May 31, 2019 | Written by: Kevin Gray
Categorized: Sales Performance Management
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Companies, like people, face pitfalls in corporate progress whose recurrence in one business case after another hints at root causes common to many organizations. The Seven Deadly Sins of SPM distills the experiences of IBM specialists who help firms around the world identify and remedy the causes that lie behind underperforming sales performance management (SPM) systems.
Such recurring causes—the authors call them the seven deadly sins of SPM—can be seen undermining the sales performance of even the strongest companies. As the white paper reveals, ensuring optimal sales performance requires that a company not only identify the root cause of each sin, but also apply the remedies that will enable the organization to overcome the error and continue its growth.
What are the seven deadly sins of SPM? How can you tell when your company is committing them? The following insights can help your organization transcend these pitfalls:
1. Ineffective compensation plans: When greed can be good
“Greed, for lack of a better word, is good.” This provocative signature line from the movie Wall Street was underscored by an Oxford University study that revealed what every business leader already knows: Incentive is the key that unlocks growth. In many organizations, however, ineffective compensation plans undermine incentive and motivation. The white paper’s authors state the issue in stark terms:
Incentive designs themselves are the most important part of the SPM ecosystem; after all, if the incentives are not capable of producing the desired results, then tweaking the other components of the ecosystem will not make a meaningful difference.
2. Dirty data: Why hygiene matters
Effective incentive calculation demands accurate data. Yet the authors note that in many organizations, the critical data set may be fragmentary at best:
When we work with clients that are complaining about high error rates, we usually find challenges with reference data, and often a lack of data hygiene is a root cause.
Dirty data—outdated, non-normalized, poorly entered or maintained data volumes that can lack names, lead sources and contact information—can undermine any sales system. Best practices for better data hygiene include data quality tools that automate data cleansing and help organizations turn data into trusted information.
3. Convoluted processes: Time to reduce the bloat
Needlessly complicated, outdated and multi-layered sales compensation policies are perhaps the most readily identifiable weakness of many SPM systems. The authors of The Seven Deadly Sins of SPM cite a recent survey that found that “simplifying operations was a top priority for over 70 percent” of sales compensation managers.
Streamlining sales compensation policies brings in revenue and spurs growth. Best practices for streamlining, however, require that an organization move out of the comfort zone of outdated manual processes and have “courageous discussions to change the old way of doing things.”
4. Lackluster reporting: How to support the finance function
Accurate reporting from sales compensation systems is essential not only to a sales team, but also to the finance function, which relies on the data provided when forecasting and planning for the entire business. Yet, as the authors highlight, weak reporting is one of the most common—and widely recognized—sins of SPM:
ICM/SPM systems only have two real outputs—payment amounts and information. Our research shows that less than one third of companies are satisfied with their ability to leverage the information inside their compensation systems.
An Aberdeen Group report has suggested best practices for remedying lackluster reporting, including using tools such as predictive analytics to enable historical and forward-looking performance reporting.
5. Service without a smile: The importance of happy sales reps
Because every cent of a company’s revenue flows through the organization’s sales representatives, rapidly resolving issues with sales reps—and avoiding such issues entirely when possible—helps ensure revenue health. Tools such as performance dashboards can help organizations readily do just these things. Indeed, the right tools can help both managers and sales reps gain insight into critical performance details:
B2B sales reps deserve an intuitive, instant-access, mobile-friendly view of “how am I doing,” including data on both their numeric (quota) and renumeric (compensation) progress.
6. Ignoring incentive ROI: The value of analytics
One of the most remarkable revelations in The Seven Deadly Sins of SPM is the following:
Only 12 percent of companies actually track and evaluate the return of investment of their incentive plans.
Without analyzing what a company gets back from one incentive plan versus what it can get back from another, bolstering the effectiveness of incentive systems and enhancing growth are almost impossible tasks. Performance and modeling analytics can help correct this sin, allowing a company to track—and build forecasts of revenue for—each incentive component, evaluating which plan design is more successful over time. An Aberdeen Group report has discussed the return on investment offered by performance and modeling analytics, which has helped companies achieve as much as 20 percent better quota attainment.
7. Unprotected SPM investments: Don’t forget about IT support
Sales revenue is the lifeblood of every business. Yet when the white paper’s authors polled commission managers, they were startled by what they found:
HR departments frequently have between three and fifteen times more dedicated IT support than Sales Compensation.
This may indeed come as a surprise, for calculating sales compensation plans is invariably more complicated—and much more critical to the long-term health of a company—than is managing home office employee payroll. In effect, many organizations are starving the goose that lays their golden eggs by not giving back-office SPM the IT resources that can help in managing sales and growing revenue.
Help your organization overcome SPM challenges using the best practices described in The Seven Deadly Sins of SPM, and learn how sales compensation analytics can enhance your incentive effectiveness and help bring in revenue.