Two of the leading experts in the field of Sales Performance Management (SPM) and Incentive Compensation Management (ICM) had a chance to chat.
David Marshall, founder of Performio, and David Kohari, the head of the strategic services and customer success operation at Canidium, talked extensively about how Canidium sees ICM's role in helping companies measure sales performance and strengthening the SPM software space.
Distinctions Between SPM and ICM
David Marshall started the discussion by asking David Kohari to talk a bit about the differences between SPM software and ICM software. Of particular interest was the kind of journey businesses take when they use ICM technologies, as well as how these tools can lead to better business practices overall.
David M felt it was essential to begin by looking at Gartner — who is viewed as the gold standard in this field — and analyzing how they assess different software categories, including SPM. Gartner is one of the world’s leading research and advisory companies. Its goal is to help companies create successful organizations today and build on that success for tomorrow.
Gartner has set out a management model about SPM, which begins with a definition of critical capabilities. These capabilities include:
- Rule definitions
- Workflow and collaboration
- Integration (data and product suite)
- Data Transformation (ETL)
- Advanced analytics
- Customization and extensibility
- Incentive compensation
- Quota management and planning
- Territory management and planning
- Objectives management
A Different Perspective
While Gartner is a leader in assessing the SPM and ICM space, Kohari stated Canidium had formulated its own perspective on just what sales force management is and what shape it should take. While there is some overlap with the Gartner model, he said, the Canidium model has a different perspective that will include more use cases, as well as additional capabilities.
Regardless of a company's strategy, it needs to start with setting overall corporate goals and objectives. Each company has key performance indicators (KPIs) that it is trying to measure or achieve. Determining these factors is what gives you your selling strategy. At Canidium, they see that the SPM framework resulting from an eight-step process that comes from that selling strategy. Those seven steps are:
From the Canidium perspective, the entire process starts with design. There are several important questions you need to ask during the design process. How do you design, model, and cost your compensation plan? How do you make sure you identify the behaviors within your own selling rules that you want to support and drive? How do you compensate specific roles within your organization to achieve those results?
Targeting is comprised of two primary capabilities: territory or account management and assessment. How do sales reps define territories? Are they limited by geography, product, or a combination of the two? How are these territories set, and how do sales reps measure specific targets against those territory assignments or categories? How do they manage that quota or target allocation process?
The next step is a matter of communication and acceptance. It is crucial for the sales rep to know they have a plan, a target they must have in their territory, or the account coverage they are responsible for. But how do companies push that information out into the sales organization so sales reps know what they are responsible for? And how are they going to get paid for the achievement of results that their organization expects out of them?
4. Administration and Reporting
Here in the middle is administration and reporting, the “blocking and tackling,” as Kohari called it, of the SPM process. This is how companies ensure that they get the data that they need, make sure that the right people get credited. This often leads to a few questions. How do I do the calculations, and ultimately, how do I put money into someone’s checking account? How do we give them good transparent reporting that says "here’s all the transactional activity, calculations and contributions that led to that money that’s in your checking account”?
This is what happens when the sales rep looks at the checking account or the report and does not like what they see. This involves that inquiry or dispute resolution process and how it is managed. The workflow, the investigations and the analysis required to make sure these concerns are addressed adequately are all factors.
This is the ongoing dialogue that should be taking place between managers and reps about establishing rewards. Coaching is how the sales manager helps the rep achieve that carrot. It focuses on rewarding the behaviors and activities that are going to make a rep successful. This will help them achieve the results both the company and the rep want to get the compensation they feel they deserve.
In this step, the company takes all the data created by these other capabilities and mines it for trends and insights. This information is primarily served up to leadership so the organization can ensure higher-ups are making good, data-driven decisions around the program and the outputs. But it’s important to remember that while the output is an essential fundamental element, there are also organizational processes that are part of the overall strategy you have to think about, as well.
Spreadsheets Versus ICM Technology
Marshall then asked Kohari about the technological point of view. To what extent did he see companies adopting technologies particularly in areas like design? Marshall commented that he saw a lot of companies still using spreadsheets to do ICM, so he was curious to get a take on what Kohari’s experience had been about the rate of adoption of technologies by companies in this field.
Kohari said about 25% of companies in this particular vertical had adopted some ICM-based technology — which, as Kohari noted, is not that much. It means 75% of the marketplace is using some custom solution or, as Marshall said, archaic spreadsheets.
Canidium put together some new benchmarking information on the subject. If you visit the Canidium website and fill out a small questionnaire, it will give you some information on how your organization stacks up from a benchmarking perspective, including insight into some of the questions about technology Marshall had just brought up. Marshall was interested in what Canidium’s benchmarking showed regarding technology and process point of view. For Marshall, the design is the foundation for the entire program.
Kohari agreed and added that many people think about design as modeling. The question is, how does the company take either prior year plans for modeling or create a wholesale new model that pulls together the necessary data and information? From a modeling perspective, there is some adoption of technologies greater than Microsoft office in the market today. But the vast majority of people still use Excel, and that critical workflow process is still in many cases manual. The business world still has a ways to go regarding the evolution of that particular capability of ICM within the framework of SPM.
