Selling Power Blog

Four Tips to Get Better Results from Your Sales Comp Plan

Today's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.

According to a recent Deloitte survey about sales compensation, sales leaders are facing a fundamental paradox. Of the 300 sales leaders Deloitte surveyed worldwide in 2013, only half said they were happy with their sales productivity. (The six-year average satisfaction level is even lower: 47.5 percent.) But when asked if they believe their compensation programs effectively drive desired sales behaviors, only one-third of sales leaders surveyed said they did not.

That raises a question. As Deloitte asks, “Why do leaders generally believe that their compensation rewards the right behaviors, yet they aren’t content with their compensation programs or their sales forces’ results?  There’s a missing link in the belief about what compensation plans can accomplish.”

Well then, what can comp plans accomplish? Deloitte found that sales leaders tend to change their comp plans to address lackluster productivity and performance, thinking the plan itself is the problem instead of looking for the underlying cause.

At the risk of stating the obvious, well-crafted compensation plans can and do drive desired sales behaviors. Poorly crafted ones don’t. The problem is, it’s hard for most companies to know which kind they have until the end of each sales period, when it’s too late to make corrections.

Here are four tips to help you get better results from your sales comp plan. 

1) Give them time to work. It only makes sense to change a plan that isn’t working — who wants to repeat mistakes? But to get the complete picture, make sure you have complete data. Use the analytics in your incentive compensation tools to determine if your comp strategy is effective. These reports will pinpoint which incentives work and which don’t.

Some things to consider: Are your territories balanced, or do some reps have more opportunity than others? That could affect turnover. Are some teams consistently underperforming? That could be a sign of a leadership problem. Have formerly high performers slipped to just so-so? They may need more incentives. A non-monetary incentive might help, especially if it’s personalized for the recipient. A new SPIFF could re-energize a complacent team.

2) Build the plan with a broad team. Gather your compensation analysts plus representatives from sales, marketing, and operations, so you can vet your comp plan upfront. By all means, include a sales rep or two — they’re the ones who’ll be living the plan. In fact, try this quick test to get an idea of whether your reps are aligned with company goals: Ask them, “How could max out your earnings this quarter?”

A simple question. But if the answer is too simple (“Um, sell more?”) then your reps don’t understand your comp plan. And if they don’t understand, they’re probably not doing what matters most to the company.

On the other hand, if they know they’ll earn more if they go after SPIFFs, improve margins, bring in new customers, bundle products, include training in deals … then you know your priorities are coming through loud and clear. 

3) Rewards or incentives? Aren’t they the same thing? Well, no. There’s no question that rewards are nice, but they’re recognition for past behavior. Incentives, however, drive behavior. They provide motivation. You want your salespeople to keep their eye on the prize, and do whatever it takes to earn it. Ideally, they have real-time visibility into their performance so they know at any time how close they are to achieving their goal.

4) Measure performance frequently. Xactly has identified several important trends by analyzing years’ worth of data among our customers. Our analysis of that data shows that reps hit quota at a higher rate when they have quarterly quotas: 67 percent average attainment vs. 60 percent attainment for reps who have annual quotas. When you measure quarterly, you can correct course for market changes, competition, the economy, and other variables. 

The Deloitte survey also recommends that managers also consider the complete employee lifecycle when evaluating their sales organizations. 

How Managers Can Go Beyond the Carrot and the Stick to Motivate Reps

Today's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.

 

Many sales leaders hope to drive performance by enticing their reps with one tempting financial incentive after another. And that makes a certain amount of sense: what salesperson wouldn’t work just a little bit harder to earn a nice bonus? Seems like a no-brainer.

In fact, the link between money and performance is more tenuous than you might expect. One expert whose work I like in this area is author and journalist Daniel Pink, who has written a number of books on shifting trends in the way we work. His book Drive: The Surprising Truth About What Motivates Us uses 50 years of behavioral science to overturn the conventional wisdom about human motivation. Based on his findings, he asserts that “when cash incentives are offered in this type of problem solving, it dulls the brain and blocks creativity.”

That’s not to say money isn’t a motivator at all. Of course it is. People who feel they’re underpaid aren’t likely to strive to do their best. But when they’re paid enough that money isn’t an issue, Pink says, it clears the way for them to focus on their work.

The carrot-and-stick approach to motivation fails to recognize the following key motivators for salespeople.

1. Autonomy

Autonomy is the desire to be self-directed, to have enough freedom to try something new every so often. Pink found that companies that wanted to spur innovation got better results when they gave employees freedom to do what they wanted rather than offered an innovation bonus.

One notable example of autonomy at work is Australian software company Atlassian’s “ShipIt Days” ­– hack-a-thons that give employees 24 hours to deliver a project of their choosing.

Sales leadership tip: In sales, autonomy might mean letting reps set open-ended goals after they’ve hit the company quota. Instead of capping commission, let sales reps achieve (and earn) as much as they want. Give reps the opportunity to prove their way into increased sales responsibilities.

2. Mastery

Mastery, of course, is simply the drive to get better at whatever it is you like to do, whether it’s playing a musical instrument, writing code, or selling widgets. Tap in to sales reps’ competitive nature. If you want them to master a particular skill, hold a contest or offer a SPIF.

Hand-in-hand with mastery comes the natural desire for recognition, which is too often overlooked. In a 2011 survey, Globoforce found that 69 percent of employees would work harder if they were recognized more.

