Mark Smith's Analyst Perspectives

Ensuring that the sales organization contributes as fully as possible to the success of the organization — to revenue, growth, profitability and the overall customer experience — requires not only dedication but effective strategy and planning. A well-developed strategy and plan to utilize current and future sales talent is essential for the best possible sales performance. To carry out this mission, organizations need a set of coordinated sales-related activities, processes and systems that enable the sales organization, from leadership and operations to the manager and sellers, to operate in a coordinated and collaborative manner. We call this sales performance management.

 Ventana Research has over almost two decades conducted market research in a spectrum of related areas including sales performance management as well as broader sales areas ranging from sales force automation (SFA) and CRM to sales analytics and planning. We also have done research on digital commerce and subscription management applications. Recently we have examined topics on the expansion of sales performance management from focusing just on sales operations and leadership requirements to applications that help address the needs of managers and sellers, in some instances by applying artificial intelligence and machine learning. Our continuous research and analysis of the market for business applications and technologies guide our comprehensive approach to the recently published Ventana Research Value Index: Sales Performance Management 2019.

Sales is a business unit designed to deliver the most effective return on the company’s products and services. It must ensure that selling is done efficiently and intelligently. Sales organizations typically are complex entities, often with cultures and histories that can inadvertently sabotage their performance. And many in leadership believe a sales organization can adapt and change its behavior without seeking out and using best practices.

In our view, effective management of sales performance requires well-designed and continuously optimized territories and accounts for which quotas are designed to capitalize on the organization’s full potential. This foundation must be established through modeling and planning that will provide analytics and metrics to guide sales leadership and operations in planning for the coming month, quarter and year.

Sales compensation and commissions and incentives can then be used to influence sales behavior and priorities. In order to optimize sales performance, organizations must be able to design incentives that can be applied to motivate sales reps to reach their targets. To evaluate whether sales plans and incentives are effective, sales leadership and operations personnel need tools to help them assess the relationship between compensation plans and actual performance. Comparing compensation and incentive plans among all sales personnel and with other parts of the organization, and even across the industry, for example, can help sales leadership managers determine whether what they offer is appropriate.

Goals and objectives must be defined, established, tracked and then linked to incentives and rewards to help guide sales performance. Moreover, organizations need to be able to know whether their sales compensation is competitive in their market. Using benchmarks to compare compensation to that of others in the industry can provide this information.

Common Challenges

Organizations often lack expertise in sales compensation and planning and sometimes don’t understand the importance of commissions and compensation in sales. Our research finds that only 57 percent of participants from small companies view those factors as very important, substantially fewer than those from very large organizations (73%). Nearly half (47%) of all research participants said their sales organization has impediments that are motivating them to invest in sales analytics, which can produce the benchmarks needed for market comparisons. Among the five impediments they cited most often are inconsistent execution (47%) and lack of sales effectiveness (38%), which can directly impact results and sales revenue.

 Using spreadsheets to manage aspects of sales, including compensation and incentives, is ineffective and can be problematic. Spreadsheets are not designed for serious benchmarking. They waste valuable time and cannot scale as a company grows, which a dedicated sales performance management tool can do. The use of multiple spreadsheets, often stored on users’ local drives, is a factor in producing scattered sales information, which organizations cited most often (52%) among impediments in the systems they use to assess plans and incentives. Incomplete or inconsistent information can undercut the ability to assess compensation plans accurately.

Even sales-related applications such as sales force automation (SFA) and customer relationship management (CRM) that are designed to capture data about accounts, contacts and opportunities cannot deliver optimal visibility and guidance for managing sales performance. Reports and dashboards from SFA systems typically look only at historical performance, but backward-looking reports can’t provide timely guidance on the current state of quotas and incentives for individual sales reps and are not flexible enough to provide information on or credits to others involved in deals. Only one-fifth (21%) of all research participants and 19 percent of those with less than $100 million in revenue said they are satisfied with the use of SFA or CRM for sales analytics.

Optimizing Sales Performance

The good news is that small sales organizations can have access to the same technology available to larger ones. The best systems can help sales organizations level the playing field by providing tools for optimizing sales performance. For example, sales compensation benchmarks enable direct comparisons with others’ pay internally and across the industry. These benchmarks are built by applying analytics to sales compensation and performance-related data; comparing the compensation and performance analyses can provide the insights needed to make sales force decisions.

Sales analytics used across sales performance management can yield important benefits. Two-thirds of organizations that use dedicated sales analytics tools said they have improved the outcomes of their sales activities and processes significantly (20%) or slightly (47%). The top-ranked benefits of having sales-related analytics capabilities are being able to align the sales force to business strategy and goals (for 38%) and better managing and tracking progress of product and sales initiatives (24%), both essential for effective sales performance management.

The Value Index for Sales Performance Management evaluates vendors and products in seven categories of requirements. Five are product-related, assessing usability, manageability, reliability, capability and adaptability, while two quantify the customer assurance issues of vendor validation and total cost of ownership and return on investment (TCO/ROI).

Regards
Mark Smith