SPM vs. ICM: What’s the Difference?

Keeping things simple is an ongoing challenge for us human beings. No matter our best intentions, it’s our nature to overcomplicate, overengineer, and overdo many things. I always like to take the approach of big to small. The Pareto Principle is a guiding light in just about any situation, focusing on the top 20% of initiatives will deliver you 80% of your results. This principle comes into play when considering sales performance management and incentive compensation tech. Do you need one? Do you need both? 

Sales Performance Management (SPM) and Incentive Compensation Management (ICM) are closely related concepts, and the terms are often used interchangeably. Both SPM and ICM are involved in managing your sales teams in order to optimize their performance. But despite the overlap, the two concepts do have distinct and important differences.

In this article, we’ll explain SPM, ICM, and how they differ, and we’ll consider whether an SPM or ICM solution is best for your business.

Sales Performance Management (SPM) explained

Sales performance management is the overarching process of managing an organization’s sales operations to motivate reps and drive performance. It relies on sales data analysis to make informed decisions in three key areas: territory planning, quota planning, and incentive compensation.

Territory planning

Rather than pointing sales reps at all potential customers, successful sales organizations often group their customers into territories and assign sales reps accordingly. This can allow reps to fine tune their approach based on the specific needs and preferences of the customers in their territory, resulting in increased sales. However, it’s important to divide territories equitably, so that sales reps assigned to one don’t have an unfair advantage over those assigned to another. Most organizations make territory planning an annual practice.

Quota planning

Well-chosen quotas motivate sales reps to achieve an optimal number of sales each period, but they have to be just right, or they’ll work against you. A quota that is too low will be quickly reached, after which sales reps will lack motivation until their next quota period begins. But a quota that is too high will be needlessly difficult or even impossible to reach, causing burnout, frustration, poor morale, and turnover. Data-informed quota planning ensures that sales quotas are reasonable and attainable while pushing reps to do their best.

Incentive compensation

Sales compensation plans drive performance by motivating sales reps to make sales and complete sales activities. Ideally, they will incentivize the sales activities that best align with broader organizational objectives. As a function of SPM, Incentive Compensation Management (ICM) uses data analysis to gauge performance, identify appropriate goals, and incentivize the right activities.

The difference between SPM and ICM

As we’ve seen, ICM is actually one of the core components of SPM. It joins territory and quota planning as the three elements that make up a well-rounded sales performance management strategy.

So if ICM is a subset of SPM, we might better ask, why do the two concepts get used interchangeably? This is due to the outsized role that ICM plays in SPM.

Territory and quota planning, as crucial as they may be, are typically only performed periodically. And the processes that go into planning for these areas are straightforward enough that the vast majority of businesses need little more than a spreadsheet to do them well.

By contrast, incentive compensation is an ongoing process requiring continuous performance monitoring, payouts, and adjustments. And ICM is far more complex than territory or quota planning, especially for organizations that have more than a small handful of sales reps.

Although many organizations try to use spreadsheets for ICM, it isn’t a viable long-term solution. Using spreadsheets for ICM can be incredibly time consuming, introduces errors and redundancies, lacks security, fails to provide transparency, and is unable to scale with an organization. By the time you reach around 50 sales reps, spreadsheets will create more problems than they solve.

For more on the problems inherent with using spreadsheets for ICM, check out our free ebook, The Practical Guide To Managing Commissions: Why Spreadsheets Aren't A Scalable Solution.

SPM vs. ICM software

Given the complexity and importance of incentive compensation, most organizations will need a dedicated software solution to manage it. The question then becomes whether they should adopt an ICM solution or a SPM solution.

The answer for the majority of businesses is that an ICM solution will offer everything they need to manage not only their incentive compensation, but also their sales performance more broadly. Very few organizations have territory and quota planning needs that are complex enough to demand a dedicated solution.

And since ICM solutions are far less expensive than SPM solutions, there’s no need to pay more for unnecessary functionality. SPM solutions are mostly used by enterprise organizations whose territory and quota planning needs actually are complex enough to justify the additional cost.

For your business, consider the amount of time and effort that goes into your territory and quota planning, and contrast that with the time and effort you expend on incentive compensation. If, like most organizations, your incentive compensation dwarfs the other elements in time and complexity, then an ICM solution is most likely your best bet.

Drive your team’s performance with Performio

Performio’s ICM software gives you everything you need to incentivize your sales reps and drive performance. You’ll be given powerful tools for creating new sales comp plans, tracking performance of individuals and the team as a whole, calculating commissions, generating reports, and seamlessly communicating within the team.

And your sales reps will be given access to their real-time performance, letting them see all the sales they’ve made, what they can expect to earn from each, how far along they are toward their quotas and goals, and what more they need to accomplish in order to meet them.

Ready to see what Performio can do for your business? Request a demo today.