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Driving ROI: 4 Key Considerations When Evaluating ICM in a Down Economy

When we think of driving ROI, the name Roy always enters our minds. The movie Tin Cup stars Kevin Costner as Roy “Tin Cup” McAvoy. Roy is a washed up “could’ve been” pro golfer whose own drive for perfection kept him on the sidelines his entire career. 

In the movie’s most memorable scenes, Roy takes countless attempts at getting on the green of an extremely difficult shot. While it was a gutsy call, it proves that multiple attempts at a hole in one isn’t a good strategy for Roy driving and driving ROI in a troubling economy. This requires focus and strategy, not a hole in one. We’ll dive into four key areas of focus to get you on the green and drive ROI through these economically challenging times.

Although the indicators can conflict and fluctuate from month to month, many finance and economic experts agree that 2023 will present a challenging environment, one characterized by rising interest rates, stubbornly high inflation, and – somewhat paradoxically – an incredibly tight labor market. To many business executives, that will sound a lot like a call to batten down the hatches and ride out the storm by pulling back on major investments and seeking ways to reduce costs and risks. Nothing brings faster clarity about expenses and investments like a recession.

The companies that prevail in these turbulent circumstances will be the ones that deliver meaningful and measurable ROI in a reasonable timeframe. After a post-pandemic surge in spending across verticals and sectors along with a rapid proliferation of new companies, a major consolidation and retrenchment lies ahead, and the ones that survive will be the firms that focus on revenue, manage costs, and demonstrate value.

When it comes to generating revenue, difficult economic circumstances raise the stakes. Revenue producers and sales-operations professionals alike face greater pressure to deliver – and greater uncertainties. That’s why, in an era of declining budgets, more companies are doubling down by investing in incentive compensation management (ICM) solutions. They recognize that, to strengthen their ability to generate revenue, they need focused automation that accelerates sales operations, maximizes productivity, reduces costs, and improves strategic agility. Here’s how ICM is helping them rise to the challenge and achieve important advantages that can spell the difference between winning and losing in recessionary times:

Productivity

The first – but by no means last – area to feel the impact of ICM is in sales operations. Today, companies can’t afford to waste time and effort by devoting teams of people to manage dozens or hundreds of single-user, 500-tab spreadsheets using fragile, hard-coded formulas. Spreadsheets can’t deliver the accuracy, auditability, and visibility that are now required. And your sales ops team needs to generate monthly statements in a timely fashion – statements that are accurate with clear calculations.

 

Cutting Costs

When margins are under greater pressure than ever, one key target should be the waste that is often a hallmark of weak compensation management in many organizations. Those fragile single-user spreadsheets with hidden formulas and version-control issues can leave you one click away from disaster.

If the annual comp payout is $10 million, a simple overpayment of 1-3% translates into hundreds of thousands of dollars of lost expenses. Conversely, short payments create significant morale and trust issues. Pay someone too much, and you’ll never hear. Pay someone less than what they are owed, and you’ll never hear the end of it.

When you have high or increasing numbers of questions, it likely means your salesforce has questions about the accuracy of your data and results – or simply lacks the visibility into the correct numbers. They can’t see how they’re performing vs. quota or they can’t see their actual and potential payouts if they meet performance goals.

Trust and Retention

That visibility gap can create morale problems among sales performers who lose confidence in your numbers (while the sales operations and finance teams chase down errors and answers). That’s particularly problematic when it comes to retaining your top performers, because when they start to mistrust comp calculations and payments, they’ll spend inordinate amounts of time (some estimates suggest as much as 5% of their time) playing “shadow accountant” – instead of selling.

And if that frustration and mistrust harden, those reps are also churn risks. Lifting sales even just 1% with an accurate and timely platform and targeted, agile comp plans can produce meaningful revenue increases – and happier sales reps. In a tight labor market where retaining your top performers is critical to meeting your goals, this subtle benefit can quietly – but significantly – bolster your ROI by helping you avoid lengthy recruitment and ramp-up of new reps who must step into the shoes of your top performers.

Strategic Insights

The real power – and financial return – of modern ICM solutions comes from the strategic insights you gain. With modern ICM, you can see the evidence – right away – about how your incentive comp plans are performing. You see who’s achieved their quota and who needs coaching to get back on track. And you can continually tune your plans – in time for those actions to have a positive impact.

Unlike primitive spreadsheet systems, you can view a complete dashboard of performance indicators and drill down to see behind the numbers and react faster to sales trends or respond in time to potential shortfalls. You know what’s working and what’s not – during the plan year. That helps you make real-time adjustments to your plans as market conditions improve or deteriorate.

The right ICM platform frees your finance and sales ops teams from low-value commission-calcs and clawbacks and lets them analyze data, spot underlying trends, and recommend the right adjustments to maximize the ability of your producers to bring in revenue. In 2023, that might stand as the ultimate value of ICM.

Creating Value in Adverse Times

As companies seek to “do more with less,” the ICM platform – combining tools, methodologies, and processes to streamline compensation management – presents a compelling opportunity to achieve short-term tactical gains and long-term strategic advantage. In short – it creates value in these adverse times.

Performio was built by sales comp experts for sales comp professionals. For more than 15 years, we’ve helped hundreds of sales teams in dozens of industries. Our product strikes the perfect balance between flexibility and ease of use.

At Performio, we love helping businesses reduce the pain of calculating and managing sales commissions, freeing them to spend more time growing and serving their customers. Talk to an Expert today to see how Performio can save you time and money. 

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