Where Does ICM Fit Into the SPM Model?
So, where does ICM fit into this SPM model? Canidium believes incentive compensation management is a critical subset of the eight capabilities listed above — and it is focused right in the middle with the administration and reporting pieces.
When we think about ICM, we are talking about the specifics around the administration of the operational aspects of what it takes to calculate and pay people, then deliver statements and reporting to that paid population so they understand what they got paid and why.
Canidium breaks it down into what they call the five Cs:
- Collect: How do I collect data from all the necessary source systems I need to pull information to do the necessary calculations? That could be transactional information or HR information.
- Crediting: How do I make sure the right person or persons get credit for those transactions and sales activities?
- Calculations: How do I calculate the data accurately?
- Compensate: How do I push through that final check or payment into someone’s checking account?
- Communicate: Now that we’ve created this process, how do I communicate that information to the paid population so they understand what is happening?
ICM becomes the foundation for the entire organizational exercise. It’s the place where most people start because it is probably where people are feeling the most pain from a corporate perspective. If you think about the cadence of some of the other activities listed above, the chances are that unless you’re in a very unusual situation, you do not design your plans every month. Most organizations see this as an annual exercise.
Kohari added that like any framework, Canidium’s has its limitations. It’s a starting point for having a conversation about what sales performance management is.
Marshall noted that in his view, he not only saw Performio focused on the ICM space, but also on helping customers bring targets into the whole process and working with dashboards and reports — a more organic approach that starts with the ICM but then moves out into these other spaces.
Kohari said Marshall’s point was a good one, and this was also his experience over the last 20 years. Companies start in the middle area and then move tangentially out. The first thought is dealing with the immediate visceral problem they’re having, solving that ICM problem first and then realizing they have a great technology platform that can also start to migrate into these other areas and check off different capabilities and functionalities.
Three Stages of Business Success
According to Kohari, business success is a journey that’s composed of three stages. Canidium sees this happening in two dimensions:
- Focus is the vertical access
- The outcome is the horizontal access
This is the ICM piece of the equation. How does a company wrangle its data under control? Companies will have lots of data like CRM and CRP that will feed information to them. All this must be wrangled under control to get clean input into the administration process, then layer self-service reporting on top of that.
In Stage One, it’s really about execution from a focus perspective, and the outcome you’re looking for is accuracy — accurate, timely payments with clear transparent reporting, so the people you're paying understand what’s going on.
Now, it becomes a conversation about efficiency, and workflow becomes very important. How does a company layer in a look at some of these other tangential capabilities, like quota and territory management, dispute resolution, plan acceptance, and maybe some standardized coaching processes? These are workflow-based, and workflow is driven toward efficiency.
That efficiency you find is on the focus vertical and helps you accelerate your business on the outcome horizontal axis. This helps you to pursue these processes faster and more efficiently so that ultimately, you get to Stage Three.
This is the brass ring — it's where every company wants to be. It's effectiveness on the focus axis. A more proactive function where the company has modeling, forecasting, and analytics. And not just historically, but to look ahead, prepare and plan for things it knows are going to come it's way. Company executives are receiving detailed information so they can make better decisions.
On the outcome axis is the adaptation. Being able to deal with a multitude of things that are going to come out of a company from a business perspective, such as much-desired flexibility. Whether it’s mergers or acquisitions or the introduction of new competition or new product launches, you are dealing with these things from a solid organizational perspective.
Unfortunately, too many organizations tend to focus on the acute pain of Stage One and don’t necessarily think about the long-term ramification of some of the decisions they make from both the operational program perspective, but also in terms of the technologies they employ at each of these various stages.
Marshall and Kohari both agreed that to get to Stage Three, ownership and governorship of all the stages need to migrate the various parts of the organization and not remain in one place. Kohari added that over the last four or five years, what you are seeing is the emergence of a wholesale sales operation organization within companies. When they achieve a certain size and scale, it might start off as a small project — but it ultimately becomes its own entity.
Canidium has seen a lot of governance success when sales operations start to take ownership of all these pieces, and it becomes a strategic function within their organization. All of these capabilities are now managed under one sales operation umbrella.
About David Marshall and David Kohari
David Marshall has more than 20 years of experience in the sales compensation area and is an ICM technology specialist. He aims to help sales organizations grow and evolve by using smart technology, like Performio's, to create compelling incentive and compensation strategies that lead to the sales all companies desire. He cares deeply about creating a seamless customer experience so businesses can create a high-performance sales culture in their organizations by using better sales compensation information.
Performio creates cutting-edge technology that aims to develop intelligent ways for companies to manage and track sales commissions. It’s a SaaS system designed explicitly with salespeople in mind. Its goal is to energize your sales force while eliminating hidden problems and costs of ICM.
David Kohari has almost 20 years of leadership in helping companies improve their sales and service performance. Before he joined Canidium, he was the Director of Customer Success at NICE Systems. He has also held similar management positions at Accenture, Compensation Technologies, and CallidusCloud.