5 min read

The evolution of sales performance management

Jason Loh

Global Head of Sales Solutions

The trend is unmistakable: The workforce is aging. While economists contemplate the impact of this trend on the economy, I think about how an aging workforce—and the coming cohort of new, younger employees—affects sales tools and technologies such as sales performance management (SPM) software. (That is my job, after all.)

Here’s what I see: As SPM software anticipates Baby Boomers’ inevitable retirement, the behavior economics and motivators that inform those tools are evolving. That’s why non-cash rewards and team rewards—incentives that appeal to Generation X, Millennials, and the Gen-Z crowd that now is entering the workforce—are on my radar.

It turns out I’m not alone. The Gartner 2018 Sales Performance Management Magic Quadrant includes the following description: “Gartner defines incentive compensation management (ICM; including standard reporting and analytics), territory management, and quota management as the three core capabilities for SPM. These core capabilities link to the following ‘near-core’ capabilities: quota planning, sales territory mapping, advanced analytics, gamification, and objectives management.”

Note the inclusion of gamification and objectives management among the “near core” capabilities. This tells me that non-monetary incentives—and the need to manage them-is moving closer to the center of the SPM universe.

Evolving SPM capabilities

That’s just one change among many. By my observation, the analysts at Gartner have done a good job of tracking SPM software, and trends in SPM capabilities, over the years. I still have a MarketScope for incentive compensation management (ICM) from 2007, for example. Over time, I’ve seen them roll in territory management and quota management, dub the category sales performance management, and raise the category to Magic Quadrant status.

I believe their analysis hasn’t been just about rolling things together; sometimes it’s been about opening things up as capabilities become discrete and mature. For example, Melissa A. Hilbert, one of the authors of the SPM Magic Quadrant, was the first person I know to separate territory planning from traditional territory management, and quota planning from quota management. These distinctions have helped customers understand the specific capabilities of vendors’ competing systems, which was important as companies came to see SPM as strategic and mission-critical.

As SPM software matured and became its own class of business applications, the analyst community saw the value that could come from connecting SPM to customer relationship management (CRM), enterprise resource planning (ERP), and beyond. After all, SPM data—and in particular, compensation planning measures (also called attainment measures) and quotas—is directly impacted by corporate budgets, sales forecasts, and other processes. Connecting them is just common sense.

And in today’s connected organizations, the people whose work affects SPM reside in many groups outside of sales, including sales operations, finance, human resources, and information technology. They need and want the technology they use to play nicely with related systems. It’s like a game of dominos; when you connect SPM to one system, it opens up an opportunity to connect to more systems and build an even more valuable, meaningful, and comprehensive environment.

This reality has led SPM software vendors in two sometimes-competing directions. One approach has been to bring a variety of point solutions under one corporate umbrella, which has led to some marketplace consolidation by a handful of powerful vendors with deep pockets. The other approach is to architect systems that play nicely with everyone; that is, that are flexible and easily integrated using APIs and other data integration capabilities.

From data to decisions

As organizations collect and connect more data in their SPM environment, it becomes the place where prospective sales data (what might happen) meets ERP actuals (what actually happened). That intersection opens the door to the application of advanced algorithms and analytics, which, in turn, changes the SPM value equation in a fundamental way. It’s not just about having a better understanding of what’s happening; it’s about using that understanding to make better decisions.

As I see it, the Gartner SPM Magic Quadrant write-up supports this idea. The report lists “Faster data-driven analytics, shortening the time to decisions and actions” as an SPM benefit, right alongside more conventional benefits such as financial savings and improved performance.

And when you talk about decision-making, of course, you get the attention of executive leaders tasked with setting an organization’s strategic goals and mapping desired outcomes. Leaders are looking for ways to align employee behaviors to organizations’ strategic goals, and to better understand and evaluate the levers they can pull to influence those behaviors and reach those goals. Because it’s a costly truth: Sometimes companies set goals without seriously considering what behavioral nudges are needed to achieve them. An unfortunate corollary is also often true: Companies sometimes pay for outcomes that don’t align with any of their top strategic goals.

Which, perhaps not surprisingly, brings us back to the aging workforce and the behavior economics and motivators of the next generation. The fact is, nobody knows what will motivate the sales force of the future. On top of that, some business leaders say the very foundation of companies’ goals is due for a change.

In a disrupted environment like this, where everything is in play, an organization’s ability to evolve quickly can mean the difference between success and failure. An SPM solution with the power and flexibility to connect across the enterprise and accommodate the unforeseen becomes a competitive advantage. Attend Anaplan Hub 2018, March 5-7 in Las Vegas, to see the future of SPM and connected planning.

Topic: Sales Performance Management

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Gartner’s 2018 SPM Magic Quadrant

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Gartner Magic Quadrant for Sales Performance Management; Melissa A. Hilbert, Tad Travis, Julian Poulter, authors; published January 15, 2018.

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