3 min read

Optimizing variable compensation takes the right technology—not a web of spreadsheets

Rowan Tonkin

Head of Sales and Marketing Solutions

Does your incentive compensation program have the appropriate level of complexity and the right tools to optimize sales performance?

Setting incentive compensation is one of the most complex aspects of managing a sales organization. With the risk of over- incentivizing reps and paying them too much or the counter—paying too little and managing rep disengagement, sales leaders must find the right balance in aligning sales compensation in a way that drives the desired sales behavior to maximize sales effectiveness. However, too many sales organizations still rely on spreadsheets and manual methods to track and manage their variable compensation programs. In fact, in Anaplan and CSO Insights recent white paper, research found that 51.5% of companies said they were handling the incentive compensation process in spreadsheets. These sales organizations are not only wasting time but are very vulnerable to making mistakes, missing out on key sales metrics, and otherwise reducing the engagement and effectiveness of their sales force.

The white paper, entitled Optimizing Incentive Compensation—Aligning What You Say With How You Pay, provides key insights and data-backed findings on how sales organizations can create the right variable compensation structure to help sales people maximize their earnings, while driving the most effective sales behaviors and generating more predictable revenue.

Most sales organizations rely heavily upon variable compensation

According to data from the CSO Insights seventh annual Incentive Compensation Plan Management study, variable compensation is widespread and makes up a significant portion of sales people’s overall income. The study found that 52.6 percent of sales organizations have compensation packages that consist of 40 percent or more of variable pay. Since so many sales people earn their income based on variable compensation plans, it is even more important for sales organizations to optimize their performance management systems and compensation programs to manage the complexity in pay structure.

Many sales organizations still use manual methods of managing compensation

Unfortunately, many sales organizations have not adapted their sales compensation management systems to meet the complexity and scale of their variable compensation programs. The CSO Insights study also found that 10.8 percent of companies were still using manual calculations to calculate and manage sales commissions, where as 51.5 percent were using spreadsheets. The problem is, spreadsheets don’t scale. If your business is in high-growth mode, your spreadsheet-based compensation management system likely cannot scale up fast enough to support your business growth—and this will lead to inefficiencies in managing sales performance and disengagement from your sales force.

Effective compensation management requires complex metrics

The CSO Insights survey found that 80.9 percent of sales organizations were using four or fewer metrics within their compensation plans. This is surprising—there are many different sales behaviors organizations typically want to encourage. With too few metrics, your sales organization is missing opportunities to measure a lot of your sales force’s activities, and this can lead to diminished sales effectiveness. This is where the right variable compensation management technology can add value to a sales organization. By equipping the organization with a robust compensation management system that can track and analyze data related to multiple metrics, your sales organization can enhance sales effectiveness across multiple behaviors and objectives, and encourage the right behaviors from the sales team.

Having a successful variable compensation plan is all about aligning the sales people’s incentives with your sales organization’s most important goals. By using technology to manage your variable compensation plan, your organization can develop more complex sales goals (for example, by creating incentives for landing new accounts instead of just increasing their revenue) while ensuring that your compensation management system is complex enough to keep up.

Hear how Tyco is streamlining their compensation process across 7,000 sales reps, 300 compensations plans, and more than 50 locations—with Anaplan.

And learn more about how to drive engagement and optimize incentive compensation for your sales organization by reading the full white paper.