5 Tips for Improving Management Visibility into Sales Force Performance and Compensation Plan Effectiveness
One of the critical linkages in using incentive compensation plans to drive sales results is the need to understand the performance of salespeople and the effectiveness of the plans so that the strategy, the plans, and the people can be changed as needed.
Being able to do this requires that executives and managers have timely, accurate, and actionable sales performance and incentive compensation information. Yet, many organizations lack the ability to effectively design, easily produce, and consistently deliver such information to executives and managers.
By providing better sales performance and incentive compensation information, executives and managers are able to make more informed decisions, such as replacing poor performers, coaching people to exhibit the right behaviors, or changing plans to be more aligned with strategy.
The following tips, derived from a long-term study of the incentive compensation management, reflect the best cross-industry practices for improving management visibility into sales force performance and compensation plan effectiveness.
Ability to provide mangement timely accurate performance metrics
90% of managers see this as very important or mission critical.
47% say this needs improvement in their organization.
CSO Insights - 2014 Sales Compensation & Performance Management Study
Define and Analyze – Proactively define and analyze metrics for performance.
Proactively analyzing sales force performance begins by defining appropriate performance metrics. The metrics should be rooted in your organization’s expectations of the performance of the sales force and individual salespeople. The metrics should also address the interests of multiple constituents (including sales, finance, sales operations, and other areas) and include easily understood metrics that give executives and managers visibility into the performance of individual salespeople, sales teams, and sales groups. Every organization has different strategies, goals, and plans, which means that different organizations will have different metrics of sales force performance; however, there are many commonly used metrics:
- distribution of sales force by percent of target earnings
- distribution of performance for each product and service
- distribution of performance in different roles and geographies
- top and bottom performers
- portfolio performance
- opportunity pipeline improvement
- club or award achievement
One caution in defining metrics is to be careful not to over measure. Limit the number of metrics being monitored and analyzed to those that are truly meaningful. Resist the temptation to measure everything and focus on those metrics that give you insight into the performance of individual salespeople and the sales force.
Once the metrics have been identified, proactively monitor results to quickly catch deviations from expected values.
Then make sure you analyze why deviations are occurring. This allows you to uncover issues—such as paying people inaccurately or paying people for the wrong behaviors—and to fix underlying causes before they become major problems.
Measure Effectiveness – Frequently assess the effectiveness of your incentive compensation plans.
In order to gain insight into the success of your incentive compensation plans it is critical to establish frequent assessment of the plan effectiveness. Doing this allows you to determine how well your plans are working and whether they are appropriately aligned with your business strategy. Some common metrics of plan effectiveness include:
- budget variance overall and by product and service
- percent of revenue paid in incentive compensation by product and service
- distribution of compensation by products and service
- distribution of compensation in different roles and geographies
- correlation of product performance to corporate performance
- commission cost of sales
The most meaningful analyses of plan effectiveness require that a wide variety of metrics of organizational performance be integrated with the incentive compensation data to provide indicators of the health of the incentive compensation plan and its relationship to business strategy.
If successful, your executives and managers will have a clear, holistic, and balanced view of whether your plans are producing the desired results and what you need to change for the plans to be more effective.
Automated Process – To provide access to actionable performance.
To help field managers make the best decisions about their salespeople, they should receive frequent, useful, and organizationally consistent updates on how their salespeople are performing.
Depending on factors such as the length of your sales cycle and whether your sales process is transactional or consultative, the performance information should be available somewhere between once per day and once per month.
The information should help managers identify top and bottom performers, quickly and easily determine performance issues, and proactively address problems. The information should also help them understand how their salespeople are performing relative to others in the company.
To promote the fair and uniform use of performance information across the organization, the process of analyzing salesperson performance should be fully automated and field managers should be provided with identically structured information about their salespeople. This ensures consistency, eliminates inaccuracies, and minimizes time spent by managers on administrative tasks.
Easy Access to Information – Eliminates the need for special requests.
When information is scattered in multiple places, it increases the amount of time managers and executives spend searching for relevant information. It also increases administrative time—ultimately impacting the ability to make timely decisions.
To eliminate this problem, develop a single system of record for all management information and provide managers easy, self-service access to reports and analysis through a web-based portal. Make sure that the security of the system allows each manager to access only information about their own people.
Finally, make sure that the portal is populated with timely information that answers the business questions that they are trying to regularly answer, and then educate managers on the information available and how to access it.
Minimize Custom Reporting – Minimize the creation of custom reports and analyses.
When managers do not easily have access to the information they need they often make requests for custom reports and one-off analyses. This takes up considerable analyst time that can be freed by eliminating the need to create special information for specific managers.
Providing online access to management information and educating managers on how to use it, as explained in the previous tip, is the best way to cut down on special requests, but there are still instances where requests for custom reports and analyses are warranted.
When this is the case, it is important to establish a well-defined process for understanding the need and getting the right information to the manager quickly and without rework. To do this, be prepared with a series of questions probing the reasons for the request and the purpose of the information. This will establish one of four possibilities:
- the information is already available online
- the information is not really required or some information already available
- can be substituted for it
- the information is required on a one-off basis
- the information will be useful for all managers in similar roles on an ongoing basis
Creating a custom report is justified when the information required is truly on a one-off basis. And if the information will be useful for all managers in similar roles on an ongoing basis, develop a standard report and routinely provide access to it through the portal, thus avoiding special requests for it in the future.