6 Reasons Why the C-Suite Should Pay Attention to SPM (Part 1)
August 02, 2018
Part 1: Building a Stronger Sales Team from the Office of the Sales Director
C-Suite Executives: Have you met Sales Performance Management (SPM)?
As a senior executive, you’ve likely heard of Sales Performance Management (SPM) solutions but don’t necessarily understand why you should be paying attention to this technology. SPM is quickly becoming a critical solution within the Corporate Performance Management (CPM) ecosystem.
Gartner Research defines the core capabilities of SPM to include territory management, quota management and incentive compensation management. Gartner analyzes this category and each year publishes the Gartner Magic Quadrant for SPM. Many organizations going through the evaluation and selection process of choosing an SPM partner and solution, will often reference this report.
According to Gartner, SPM:
“…comprises tools and process functions that automate and unite back-office sales processes. It is implemented to improve sales execution and operational efficiency. Capabilities include Territory Management, Quota Management, and Incentive Compensation Management. SPM solutions also provide ‘Modeling and Analytics’ capabilities to help businesses evaluate sales assumptions and trends in sales outcomes.”
Gartner has been researching the SPM category for just over a decade now. Sales organizations are continually investing in SPM and software vendors are continually building and expanding capabilities. According to Gartner, the $850 million SPM software market continues to grow by 12-13% each year, and it is estimated to grow to $1.4 billion by 2022.
More and more C-level executives are seeing SPM as a critical solution to success.
What is the key driver for organizations to seek an SPM solution?
Typically, organizations first discover that they need an SPM solution because the process of managing their incentive compensation has become too difficult. It’s amazing how many organizations continue to rely on spreadsheets to manage the sales commission process – cumbersome, error-prone spreadsheets alongside manual processes.
Imagine going from100 sales reps – likely manageable using spreadsheets depending on the complexity of compensation plans – to 1,000, 2,000 or 20,000 sales reps. Spreadsheets simply don’t cut it. Some organizations build their own home-grown solution or, in some industries, code incentive compensation rules in legacy COBOL applications, only to later discover that these home-grown solutions are difficult to maintain or don’t provide the agility and flexibility to adapt to change.
The points I’m making here is:
- Organizations quickly outgrow spreadsheets and legacy systems built for calculating sales compensation and;
- It’s typically the incentive compensation team that surfaces the need for a sales performance management solution.
However, SPM brings much more business value to organizations than simply solving the challenge of managing incentive compensation plans – and the C-Suite is paying attention.
SPM: The value recognized by the C-Suite
All SPM solutions include capabilities that address the “core” definition including territory management, quota management, incentive compensation management, dashboards and reports.
The capabilities of SPM have expanded, and as organizations are adopting SPM, senior executives and sales leaders are recognizing the value of an SPM solution as more than simply managing the associated sales performance business processes. Some SPM vendors are beginning to expand and add more advanced capabilities, which especially interest the C-Suite because of the deep analytics that allow them to make more informed decisions, adapt to change quickly, and remain agile.
Highlighted below are three considerations that illustrate the value of SPM for building a stronger sales team and organization:
Consideration 1: Advanced sales analytics
To make informed decisions, we need data. However, data can often be difficult to access. Customer data is stored in the CRM solution. Product data is stored in a product catalog or a business intelligence (BI) tool. Transactions are stored in the ERP solution. Data is “everywhere” and access to it is often restricted.
To calculate incentive compensation, the SPM solution needs to bring customer, product, transactions, and employee data into one centralized data source – and that’s SPM. We often say that SPM is a “treasure trove of data,” and the data is the most sought after in the enterprise. It simply needs to be – after all, the data from these various systems is used to accurately calculate and pay sales commissions.
SPM solutions have expanded to provide advanced analytics, enable better data-driven decision-making, and improve sales performance results. More importantly, advanced analytics can help you uncover hidden opportunities and market potential that you might not have otherwise discovered.
Consideration 2: Target the right opportunities, reduce territory coverage gaps, and manage unassigned quota
Your organization needs to target the right opportunities, reduce the territory coverage gaps that can occur when a sales rep has relocated or leaves the company, and manage any unassigned quota to ensure that the organization meets the revenue plan.
If you have 1,500 hundred sales reps, at an attrition rate of 20% or 30% consider the math. The coverage gap and the unassigned quota that you’re juggling month over month puts you at risk of not hitting your revenue plan. Another factor contributing to keeping your sales reps happy and satisfied includes providing competitive incentive compensation plans.
But just as importantly, as the CSO you need to ensure that the incentive compensation plan aligns with the corporate goals and revenue plan. You will need to collaborate with Finance to align the quota targets with the revenue plan.
SPM can provide insight on the health of the organization and keep Sales, Finance, Marketing, and HR plans in sync and aligned with corporate goals.
Consideration 3: SPM can help attract and retain top sales talent
C-level executives and sales leaders are always concerned about keeping the top sellers. SPM provides a more systematic approach that encourages engagement, coaching, and employee satisfaction. It's been said that it costs organizations between $40K to $70K to recruit, hire, and on-board a new sales rep and get them to a satisfactory productivity level. This is not including base salary, any draws they might take as they are learning the products and services, or any commissions they might earn – it’s just the cost of recruiting, hiring and on-boarding.
Needless to say, this is a concern for most C-level executives and sales leaders. Consider the use of SPM to attract the best sales talent. SPM allows you to plan, manage, and analyze sales performance in a way to contributeto the success of your sales team – sales territories defined on market opportunity and potential, intelligent quota setting, and competitive incentive compensation that provides focus and motivation.
SPM can help keep the sales team happy and satisfied, reduces sales rep attrition, and lower costs.
Because of advanced sales analytics, optimized sales tools for territory and quota management, and the ability to attract and retain top sales talent, SPM is a vital tool for the growth and development of any sales team. Join us next week for part two of this blog series as we consider the value of SPM solutions from a finance perspective.
Download the White Paper: The benefits of IBM sales performance management for C-level executives and sales leaders.
To learn more about IBM Sales Performance Management (SPM) solutions, visit https://www.ibm.com/industries/sales-performance-management .