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Sales organizations are under constant pressure to maximize their potential. To accomplish this they need to integrate their people and processes with those of the finance and operations groups and have access to all available information and useful technology. This is particularly true in the area of sales compensation, which when managed properly recognizes accomplishments, rewards success and motivates people. However, we find that few sales organizations take a comprehensive approach to sales compensation management.

Sales needs a well-developed compensation strategy that utilizesVentanaResearch_SCM_BenchmarkResearch incentives and rewards to motivate sales talent. To optimize sales compensation strategies and processes requires access to all relevant information about quotas, territories, forecasts and bookings. Organizations have invested in technology for sales force automation (SFA), enterprise resource planning (ERP) and customer relationship management (CRM), but these systems are not designed to manage sales compensation.

Our recent benchmark research on sales compensation management reveals key indicators on the state of this critical sales activity and best practices and key insights that can help organizations improve. It is no surprise that nearly all research participants said sales compensation is very important (for 73%) or important (22%) to the success of a sales organization. An effective sales compensation requires efficiently running processes automated through software to manage data, models used to calculate commissions and workflow and communication with sales professionals.

Our analysis of the performance of organizations in sales compensation places fewer than one in five (17%) at the highest Innovative level. Each succeeding lower level tallied a larger percentage; the largest percentage (37%) rank at the lowest Tactical level of performance. Further analysis by industry and size of organization and sales team shows that the largest organizations manage sales compensation best. When measured by overall revenue, the very large have the greatest percentage (47%) at the Innovative level, significantly more than other sizes of organization. Our analysis also finds that larger organizations have both more sales people to manage and more resources to apply to sales compensation.

vr_scm14_01_impediments_to_effective_sales_compensationIn addition, we find that more than one-third (34%) have impediments that are motivating management to consider further investments in sales compensation. The most common impediments are inconsistent execution in sales (61%), lack of sales effectiveness (48%), limited alignment of sales and strategy (45%) and scattered sales information (41%). Almost two-thirds of organizations with few or no impediments are satisfied with their current process, substantially more often than others. for the research finds that organizations that have impediments often have obstructions to making technology investments, primarily no budget (for 42%), low priority (38%), a business case that is not strong enough (37%), lack of resources (37%) and lack of awareness (28%).

On the positive side, we see positive results from such investments. Two-thirds of those that use dedicated sales compensation software have improved the outcomes of their vr_scm14_09_value_of_sales_compensation_applicationssales activities and processes significantly (38%) or slightly (30%). One of the benefits of a dedicated approach is that commissions can be processed faster and more accurately: More than half (57%) of such organizations process them in less than a week. Another, more sophisticated benefit is that the sales force is aligned to business strategy and goals, which 43 percent ranked first, more than any other. Other benefits cited are better management and tracking of the progress of product and sales initiatives (by 30%), improved communications to Sales on the status of compensation (26%) and improved auditing and compliance of sales forecasts to goals and targets (25%). Among those planning to adopt dedicated sales compensation the highest-ranked expected benefits are to increase revenue and grow the business in terms of net new customers.

Improving outcomes also requires metrics that are aligned to sales objectives. In our research the most common metrics to measure overall sales performance are quota attainment (65%), revenue attainment (63%) and customer revenue (51%). Each of these metrics can be tied to compensa­tion, rewards and incentives. Organizations should make sure that the sales compensation software they use facilitates creating, tracking and reporting on metrics, which is essential to examining overall sales performance of which commissions earned are only a component.

Managing and improving sales performance must include a focus on the efficiency of processes for compensation and commissions, and it often involves more functions than sales force management. Sales Operations should assess its own efforts, as should Finance, which increasingly (in 31% of organizations) sponsors and funds investment and influences and wants to improve process or wants to access information for improving performance. Finance increasingly has a key role in calculating and processing commissions: In about 40 percent of very large organizations Finance performs these tasks, and Sales Operations performs it in about half of organizations. We conclude that sales compensation requires teamwork to ensure that the process, information and supporting software are managed optimally. As well as an organizational commitment to ensuring proper management, a dedicated approach to sales compensation can save time and resources while providing more accurate and timely payment of commissions. If your organization has questions in managing sales compensation, our research and expertise can provide guidance in making a detailed assessment.

