Today's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.
Xactly just wrapped up our third annual CompCloud user conference in San Francisco last week. It was great to spend a few days listening to our customers and sharing our plans for the next year or so.
We were pleased to go into more depth with them about our new products and services, including Xactly Insights, which I wrote about in March. We’ve analyzed eight years’ worth of anonymized customer data from hundreds of companies to establish benchmarks and best practices in incentive compensation and motivation.
Our principal compensation strategist, Erik Charles, will detail some of our findings on Wed., May 22, at 10 a.m. Pacific time in a free joint webinar with Selling Power. He’ll discuss quota attainment, and what our data shows on issues including:
- Quota timing, and why short and long measurement periods can deliver different results
- What to look for when determining the true total cost of a sale
- How you can hurt performance by measuring too much
The benefits of having this “big data” analysis are very real. Michael DeLeonardis, our VP of Insights and Benchmarks, says that “companies that use data always get a better ROI.” Imagine, for example, if you had two similar territories with a $1 million difference in spend. A deeper look could pinpoint the cause and help you get expenses in line.
DeLeonardis says that when strategic business decisions are driven by data, he’s seen revenue increase by 10 percent, productivity by 30 percent, and margins by a significant amount.
One of the most powerful applications of our Insights data is that it can be used to drive behavior much more effectively than by simply making assumptions about how to improve sales results. Our data highlighted three factors that are widely assumed to drive behavior, but in fact seem to have a negligible effect:
- Holds and releases: Sales reps commonly aren’t paid their commission when they make a sale; they’re paid at a later date because the company wants some secondary behavior, such as invoicing or collection. Some companies use holds to influence sales behavior as well, but our data found no evidence that that’s the case.
- Plan components: Some customers have designed compensation plans with 10–15 measures. Our data validates the industry belief that two or three measures are ideal, and that performance drops at five.
- Credit assignment: Examples in which many people were credited on deals also showed no improvement in sales behavior.
On the other hand, some that drive behavior effectively:
- Quota timing: Shorter, more frequent periods can improve performance. A higher percentage of reps meet quota when they have monthly or year-to-date quotas than if they’re measured quarterly or annually. The exception is for products with very long sales cycles, when it’s not realistic to shorten the time.
- Pay mix: The mix between base salary and variable pay does have a correlation to performance. The ideal mix varies by sales role, industry, and other factors.
- Capping: The practice of setting a maximum amount that sales reps can earn, regardless of their performance, has a negative impact on sales behavior. Caps prevent reps from reaching their peak performance, and indirectly encourage them to relax after their quotas are met.
These are just some of the ways we’re using data to develop our Insights services. I hope you’ll join our webinar on Wednesday for more on how Big Data can help you incent your sales team to attain and exceed quota.