What is sales performance management?
Sales performance management (SPM) is a set of operational and analytical functions that automate and unite back-office operational sales processes and is implemented to improve operational efficiency and effectiveness. SPM capabilities include incentive compensation management, quota management and planning, territory management, advanced analytics, and gamification.
Sales performance management strategies and tools are used by sales leaders to raise the efficiency and effectiveness of their sales teams.
Putting a complete sales performance management strategy into place can be complicated. A sales strategy contains many interlocking parts, each of which influences the others. Account segmentation, incentive compensation, territory planning, quota setting, pipeline optimization, and forecasting are some of the tools a sales leader uses to assess and manage a sales organization. What happens in each of them inevitably affects the others. For this reason, the most forward-looking sales leaders approach sales performance management holistically, taking SPM as a unified set of concerns rather than a collection of disconnected parts.
Why is Sales Performance Management important?
In a competitive market, how a company brings its products or services to market is as important as what that company is selling. Even the best products rarely sell themselves. Conversely, a great sales team—when paired with a great sales strategy—can sell virtually anything.
Knowing this, the best sales leaders work to innovate not only the products they sell, but the ways they sell. By innovating the way they sell, sales leaders can move their organizations ahead of the competition, regardless of product or service they sell.
This is why SPM is important: It allows sales leaders to develop sales strategies that cover all parts of the sales cycle and impact all parts of the sales process. By properly managing the various aspects of sales performance (incentives, insights, forecasting, and so on), sales leaders can implement new strategies and techniques that help their sales organizations succeed.
What are the components of Sales Performance Management?
A sales performance management strategy is generally built on three priorities: where, how, and what to sell. The way a sales leader attends to each of these priorities defines that leader’s plan for succeeding in the market.
Sales planning (where to sell)
Sales planning is how a sales organization slices up the market and aligns the team to fit. This includes account segmentation (how accounts are organized), territory allocation (how salespeople are assigned their sales territories), quota setting, and capacity planning (how many salespeople a team needs in its various geographies).
Effective sales planning is about staying ahead of changes in the market or the workforce, using advanced modeling to optimize the potential of each account, territory, and region. Because poor territory and quota planning can dramatically reduce motivation, sales planning is also a tool for reducing attrition, and making sure a sales organization puts its salespeople in the best position to succeed.
Sales incentives (how to sell)
Sales incentives are the commission structures that encourage salespeople to sell specific products to specific customers. By modifying these commission structures and adding various bonuses, sales leaders can nudge salespeople to focus their energies in desired directions. Because sales incentives are visible on a near-daily basis to salespeople, sales incentives can often be the place where sales leaders devote the bulk of their energies.
The best sales incentives accomplish two goals: They allow individual salespeople to maximize their personal earnings and they advance the company’s bottom line.
Because sales incentives may need to change quickly to capture new business priorities or products, insurgent competitors, or other unpredictable dynamics of the market, sales incentives need to be malleable enough to change quickly without updating so often that salespeople become confused. Sales incentives work best when they incorporate data from across the sales organization, ensuring that incentives accurately capture opportunities as they are distributed across territories, accounts, geographies, seniority, and so on.
Ideally, incentive compensation plans should be designed in four phases: a planning session that begins two to three months before implementation; a diagnostic review of plan performance that includes relevant stakeholders; an implementation phase that clearly communicates all new plans, targets, and accounts gaining buy-in from salespeople; and an ongoing adjustment phase in which plans are re-evaluated and modified based on market or business changes.
Sales insights (what to sell)
Sales insights are about focusing on the metrics that help a sales leader measure and improve their business. These include pipeline management, pricing and discounting, sales forecasts, and other similar KPIs. Arguably, it’s in this area that SPM has made the most progress in recent years, as advanced software now allows sales leaders to collect and process data from throughout the organization, and then deliver it in the appropriate forms to different stakeholders.
By managing the huge amounts of data an SPM solution produces, sifting through it for insights about the health of the organization, sales leaders can use sales insights to dramatically improve nearly all metrics: deals closed, deal size, velocity, and more.