Regards,

Mark Smith

CEO and Chief Research Officer

Investing wisely in sales-related people and processes is a key to business success. In 2012, helping sales staff perform at their highest levels should be a top priority for management. That may take some effort, according to our benchmark research, which indicates that only 14 percent of sales organizations operate at the highest level of innovation and competitiveness. In recent years, most organizations merely discussed moving beyond using only their sales force automation application and Microsoft Office for improving sales efficiency. Now sales organizations can move beyond systems that were designed decades ago, thanks to the availability of a broad range of applications to support sales activities and processes. In fact dozens of new types of sales applications are available to help sales focus on selling, which creates another issue. Where should sales organizations focus their limited resources and budgets?

Ventana Research intends to provide guidance here. We have identified important overall business trends identified, including big data, business analytics, business collaboration, cloud computing, mobile technology and social media; all of these areas offer new competitive opportunities for improving sales efficiency and effectiveness. For example, the use of sales analytics puts 17 percent of sales organizations at the Innovative level of maturity in the Ventana Research Sales Analytics benchmark research. These organizations benefit from daily and weekly metrics about the pipeline and forecasting, quotas and the performance of account reps. As well renting sales applications through cloud computing has become the preferred practice in 41 percent of sales organizations, compared to 25 percent that purchase them in an on-premises, according to the Ventana Research Sales Performance Management benchmark research. In mobile technology, 67 percent of sales staffs use smartphones today, 17 percent use tablets, and 30 percent plan to expand their existing deployments, according to our research. In the area of collaboration, having people broadcast and post their needs to help in the sales process is a top priority in more than one-quarter of sales teams, compared to legacy methods of electronic mail and instant messaging. 

Our upcoming research aims to help your sales organization turn these business technology advancements to your sales advantage. Ventana’s 2012 research agenda on the business of sales will focus on three key areas at the intersection of people, processes, information and technology: improving the potential of the sales organization, establishing dedicated methods to manage sales and accelerating time to sales readiness. 

In the area of improving potential, we will look at the use of social and collaborative technology to coach and guide sales. We will examine the use of mobile applications accessible from smartphones and tablets. And we will assess the use of product information management to help configure deals and price them efficiently. Each of these address the need to improve access for sales to the applications that can help improve the potential of achieving revenue targets.

Establishing dedicated methods to manage sales requires many sales organizations to improve compensation and incentives that influence sales reps’ performance. Sales forecasting was identified as the most important application for 65 percent of sales organizations in our research, yet most are still using spreadsheets, which we found to impede the management of sales. Instead, sales forecasting should be a team-based business process that incorporates management of the pipeline. Sales analytics and metrics can help optimize activities and processes in key management categories including people, performance, process and risk. Our research found that 86 percent of organizations want to have simpler sales analytics, but most struggle with the difficulty of building and maintaining silos of one-off spreadsheets and presentations. Managing sales can be much easier with targeted applications that can assist managers with oversight and guidance.

Finally, accelerating time to sales readiness is important because many organizations perform tasks that take two to 10 times longer than necessary, and they often wait for long periods to get the information they need. Organizations can use SFA as a source of information for the operational and performance needs of sales, but a best practice is to use integration tools. Cloud computing can reduce IT challenges and resources while providing ready access to applications and information. Providing information through mobile and social media also can improve sales readiness and make it easier to respond to sales opportunities. Scattered information was rated as the most significant impediment in 58 percent of sales organizations, indicating the importance of improving the management and use of information.

Our research agenda will examine applications that focus on sales, considering the broad range of analytics, assets, channel, coaching, commission, forecasting, incentives, leads, learning, objectives, performance, pipeline, planning, pricing, promotion, proposal, quoting, quota, reporting, rewards, sales force automation and territory. In addition, our Ventana Research Value Index methodology again will assess vendors and their suites of applications and tools in sales performance management. Our newly released benchmark on sales applications and technology uncovered the priorities of organizations in applications as well as new technology trends, and we have previously released research on sales analyticsbusiness and sales data in the cloud and total compensation management. The next benchmark we’re conducting is in the area of product information management, and it will be followed by sales forecasting

I believe that 2012 will be a critical year for sales operations teams, which have to perform more tasks faster and more effectively than ever before. Only 39 percent of sales organizations have any confidence in their organizations’ ability to manage sales operations and performance, indicating a significant opportunity for improvement. Utilizing new applications and software that can handle analytics and planning for tasks in sales will be essential in helping sales staffs utilize their time efficiently. Simplifying access to applications through mobile technology and enabling sales people to work collaboratively and socially should be key priorities for sales executives. 

Sales cannot overachieve without making investments that target the culture and environment that sales executives want to establish. Our research will help them understand the best practices that can save time and money while reducing the risk of failing to achieve maximum results.

Regards,

Mark Smith – CEO & Chief Research Officer

Mark Smith – Twitter

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