Sales Performance Management Best Practices Blog

Leading Wholesale Distributors are using sales compensation to keep pace with industry changes. Here is a quick summary of why and considerations you should be thinking about as you examine your own information technology & analytics investment priorities.

Celent recently conducted a survey involving 11 major insurance carries managing thousands of sales reps/agents/producers seeking to understand the state of automation for processes such as distribution management and sales commissions & incentive compensation. This type of research is valuable to sales business leaders in all industries as the dynamics and insights we can glean for the experiences of those who compete tooth & nail for every dollar in this mature industry provide lessons for all.

After reviewing the results of this survey I tried to distill everything down to a few insightful ‘nuggets’ tovshare.

• One very surprising nugget pulled from the survey is the fact that executives at these companies though that it is more important that their sales compensation be accurate than to be effective. Said another way, it is more important to calculate commissions and incentive compensation in a timely and accurate manner than to have plan designs which are completely optimized to driving desired behaviors.
  • Take away lesson; focus on putting in place the infrastructure you need to scale your process and ensure the timeliness and accuracy of your process then once this is established, turn your focus to fine-tuning your sales compensation incentive plans.
• In a mature industry like insurance, approximately 70% of the carriers surveyed still rely on spreadsheets & custom build ‘homegrown’ (read: inflexible) software as the backbone of the commissions system. The author speculates that this technology situation is driving the views on the importance of calculations accuracy. As discussed her many times before, spreadsheets have an inherent 3-7% error rate simply due to human error that manual systems often exacerbate.
  • Take away lesson; delays in migrating from spreadsheets and homegrown solutions to sales compensation solution (like NetCommissions ) will only prolong the pain of a slow and inaccurate process.
• A significant hurdle for 40% of the survey respondents is fragmented data and disparate technologies used to administer and assimilate this data. This results in inefficiencies as administrators have to put in place imperfect manual work arounds to patch these systems together as best they can.
  • Take away lesson: an important aspect of scalable infrastructure mentioned in the first bullet is not only improving calculation accuracy, but also collapsing the cycle time and improving the quality of the data management process involved with sales commissions.

Does any of this sound familiar? If so, not to worry, you’re not alone and others in a significant industry like financial services are struggling with many of the same challenges we’ve heard across industries.

How to meet these challenges?

• The use of sales compensation software (such as NetCommissions) seems to be correlated with fewer problems in managing the sales compensation process.

Reference: Source: Celent, Strategic Issues in Distribution Management Survey April 2015