Why is Sales Performance Management a part of the Quote-to-Cash process and how can it help businesses implement long-term strategies and drive change?
Sales Performance Management is the process of aligning organizational sales strategies processes and resources to achieve desired sales outcomes. The goal is to improve the organization sales productivity and efficiency. Today, when number of businesses are changing their business models and moving from the product focus organization to service focused approach, there is a clear need to have a process that helps to ensure that organization is changing, and these changes are aligned with the strategic goals. Sales Performance Management covers one of the most important parts of the organizations – the sales perspective.
Our guest Daniel Hovart – subject matter expert from SAP – helped us to uncover Sales Performance Management together with Sergey Jermakov, Senior Partner at CLARITY.
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Adaptation of employees to business changes and ways to help them embrace changes
How do you see businesses changing, and how could they support their people in changing the way they do business?
Often organizations forget to include the people in the process when they make a rapid change in their business, but the people are what will help them get this job done. Aligning people to this change and taking them on the journey is an important piece, and compensation plans and incentives are just the way to enable the strategy. You need to justify your change as people don’t want to change; they are used to developing habits and sticking to them. Surely, we all are motivated to also grow, but the first reaction to change is always questioning whether it is needed or potentially dangerous.
How help people to accept the change?
Taking people on a journey with you and providing incentives for them to join your strategy is key to success. When you have targets set in place, be mindful that setting goals too high may disincentivize people, while setting them too low will not keep them motivated. You also need to understand past performance, current market trends, and how to adjust when you’re changing the business model; this is a constant process. There is no one-size-fits-all approach when it comes to your compensation plan. It needs to change with any alterations made during the year, such as KPIs and targets.
Biggest challenge when setting a compensation plan
What is the biggest challenge the companies face when they are setting up their compensation models, and is there a solution to overcome it?
The main challenge is in the process itself. Companies start by saying “We need to do sales incentives” and trying to figure out what usually works for sales teams, rather than looking at what the business wants to achieve in the long-term. It’s important to think about success holistically, and then break down into different levels for everyone to follow. Unfortunately, many companies are relying on spreadsheets for this, which can work for a while but can quickly become too complicated or messy if your organization is growing. There is a lot of room for manual errors that can keep people from being paid fairly, resulting in lost trust and low performance. The typical challenges come from setting up a successful plan and then using technology to manage it.
From Sergey’s experience, there was a company that implemented a tool that helps employees track their progress in real-time, understanding how their opportunities close and what they will be compensated for on a quarterly basis. It turned out that the system was implemented incorrectly, which led to incorrect calculation of information, and overpayments to employees.
Recommendations for the companies who are radically changing their business models
- Look at your compensation plans. Think about what you are paying people and what kind of behavior this triggers based on their current compensation plan. Next, consider what you want to achieve as an organization. If those two things do not match, you should be looking at changing something about our compensation plan. Make sure that your compensation plans are aligned with what you want to achieve as a company.
- Think about the people who make this work every single day. Help your salespeople automate the calculation and make sure it is running to get them moving in a direction where they can focus on improving the process and doing their best.
- Talk to your salespeople. They are the ones getting the payments, so just ask them what they think about the process and if there are any improvements to be made. As a result, they may be able to guide you in a direction where there might be some things you want to treat differently going forward.
The Bottom Line
As businesses continue to evolve, Sales Performance Management will remain a key component in driving success. Adaption of the compensation plans to the changing environments is essential to help businesses stay competitive and ensure that your sales team is motivated and performing to the highest standards. Properly managing and rewarding performance, as well as keeping the employees on the same page with company goals, can increase companies’ profits.