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3 reasons why sales performance management is so important

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When we talk about sales performance management, what do we mean?

Sales Performance Management (SPM) is a mix of operational and analytical capabilities that connect back-office processes, like sales planning and compensation, with front-office sales functions. If you didn’t think of SPM in this light, it could be because SPM tends to mean different things depending on what line of business you’re talking to.

Sales reps and managers tend to think of SPM from a tactical perspective: leaderboards, competitions, and gamification that ensures quota attainment. Sales operations views SPM as the sales planning process for building the right sales foundation to cover a company’s addressable market.

Outside of sales, it’s a measurable way to plan for sales outcomes and forecast revenue for finance departments. Meanwhile, IT views SPM as part of a company’s sales and financial systems, one that’s closely connected to CRM.

The problem is that each stakeholder involved in SPM, whether sales, finance, or IT, can get a bit myopic. They tend to only think about their piece without considering the bigger picture. And in today’s complex business environment, tunnel vision can be costly.

A connected ecosystem

SPM in the modern enterprise depends on many lines of business and interconnected processes and systems. If the business units are working from their own data sources, including spreadsheets, they risk making errors or missing key trends.

If there’s a breakdown in any one area, it can cause issues for everyone connected to the ecosystem. Ultimately, it can impact a company’s bottom line.

For teams to work together effectively, they need a single, natively integrated platform that provides a single source of truth. This connectivity eliminates guesswork and puts everyone on the same page, enabling a business to make informed, data-driven decisions to meet its sales and revenue goals.

3 reasons why sales performance management is so important

Let’s examine the three core elements of modern SPM to understand the critical role a single, connected platform plays.

  1. Sales planning and administration

This part of SPM encompasses territory creation, balancing, and assignment — it’s where a company makes sure its total addressable market (TAM) has appropriate sales coverage. It impacts quota creation and assignment, as well as financial planning.

Using disparate — and often bad — data from financial, CRM, and other systems, territory planning is a laborious process that results in groupings based on third-party systems like zip code or arbitrary geographic groupings like county. Aligning data sets between systems or managing via spreadsheet becomes error prone, leading to unbalanced territories with unequal earning potential. Because quota planning is closely tied territory alignment and financial plans, breakdowns and errors yield quotas that are unreasonable, damaging sales rep morale and triggering churn.

A connected, centralized system of truth gives planners contextual information, like geographic data or historical performance to help them create optimized territories and quotas. Leveraging artificial intelligence, this data-driven approach ensures balanced territories and fair quotas, which makes for happier sales reps and improves sales outcomes.

Better sales planning sets the organization up for success, positively affecting forecast accuracy and seller attainment.

  1. Compensation planning and administration

Creating and administering sales compensation plans to support organizational goals is complex. Companies want to get the most bang for their buck, but they need to strike a balance between cost and complexity. Spending too much hurts the bottom line, but spending too little will drive sales reps away. Simple plans are easy to communicate, but fail to drive complex behaviors, while overly complex plans can fail to motivate sellers or can be exploitable.

Companies often have dozens of sales compensation plans, with several teams drawing from multiple sources of data. They usually create them at the beginning of the year, but if they don’t have a way to periodically analyze whether the plans are effective, they put the business at risk of missing its goals.

A single, natively connected system gives teams a single source of truth and a complete view in order to analyze sales compensation plan performance. Administrators can quickly see plan components that are costing the business, but not generating revenue. If analysis reveals lower returns or strategic areas that need additional traction, administrators can use SPIFS, bonuses, or accelerators to pull sales back on track.

Connected sales performance management platforms are better equipped to deliver results with artificial intelligence and machine learning, delivering e recommendations to improve performance and drive increased revenue without complicated and labor-intensive analysis.

  1. Sales execution

Of course, distribution and execution are critical components of sales performance management where many sales plans fail. How long does it take for your organization to develop and assign compensation plans? Are your sales territories balanced and assigned quickly?  Are quotas aligned to real outcomes and quickly accepted by the sales force?

The quicker finance and sales operations can get these plans out to the sales team, the faster sellers can start selling. If they’re waiting around for their territories or pushing back on their quotas, they often go on mental vacation which decreases motivation, performance, and compresses selling timelines.

Distribution of territories and quotas to the sales team requires alignment and collaboration with sales leaders and acceptance by sales reps. A platform with a built-in workflow enables sales leaders to collaborate with finance and sales operations. For example, a sales manager can suggest consideration of an outlier that would impact a territory, and finance/ops can easily investigate and make any necessary adjustments.

Other components of SPM can include gamification, incentives, and tools to track and measure sales performance to keep sales on track. With an AI-powered, end-to-end approach to sales performance management that’s designed to natively support the distinct needs of sales, sales operations, finance, and IT, these pieces can be readily integrated.

Learn more about the future of sales performance management here.

Grant Smith
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April 10, 2019
Grant Smith

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