Best-in-Class Sales Teams Use Performance Modeling to Ensure Sales Execution

End of quarter is fast approaching, the pipeline is full of potential but time is limited … where should the focus of your sales force be to make the biggest impact? This decision that is made every pay period by everyone in your sales force and can be difficult, time consuming and have far reaching strategic implications. What would be the impact of putting accurate, easy to use “What-if” analytic tools at the fingertips of your entire sales force?

Well designed sales compensation plans will encourage sales efforts focused on activities that will help the company fulfill its strategic mission to deliver profitable revenue growth. Plans are often composed of between 3-5 key performance measures, each with its own individual performance targets and payout characteristics. For an analytic sales modeling tool to be effective, it should take each performance measure into account and enable the sales professional to model scenarios across the any performance measure or bonus opportunity of their compensation plan.

A performance modeling tool for your sales force must meet the demanding requirements of a world class sales team. To be effective, it must enable sales professionals:
•   throughout your entire sales force to model their performance no matter which plan they are on.
•   to perform any modeling activities based on the very latest and most current sales results.
•   to model performance against any of their plan components (i.e. new sales, renewal sales, service contracts, etc.)
•   save of various scenarios for future use and reference. Performance modeling is an iterative process and requires quite a bit of reflection and collaboration to be effective.
• take into account the various time dimensions of their plan as they apply to the performance period, payroll period and quota time period. A best in class modeling tool should account for Performance that can be measured over multiple payroll’s and ‘trued up’ against on a periodic basis against a quarterly or annual quota.


NetCommissions Payee Performance Modeling is ideal for organizations that want to provide their sales force with decision making tools to assist them in focusing their time and attention on activities that will help the company, and impact their wallet, the most. It is a critical to transforming sales performance management into an interactive collaborative process that focuses all on achievement of corporate sales goal of profitable revenue growth.

The sales force of the 21st century must be able to react to shifts and emerging market opportunities faster than ever before. Sales Incentive compensation is a strategic tool that enables sales teams to react quicker than competitors to these changes, but only if the correct systems, technologies and skill sets are in place. Performance modeling is an emerging critical analytic tool that will enable sales teams to achieve best-in-class performance. Providers of Sales Performance Management solutions such as NetCommissions can help.

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‘Hybrid’ SaaS is key to providing the flexibility required by the Sales Compensation process

Product evaluation teams that are in the midst of an evaluation process often ask vendors such as NetCommissions if a particular SaaS solution is a multi-tenant or not.  The reason for this line of reasoning is often puzzling and may highlight a need to define terms when discussing hosting methodology.  Is the team looking for the lowest cost solution possible and view the requirement of hosting strategy as the dominant cost driver (BTW: it’s not). Is the team worried about the scalability of the solution and feel that having many companies sharing resources such as a shared database as a litmus test for meeting whatever scalability criteria the firm has?

Interestingly, we view the question a bit differently; while many in the marketplace would have you believe that SaaS delivery of software is synonymous with “a multi-tenant’ hosting methodology, we say let company needs drive any requirements related to deployment methodology, not the vendors desired cost model.

Let’s start with some basics;

  • Sales compensation is a heterogeneous process; the needs of different industries and companies within each industry very significantly. Sales strategy and the compensation plans that reinforce that strategy along with the data which support the compensation plans reflect unique corporate strategies which, by definition, are unique.  
  • With a competitive global landscape that is constantly shifting, your sales performance management system needs to be able to morph and keep pace with the changing corporate strategies & plans.
  • Flexibility is a core need if your sales incentive management software is going to be a tool that helps your company and sales force out execute your competitors.
  • Vendor definitions of Multi-Tenant need to be clearly defined, what elements of the solution are truly shared; Infrastructure? Databases? Application?

Sales compensation requires SaaS deployments to provide sufficient flexibility to keep pace with changing business requirements. How?

  • Flexibility & the ability to adjust should the need arise.
    • There are times when it may be desirable to automate some of the activities or processes related, but not central to, Sales Compensation. Is it possible to add unique automation to these activities or does your vendor force you to ‘get in line’ and add these requests to a feature list that will be prioritized by a centralized developer team and rolled out to all tenants? What if you are not one of the ‘big fish’ in the pond, will your requests be heard and acted upon in a timely fashion?
    • Deployment flexibility.
      • A SaaS deployment may be embraced by the current management team, but what if you would like to bring the solution in house at some future date? Can you?
      • Customer specific upgrade schedules at a pace, time and sequence each can determine.
        • Are you forced to schedule around the vendors upgrade schedule, or can you work with your vendor to schedule such activities to suit your own schedule?

