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Sales Performance Management Explained

When you have a sales department that is paid on commissions, it is critical to design effective compensation plans and accurately calculate and communicate the results to keep your team happy. Understanding the fundamentals of sales performance management will help you get the most out of your SPM software.

Clearly compensation matters to sales reps. And in sales, compensation is tightly linked to performance. So anything you can do to keep your reps motivated and help them hit their quotas will make them more money and encourage them to stick around.

The turnover rate for sales reps sits at almost 35%, which is nearly three times the average for other professions. The biggest factor behind this is insufficient compensation, which causes 89% of sales reps to leave their jobs.

Designing and administering sales comp is diabolically difficult. Creating fair territories, setting appropriate quotas, pulling in the right data, and calculating commissions involves lots of variables and complex calculations.

That’s where Sales Performance Management (SPM) comes in. Sales Performance Management describes software that helps you design territories, come up with quotas, calculate commissions, and report on performance. It’s a way of helping plan, manage, analyze, and improve sales performance.

Both Sales Performance Management and Incentive Compensation Management (ICM) software provide the core capability of calculating and communicating sales compensation. SPM vs ICM: in a nutshell - SPM differs slightly from ICM in that SPM encompasses additional functionality around quota and territory planning.

Why people buy SPM Products

Similar to ICM, the biggest benefit of using an SPM solution is that it saves you time and hassle around your sales comp process. Manually calculating sales commissions each period is time-consuming, challenging, and can lead to frustrating errors. It’s tricky enough when you have a small sales team (less than 50 reps), but if you have a large team the task can be downright impossible.

ICM and SPM solutions help by automating the process, often reducing the time it takes to manage commissions from weeks to hours. And, it eliminates the risk of human error in the process.

Another major benefit of an ICM and SPM solution is a higher level of transparency for your sales reps. You can provide your reps with dashboards that tell them exactly where their commissions are coming from and how much they can expect. They can see if they are on track to hit their quota and which of their customers are contributing most to their performance.

Individual sales rep dashboards showing basic commission information are table stakes for all SPM and ICM solutions. But the more enterprise-grade ICM solutions and most SPM solutions provide advanced reporting for leadership. With leaderboards and reports, managers and executives gain a complete picture of their sales team’s performance. They can see how reps and teams are performing against their quotas, which reps are over-performing, which are under-performing, which territories are generating revenue, and much more.

Where SPM solutions differentiate from enterprise-grade ICM solutions is around quota and territory planning. For most companies, Excel is sufficient for designing territories and setting quotas. But companies with especially complex territories, many differently-sized territories, and multiple quotas per rep may find the additional planning capabilities in an SPM solution valuable.

Ultimately, both SPM solutions and enterprise-grade ICM solutions save time for medium to large companies around calculating and communicating sales comp. SPM provides additional benefits around territory and quota planning. Both tools will help you align your sales goals with your overall strategy, reduce attrition, and puts your sales people in the best position to succeed.

When is the best time to buy an ICM or SPM solution?

Most small companies use Excel to manage their sales commission process. As you scale, the number of sales reps increases as does the complexity of their plans and the data used to calculate their comp. By the time you get to 30 sales reps you are likely feeling some pain using spreadsheets, and by 50 sales reps that pain is likely untenable.

Ideally you want to invest in an ICM or SPM solution for your business before the problems associated with spreadsheets become too much for your organization to bear. Excessive errors in comp calculations, getting commission statements out too late, or spending more than 10% of your time on comp-related issues are all signs you’re past ready for ICM or SPM. You certainly don’t want to get to the point where you are losing high-performing sales reps due to commission problems.

An appropriate ICM or SPM solution will save you time, create trust among your sales team and delight your sales leaders with the additional information they’ll have around sales comp data.

Getting started with an ICM or SPM solution

When you’re ready to get started with ICM or SPM, an important first step is setting clear goals for what you want to achieve. Consider how much of your process you would like automated (calculations only or also dispute resolutions?), what commission information you want your reps to see, and what reports your leadership needs to be effective. Don’t consider only what you need today, think about what you’ll need over the next few years as your company grows. You do not want to pick a vendor that can meet today’s needs only to find they are inadequate as you scale.

Once you have defined your goals, come up with a list of vendors that can meet those goals. There is plenty of information available online at sites such as Gartner Peer Insights, Capterra, and G2Crowd about each vendor’s offerings. A key consideration is breadth of functionality. Vendors can broadly be categorized by SMB or Enterprise-grade. SMB vendors are typically easier to use but light on functionality and may not scale with you. Enterprise-grade vendors vary in their ease of use but have a rich feature set that will handle all your use cases as you grow.

Narrow your list of vendors down to 3 or 4 names you like, and go through an evaluation process with each. This usually involves an initial conversation where you communicate your goals and the vendor determines if they’re a good fit. Then a generic demo so you can get a sense for the look and feel of each platform and the overall functionality. The most important part of this process is the custom demo. The vendor should take your actual data and compensation plans and build out a proof-of-concept for you. This will get you comfortable that the vendor can indeed handle your comp plans and meet your goals.

Picking a vendor

Now comes the fun part, deciding which company to go with. There are three key areas to consider when selecting a vendor:

  • Functionality: Determine if you want an enterprise-grade or SMB feature set. Even if you are not at enterprise scale yet, you want to be sure that your vendor can handle your needs as you grow. This is where establishing your goals can be helpful. When you know what you want to achieve with your solution, you know what tools you need to make it happen and you can select a vendor that helps you reach those goals.
  • Usability: Ease-of-use is important with an ICM or SPM solution. If you can’t easily teach your team how to use a platform, adoption is going to be low. Worse, if you have to contact the company every time you need to make changes in the system, the costs associated with your ICM or SPM are going to be higher than you originally planned. Choose a vendor that has an easy to use platform and your team will thank you.
  • Implementation Process: All ICM or SPM vendors with even the most minimal functionality involve a setup process. Automating sales compensation is unique to each company and requires deep domain expertise and a quality team. During this process the implementation team will understand your unique requirements and configure the solution to your needs. Then there should be a thorough testing and onboarding process. The key dimensions to think about here are speed, quality, and cost. You can usually get two out of three, so choose wisely!

If you’re ready to see what an enterprise-grade ICM can do for your business, let’s chat. Performio can help you automate your sales compensation calculations, gain increased transparency for your sales reps, and provide meaningful insights for leadership through reporting. Book a demo today.

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