5 Tips to increasing sales performance
- 1. Keep your sales strategy transparent
Although a strong sales strategy is key for taking down the market, equally key is making sure that strategy stays transparent to your team. Communicate often, explaining why your organization is targeting the market the way it is, and what it hopes to accomplish by doing so. Doing this keeps salespeople in the loop, so that they can be aware when strategies shift, and has the added benefit of showing salespeople that the company trusts them.
- 2. Give salespeople analytics
Even more beneficial is when salespeople can check in at any time to see where they stand relative to their quotas. At many companies, it takes weeks or months for salespeople to know how they’re doing. Figuring out how many and what kind of deals they’ll need to meet their quotas is even more complicated.
Luckily, today’s advanced software can automatically show salespeople in real time how much money they’ve made over any given period and how far they are from their quotas. The best software even lets salespeople run “what-if” models to help figure out what deals they should target to maximize their income. This modeling can incorporate information about how likely any deal is to close, how similar deals have gone, the salesperson’s experience with that company, the likely renewal value of the deal, and more—all complex variables that are handled far more effectively by software than by paper and pencil.
- 3. Get input from all directions
Sales leaders were once like dictators: they made decisions, and the business lived or died with them. Today, forward-thinking sales leaders know that the more they can gather input from the people around them—both above and below them in the hierarchy—the more effective their decisions are.
How effective are your compensation plans? Ask the salespeople who are directly affected, and the managers who oversee those salespeople. What are potential implications of your new idea? Ask people up and down the chain to come up with objections to it and see how powerful those are. Subject your ideas to criticism—it only strengthens them.
- 4. Use advanced software
Today, the best sales leaders are those who can quickly analyze lots of data, automate functions, and use modeling to optimize their sales strategy. The only way to do these is to employ advanced software that connects the varied components of a sales strategy and offers real-time calculation abilities.
Point solutions, for example, may be able to help with any individual component of SPM, such as compensation or account segmentation. But point solutions can’t help you evaluate the effect that any of these individual components have on the rest of your sales plan. As a result, point solutions leave sales leaders vulnerable to small changes and can produce enormous unintended consequences.
Similarly, software that can’t automatically gather data from across the sales organization or perform complex calculations in real time leaves sales leaders without enough information to make strategic decisions.
The solution to both of these issues: Use the most advanced software available, preferably software that can put the entire sales strategy (and the entire sales team) on a single platform.
- 5. Review and adapt
A sales strategy isn’t a fixed entity, remaining static as the world changes around it. It should be seen as a fluid set of guidelines, one you can rearrange quickly to take advantage of new opportunities.
To be successful at sales management, sales leaders need to regularly assess what about their approach is working and what isn’t, and then modify accordingly. Gathering widespread data is critical. Are there specific products, geographies, or territories that aren’t performing well? Are there salespeople or teams that are overperforming? Are there new competitors in the game? If your actuals aren’t matching your forecasts, can you figure out why, down to the level of the individual sale?
What should you look for in sales performance management software?
There are lots of different software solutions out there, many of which claim to improve your sales performance management. The best ones include the following three features:
- 1. Connecting people and processes
All businesses today strive to have a single source of truth that gives everyone access to the exact same data. In most places, however, data is spread across different solutions and spreadsheets, so that SPM processes remain disconnected and disjointed.
It’s for this reason that SPM solutions allowing all departmental stakeholders to work in the same platform and with the same data enable businesses to create a connected plan that drives decision-making at all levels of the organization.
- 2. Access to real-time data
With access to real-time data, an SPM solution allows you to monitor, plan, and react to the ever-changing business world and swiftly move to incorporate new company objectives.
With real time data for T&Q, you can monitor sales territory coverage gaps in real time and fill them, or quickly locate the right salespeople to cover new accounts. With real-time data for managing incentive compensation, sales reps can better understand the impact any given deal will have on their earnings, especially if that deal involves any kind of discounting. With real-time sales forecasting, the sales organization can share information about future sales with finance, supply chain, and the other parts of the company.
- 3. Predictive analytics
For sales leaders looking to get a leg up on their competition, it’s vital to be able to use predictive analytics to do enterprise-wide planning and modeling. Without predictive analytics, it’s quite difficult for leaders to test future scenarios and see what courses of actions will work best. With predictive analytics, decision-makers can know ahead of time what to do in the event of any number of circumstances, and then take action while their competition is still trying to register what’s happened.