Hybrid SaaS deployments where some resources are shared but others are dedicated can provide for all the flexibility mentioned above while fully matching the uptime, security certification and price of multi-tenant solutions. So why is there so much buzz about multi-tenant SaaS?  the primary reason we see is that vendors who have embraced this strategy may be able to save a little money related to managing its infrastructure, so it’s in their best interest to promote it vigorously. Otherwise, the added flexibility of hybrid SaaS approach provides you with much more flexibility for essentially the same cost.

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“Consumerization of IT”

A tremendous article that references trends NetCommissions is experiencing real time. As a SaaS vendor in the Sales Incentive and Performance Management space, we find ourselves interacting directly with business process managers at a ever quickening pace.

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A ‘Best Practices’ summary of how often to pay sales

The following is a distillation of a recent, quite lively, dialog on LinkedIn amongst several practitioners in the sales compensation world. Given the importance of the investment companies make in sales compensation, this topic merits our attention.

Best Practice guiding principle:

  • Couple action and reward as closely in time as possible

This is a basic lesson from BF Skinners Operand Conditioning work and lies at the root of using sales incentives as a tool to help maintain sales force alignment with corporate goals that may change to keep pace with a shifting competitive environment. Immediacy is one of four basic factors that can alter the effectiveness of reinforcement such as incentive compensation. An example often cited is a situation where someone’s license plate is caught by a traffic camera for speeding and they receive a speeding ticket in the mail a week later, this consequence will not be very effective against speeding. But if someone is speeding and is caught in the act by an officer who pulls them over, then their speeding behavior is more likely to be affected. The same is true for sales incentives, the closer the payouts is to the action being rewarded, the stronger the reinforcement.

Applying the Principal:

While not perfect, the following definitions certainly build our understanding and help put this principal into practice:  Plans that reference Sales Commissions typically tie payouts to individual transactions (i.e. 0.75% of each sale) while plans that refernce Sales Incentives typically tie payouts to a summary level performance (i.e. total sales for the territory over a defined the performance period as measured against a goal/quota). Situation exist where noth methods are employed, but for this summary we’ll keep the lines fairly distinct.

Sales Commissions:

Given the level of influence the sales person has over every single sales transaction, the Best Practice Guidance is to pay as soon after the sale as your internal systems can reasonably support. Monthly payouts are common with some firms/industries moving towards more frequent payouts. A situation to watch out for is for those where cancellations are frequent enough to make clawbacks of paid commissions an issue. In those situations, extending the payout cycle a bit will help simplify the process enough to be worthwhile.

Sales Incentives:

For companies with plans that are primarily sales incentives: the following guidance provided by Chad Albrecht has much merit; “The primary determinant is pay mix. 85:15 companies pay semi-annual or annual. 75:25 pay quarterly. 60:40 or more pay monthly”.

So what determines pay mix? Companies with longer sales cycles and/or more of a ‘farmer’ selling model tend to have a higher base component in their pay mix. Companies with shorter sales cycles and more of a ‘hunter’ sales profile tend to have lower base components in their pay mix.

An important point to remember is that sales reps with a low pay mix will depend on incentive income not as much as a bonus but to actually pay their bills and increase pressure for more frequent payouts.

Other factors which may influence your payout frequency decision:

Industry regulations: Regulations in certain industries (such as financial services) may be pushing for longer payout cycles.

Those employing monthly or quarterly payouts on plans employing annual targets may want to consider capping those payouts if you wish to minimize clawbacks.

NetCommissions has been designed to execute sales compensation calculations & performance reporting in a manner aimed to keep our customers on the leading edge of performance and deliver to them the highest return possible on their investment in sales incentive.

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Performance Feedback …

A recent discussion at one of the groups over at LinkedIn was focused on rewards for a 100% commission sales force. As usual, the discussion meandered around until a reference to Glenngary Glenross rekindled a classic movie moment for anyone who has seen the movie;

For more on a little different spin on communications, check out web reporting with NetCommissions.

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Clear Communication to Field Sales is a Key Success Factor

Insights gleaned from recent research by NewSigma published as part of their inaugural 2011 Sales Compensation Survey reinforce the need for strong communication strategies if your sales compensation process is going to truly be a catalyst for delivering on aggressive sales growth goals.

Summarizing just a few key insights:

Almost 30 % of the front line sales reps from the 200 organizations surveyed indicated that they did not understand their compensation plan.  In addition, 64% of respondents indicated that they invest time checking into the accuracy of their commission payments while 26% do not see the connection between their plan and corporate strategy.

