Why Automate Sales Compensation Management

December 04, 2015

On November 19th, 30 organisations gathered in London at the e-reward conference to discuss the benefits of compensation management software. OpenSymmetry’s (OS) focus was Sales Performance Management (SPM) software – how we define it, how we identify the business benefits and how to choose the right software.

What is SPM?

A common question we get is what is Sales Performance Management? There are many definitions of SPM. Gartner broadened the scope of the definition 3 years ago to encompass all those capabilities relevant to delivering sales strategy including sales talent acquisition and onboarding, sales talent development, sales process, territory and quota management (TQM) and incentive design and administration (ICM).

Only one vendor, CallidusCloud, through its Lead to Money approach, presents a suite of solutions which spans almost all of the Gartner definition, although the CRM aspect of sales process remains separate. IBM, through its Incentive Compensation Management, TQM and Kenexa offerings are able to deliver 80% of the range of capabilities. Other providers listed in the magic quadrant, such as Xactly, are more focused specifically on Incentive Compensation objectives and benchmarking.

At the conference, we stressed the importance of having a clear understanding and definition of what it is you want to automate and how this may integrate with other technology solutions. ICM can encompass both internal sales force and external third party sales forces’ which are common in telecommunications and financial services. The need to automate territory and quota management will be driven by the dependency of the incentive plan on more complex quota setting and territory alignment challenges.

Most organisations start with Incentive Compensation Management, then build out automated capability.

Why is SPM important?

There are three aspects to answering this question. First, it is important to understand your Current State capabilities and the potential Future State that may be enabled by SPM technology. Secondly, you need to make sure the business benefits of SPM automation are clearly identified. Thirdly, you need to understand what else may need to change to maximise SPM impact.

OS deploys a Smarter Salesforce assessment approach to establish the client’s Current State capability and identify target Future State capability. Through the assessment process, a number of initiatives can be identified under each of the 5 aspects of SPM identified above on a maturity scale from Survival to Strategic capability.

These are then evaluated using a Value Grid with 2 key axes – the level of positive impact on sales for the following year and ease of implementation. The 4 quadrants then guide which initiatives make it to the roadmap to a Future State.

  • Top Right – significant impact, easy to implement are the most easy to adopt.
  • Bottom Left – little impact and difficult to do – do not make it to the roadmap
  • Top Left – less impact but easy to implement – some quick wins here
  • Bottom Right – high impact but less easy to deliver – normally require additional business case development and scoping

Each initiative can be broadly costed which then generate a total cost to build into the business case.

In terms of Return on Investment (ROI), the tangible benefits are well trailed – reduction in error rates, administrative FTE requirement and shadow accounting, improvements in process efficiency and sales effectiveness. There are many intangibles including better management decision-making and sales staff engagement or the reputational risk of having a failing system which is used to pay third-party agents or brokers. What is critical is that the client signs up to the quantified and unquantified benefits – these are the client’s numbers. OS’ guidance is always to be pragmatic and ensure clear, agreed expectations.

How To Chose Between Vendors?

Choosing the right vendor is challenging, especially when you are going through the process for the first time. Regardless of technology selection, OpenSymmetry’s ensures customers have success by using a 7Cs methodology:7Cs_Why Automate Compensation

This approach helps clients identify the critical capabilities that will help both differentiate between vendors and scope the project using the 7Cs framework. The initial Identify stage of the selection process enables the identification of Current State. The Qualify stage is where the critical differentiating capabilities are identified and the Present stage is the forum where vendors demonstrate how well their technology delivers against those capabilities.

The final consideration that is critical in order to maximise the potential for implementation success is to determine implementation readiness – those initiatives will help to deliver the Future State and the Business Case for Automation. Typically, we find there are three or four actions including developing a clear data strategy, end-end process redesign, an incentives Centre of Excellence (COE) and ensuring resource capacity planning, both in terms of numbers and competence.

In order to deliver the desired Future State there are 3 must haves – confirm SPM scope for Future State, agree the business case for automation and employ a robust process to chose the right vendor solution.

At the conference we offered all attendees a free 2-hour workshop to enable clients to determine the right way forward and we are extending that offer to all those downloading this article. Sign up for a free 2-hour session today to understand your organisation’s business performance requirements. Receive guidance on how to plan, deploy, and manage a comprehensive solution. For additional questions, please contact us.

What are some of the challenges your organization faces as it relates to sales compensation automation? Let us know in the comments section below.

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