Sales Operations is an emerging discipline that essentially arose with the advent of CRM solutions. It’s a fairly amorphous role which may involve varying levels of ownership for processes such as forecasting to compensation, sales analytics to data quality and many things in between.
Sales Performance Management Best Practices Blog
When growing your business, setting up and managing compensation plans for sales reps can be a daunting task. The temptation to add too much complexity too fast can sacrifice the strategic benefit of simplicity and clarity. The goal at the beginning should be to start with a solid basic plan structure that can evolve and adapt as your sales team grows and specializes.
Are you someone who thinks that humans are rational? What about Sales reps? The fact is that not everything we do is either smart or rational. In fact, understanding the patterns behind why we often make irrational decisions sets the stage for deeper understanding of human decisions and can yield some very surprising results.
World@Work recently posted an interesting interview that touched on an often overlooked aspect of the ‘Sales Performance Management’ analytics discussion which focuses on sales force feedback.
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
Those of us who sell, or are involved with administering the sales commission plans of, service based products such as SaaS software and/or Professional Services know them to be, well, unique (to say the least). Sales compensation plans for these product types always seem to vary from company to company and never seem to be as easy to manage as they should be.
The debate about whether Sales Ops should be on a sales comp plan can be quite lively. On one hand, sales operations can mean different things to different organizations and be the root of some deeply rooted opinions. Some Sales Ops roles may greatly influence sales results and outputs (i.e. setting quota’s or deal level opportunity identification) while others may have more of a focus on activities such as training or sales compensation administration. In short, it can get a bit confusing about what is the best way to approach this question. Simplifying this complex issue and adding some context and definition to the issue is the first step in making the right decision.
Sales Performance Management is a term that has evolved over the past few years to describe the process of measuring and rewarding sales performance. In the past, similar industry terminology such as Sales Incentive Compensation Management (ICM), Enterprise Incentive Management (EIM), and many other acronyms were popularized by consultants and practitioners to describe the same fundamental process of measuring and rewarding sales achievement. Practitioners using the term Sales Performance Management typically refer to three keystone elements to the process;