Today's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.
One statistic I shared at the Sales 2.0 conference last April was that US companies spend about $800 billion a year on sales compensation – three times more than they spend on advertising and $100 million more than the government spends on national defense.
Even though the cost of compensation dwarfs national advertising spend, companies tend to constantly analyze ad performance but seldom give their comp plans the same level of scrutiny. Businesses as a whole simply don’t do a very good job of measuring, iterating, and optimizing their incentives and compensation.
Well, why not? Why would otherwise savvy businesspeople not track their compensation plans to gauge how well they motivate employees to achieve company goals?
Because, until now, there simply hasn’t been empirical data available to inform or measure compensation plans.
Traditionally, there have been two approaches to analyzing incentives, neither of which is entirely satisfactory:
- Academic research, which tends to focus on single firms that grant researchers access to their internal information. This provides a snapshot of plans and performance but not a continuing view that would account for business changes.
- Experiential design, which is based on the combined knowledge of consultants and employees about strategies that have worked in the past. That’s helpful information, to be sure, but it’s also subjective and not forward-looking.
The good news is that empirical data is no longer the missing leg of a figurative three-legged stool. Which brings me to my topic for next month’s Sales 2.0 conference: “Real Insight on What Drives Success: The Definitive Metrics of Sales Performance.”
As the only 100 percent cloud-based, multitenant compensation software solution in the marketplace, Xactly is in a position to provide exclusive data based on an analysis of seven years’ worth of sales-performance management. Armed with these terabytes of information, we’re developing insight and benchmarks to help companies align their sales compensation with their sales strategy.
I’ll be sharing more on this topic at the upcoming Sales 2.0 Conference on April 8-9 in San Francisco, but here are a few statistics to give you an idea of the magnitude of our number crunching. We’ve analyzed compensation data from
- more than 500 companies,
- more than 100,000 sales positions,
- billions of calculations over the last seven years.
(For the record, the data is aggregated and anonymous, so no person or company is identifiable.)
We’ve always touted the advantages of automating sales compensation over calculating it manually on spreadsheet, but we also understand that automation is only part of the picture. Organizations can end up with complex calculation tools that prepare timely and accurate payroll but still lack any meaningful analysis or actionable information to inform their strategic decisions.
That’s the gap that our ever-expanding data set will fill. By accessing this information, companies will be empowered to keep up with their peers by tapping into performance-management benchmarks. They can streamline processes to follow accepted standards and reward their teams competitively.
In short, the data we’ve compiled will provide the critical information companies need to make strategic management decisions and incent right.
I look forward to sharing more on April 9 at the Sales 2.0 Conference in San Francisco.