the pre-sales process—and spreadsheets and cumbersome manual procedures to take care of everything else, from incentive compensation to post-sales analytics.
While adopting a CRM application is an excellent first step, successful sales performance management hinges on maximizing the effectiveness of both pre- and post-sales business processes to enhance productivity, increase profits and deal proactively with risk and compliance. This means looking beyond CRM and starting to focus on some of the other key processes that help drive sales performance. And a pivotal place to start is with sales compensation management.
Obviously, clinching a sale is fundamental to acquiring revenues and profits. But just as essential is the ability to compensate sales representatives accurately and strategically: In doing so, you motivate reps not only to make further sales, but also to consistently make the right kind of sales—i.e., the most profitable kind. That being said, here are five best practices for total sales performance management.
1. Use incentive compensation to align payments to strategic corporate objectives.
Unfortunately, the spreadsheet-driven manual processes that most companies use to manage incentive compensation are serious inhibitors of sales performance, as they make it difficult to incent in a strategic manner—such as varying compensation for product and service price points. They are error-prone, so accuracy can never be assured. They don't support real-time visibility, so reps cannot readily see how they are being paid. They are difficult to audit and elevate the risk of noncompliance. And they provide a poor basis for meaningful post-sales analytics, which is a valuable tool for improving pre-sales processes.
To avoid dumbed-down, one-size-fits-all compensation plans and to start incenting strategically, it is imperative that you get the sales compensation process off of spreadsheets and automate it—just as most companies have automated their pre-sales CRM processes.
2. Motivate and reward performance with contests, SPIFs and non-cash incentives.
Contests and special performance incentive funds (SPIFs) introduced on-the-fly can promote desired short-term sales behaviors and allow you to react quickly and effectively to emerging market opportunities—for example, rewarding reps who drive attendance to special marketing events or who up-sell or cross-sell new add-on products. But, again, they are hard to implement using inflexible spreadsheets given the additional levels of complexity such programs introduce. Automating the compensation management process makes it easy to create, launch and manage these kinds of opportunistic performance kickers.
Offering non-cash incentives with this method is another rewards option that can drive performance, particularly when these "reward points" can be redeemed for instant gratification. An effective compensation management process should be able to support this option as well.
3. Model and forecast your compensation plans prior to deployment.
This is so crucial. Why fly blind and court risks when you don't have to? Model plans and plan changes in advance of implementing them to determine the upsides and downsides. For example, project how different order forecasts will impact your cash flow statements, and how potential commission expenses will affect future cash requirements. See in advance how a new SPIF or revamped incentive structure will play out. Do the same each time you align the sales team to assess the potential consequences to the top and bottom lines. If you've automated, this kind of modeling will be easier to do than if you are still on spreadsheets. Plus, if you like what a model shows, you can roll the changes right into your "live" environment.
4. Use analytics to drive sales performance.
Analytics are the brains behind sales performance management, capable of promoting efficiency and visibility across sales operations. Yet comprehensive analysis depends on ready access to comprehensive data—from order entry and inventory to accounts receivable to HR. This is the data required to drive timely and accurate sales compensation calculations, but it's not easy to get your hands on all this information in a timely and useful fashion when you rely on manual methods.
When you automate the sales compensation management process, you automate the collection, scrubbing and consolidation of this valuable post-sales data as well. Once consolidated and centralized in a sales compensation management repository, the data can then be leveraged for comprehensive post-sales analytics and valuable visibility into what exactly is going on in the field at any time.
5. Integrate CRM and compensation management applications for greater insight into sales opportunities.
Compensation information is highly leveragable within the pre-sales process where it can be used to guide reps to the most strategic and profitable sales opportunities, as well as integrate a company's respective CRM and sales compensation management applications to take advantage of their natural synergies. With this integration, reps can explore "what-if" scenarios tied to every component of a "live" CRM opportunity and receive immediate feedback on how best to structure a sale for maximum commission and bonus payout. They can see at a glance exactly how much money they can make from each opportunity, and where to put their best efforts. And they can do it without ever leaving their CRM application.
Get a Broader View
Automating the sales compensation process and linking your CRM and sales compensation management applications sets the stage for major ongoing sales performance improvements. And, while there are numerous best practices for maximizing sales performance beyond the five touched upon here, the overriding best practice is to take the broadest view possible of sales performance management.
Don't be tethered to spreadsheets and manual processes. When you begin automating pre- and post-sales processes, the synergies start to multiply, and the performance improvements only accelerate.
Christopher W. Cabrera, founder and president of Xactly Corporation, is a seasoned executive with more than two decades of successful senior management experience at both early-stage and public companies. He is the co-author of Xactly Sales Compensation for Dummies (Wiley Publishing, 2006) as well as a contributing writer to such industry publications as destinationCRM.com, CustomerThink, BusinessFinance, Sandhill.com, CRMBuyer.com and the Sarbanes-Oxley Compliance Journal.
Sales & Marketing Management Magazine
This article is brought to you by Sales & Marketing Management, the leading authority for executives in the sales and marketing field.
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