If 64 % of field sales reps do not trust the accuracy of their commission check calculations enough to divert valuable selling time to ‘Shadow accounting’, it is clear that sales organizations will benefit from direct productivity boosts when implementing Sales Performance and Incentive Compensation Management solutions.

With a staggering 30% of respondents claiming they did not understand their compensation plan, it is no small wonder that many sales leaders struggle to improve the ability of their sales organization to deliver on goals such as the profitable revenue growth.

What to do ?

The following Best Practice suggestions focus on leveraging your Sales Performance Management Software to improving the level of communication with Field Sales organizations and transforming what has traditionally been a performance feedback channel into a proactive strategic communication channel.

  1. Utilize a robust Sales Performance Management Suite to ensure the timely and accurate execution of your sales incentive management process.
  2. As frequently as is possible, communicate performance feedback to your front lines sales team in the form of timely and accurate sales commission statements.
    • If payouts occur monthly but sales data is refreshed weekly, performance reports should be refreshed on a weekly basis as well.
    • Provide 7×24 secure online access to performance reports that allows field sales to conveniently monitor their progress to key goals without impacting sales productivity.
    • Include access to both the summary level data from which performance is measured, but also to the deal/transaction level detail that is at the core of each reps performance.
    • Reporting should be focused, clear and break down their total payouts into constituent plan components.
  3. Provide field sales with an quick and easy to use method for asking questions and soliciting feedback regarding their plans and plan details.
  4. Provide Sales Executives with a means of quickly distributing strategic messages to the whole sales organization through the same vehicle that they use to monitoring their performance and pay.
    • The NetCommissions multi-media Dashboard is a unique vehicle that puts this capability right into hands of sales executives who need to clearly communicate market dynamics and changes to sales comp plans to a dispersed sales force in real time.

Communication to field sales is a core requirement to keeping your entire sales organization engaged and focused on achieving aggressive sales goals. In today’s dynamic marketplace which is characterized by a shifting competitive landscape and increasingly demanding customer requirements, you need the ability to use your sales compensation process as a competitive weapon. Sales Performance and Incentive Management Software that embraces the proactive use of executive communication to each and every field sales executive is the core of doing this successfully.

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Embrace best practices to boost sales force productivity

Investments in Sales Incentive & Compensation Management directly impact the performance of any sales team. Why ?

Improve Revenue

Time is your sales team’s most valuable resource. Success and failure often hang in the balance as sales reps allocate their efforts to activities they feel will bring them, and their companies, the highest benefit. Improvements to top line revenue, the annual increase in revenue that can be attributed to increasing the time each rep spends selling, as well as the effect of a clearer focus on selling a product mix that is aligned with corporate goals.

More time selling

Sales Commissions are notoriously inaccurate. Ask any rep if they double check their commissions check and many will brag about the elegance of the spreadsheet based system (macros and all) they created to validate their sales credits and commission checks. You can bet that the time spent performing this activity (often call ‘shadow accounting’) takes away from selling time. If your current process & system has not won their trust, who can blame them? The productivity penalty of this situation is enormous. Research indicates that sales rep’s will spend up to 5% of their time, or one day a month, shadow accounting.

Improved alignment

A selling organization whose selling activities are well aligned with corporate goals will focus closely on the product mix being sold. Sales commissions are used proactively as a means of rewarding sales that are complementary to that strategy.

This is a common need for companies with the following:

  • Dynamic product lines  and the struggle to manage the product life cycles (introduction through obsolescence) of multiple product lines
  • Multiple divisions trying to optimize the efforts of sales forces by encouraging more ‘cross-selling’
  • Just completed or are planning an acquisition
  • Looking to encourage sales of the most profitable product lines
  • Sales forces with Strategic Account Teams
Reduce turnover
An important aspect of higher employee retention is avoiding the productivity hit as new sales people ramp up the learning curve. Maintaining the excellence of your high performing sales agents is an often-overlooked benefit of an investment in sales commissions automation. Often, it is the high performers that are making the most money who have the most to lose from an error prone system. Thus, it is usually these high performers that will seek employment elsewhere if they do not trust the company’s sales commissioning system. It typically takes a new sales rep 6-9 months to ramp up to maximum productivity.

The sales force of the 21st century must be able to react to shifts and emerging market opportunities faster than ever before. Sales Incentive compensation is a strategic tool that enables sales teams to react quicker than competitors to these changes, but only if the correct systems, technologies and skill sets are in place. . For more depth, a great reference is the ROI White Paper from NetCommissions.

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