Sales leadership tip: Mastery is easy enough to orchestrate for a sales team. Recognize accomplishments on public leaderboards, via email blasts or social/mobile technology, or at weekly team meetings.

3. Purpose

Purpose can be lofty, as in working to make the world a better place, or as down-to-earth as a salesperson’s wanting more from a job than just the next commission check. Sales leaders can lay out a career path that rewards reps for their successes, moving them from inbound to outbound calls, for example, or from SMBs to larger and larger firms.

Sales leadership tip: Successful salespeople might aspire to be seen as experts in their vertical or become coaches to less-experienced colleagues.

For more on motivating your sales team with more than just dollar signs, see my SlideShare presentation, “Insights on Motivation.”

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Five New Year's Resolutions for the Data-Driven Sales Leader

Today's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.

Recently, many sales managers have told me that they feel they could and should be operating more strategically — but they lack the data they need to make critical business decisions and consistently drive performance. Here are five New Year’s resolutions to help you make better, more strategic management decisions and get your team on a better track for 2013.

Resolution #1: Find out how much sales compensation really costs.

Most sales managers and sales-compensation analysts consider Compensation Cost of Sales (CCOS) a key metric for making the right strategic decisions. To correctly determine the percentage of total revenue spent on salaries and incentives, however, you must have the right data.

Collecting that data is not always as easy as it sounds, because it lives all over. For example, base pay may be stored in payroll software, while commission information may be stored on spreadsheets. Instead, consider this:

• Sync all of your business data — finance, ERP, sales, CRM, etc. — in one automated sales-compensation tool.
• Use complete, real-time data to determine percentage of spend.

Resolution #2:  Spend more on sales.

I know what you’re thinking: “Shouldn’t we reduce costs?” The short answer is yes. But you’ll spend less in the long run (and increase profits and revenue) if you spend more on sales where it counts. For example, drill into your top-performing territories, products, and performers. What opportunities do you see to increase spend for long-term improvements? Maybe data indicates that you should sweeten the pot for certain top performers or increase sales spending in certain territories.

Resolution #3:  Determine exactly where to allocate funds for coaching and training.

Many sales managers take a one-size-fits-all approach to coaching and training. But research by Harvard Business Review and CEB has shown that sales managers get the best ROI on coaching dollars by investing in midlevel performers. (Top performers don’t require the same level of coaching, while poor performers often can’t be helped, no matter what you do.) Here are a few action steps I recommend:

• Review your data to determine the effectiveness of your coaching and training programs.
• Identify sales reps who could most benefit from coaching and training (typically midlevel performers).
• Customize training and coaching programs to increase performance where you need it most, based on what’s worked well already.

Resolution #4: Eliminate payment errors.

Sales-compensation plans can be complicated and confusing. And the information can take forever to true-up, get approved, and so on. The net effect is often inaccurate or delayed payments. What can you do to simplify? 1) Export sales-compensation data from the database directly to your payroll system. 2) Eliminate errors with an automated sales-compensation solution. Your reps will thank you for timely and accurate comp-plan payments in 2013.

Resolution #5: Comply with sales commission regulations.

You know noncompliance can be very costly, but how effective are you at staying up-to-date on legislation?

For example, have you heard about California AB 1396? It’s a new law requiring companies with any commission-based employees providing services in California to have written commission plans in place by January 1, 2013. (Read more about the details on Xactly’s blog.)

Stay compliant:

• Create plan documents that specify how commissions will be tracked and paid, then route them to employees for approval.
• Use an automated tool to guarantee consistency between commission plans and information used to calculate and report on commissions.
• Partner with a company that will keep you abreast of future legal requirements.

We all want to do better in the new year. These five resolutions for sales managers will help you make the decisions necessary to ensure that your sales team is set up for success. 

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Three Trends that Will Affect Territory Optimization in 2013

Today's blog post is by Christopher Cabrera, CEO of Xactly Corporation, the industry leader in sales compensation automation.

Last year alone, quota attainment plummeted by 25 percent, even as quota targets rose by 33 percent. Several factors likely contributed to this statistic, but doubtlessly, unrealized territory potential is one of them.

Your approach to territory planning has a significant impact on your sales team’s performance – particularly if you’re planning to increase your sales quotas and head count in 2013, expand your product road map, or attempt to penetrate new verticals.

Historically, territory management involved distributing responsibility and revenue potential across different geo-territories to manage your sales force’s incentive potential and overall cost and productivity. But sales territory design is no longer what it used to be. Here are three current trends in sales that will dramatically impact how you can optimize your sales territory plan in 2013:

1. Social proximity is replacing geographic proximity for territory planning. As the importance of personal connections fuels the meteoric growth of such companies as LinkedIn (an Xactly customer), the effectiveness of preassigned geo-territories shrinks. Buyer 2.0 wants to do business with people he or she knows and trusts, whether directly or indirectly. Expect to see social territories grow in popularity and ROI at the same time that geographic territories disappear.
2. Mobile devices are now the norm, not the exception. Fewer than five years ago, one in every 10 people owned a smartphone. Today, we’re surprised when one person in 10 doesn’t own one. While this trend represents an unparalleled opportunity for your sales team to provide concierge-level service anywhere at any time, it also signifies your sales team’s expanded expectations, which include the ability to view their up-to-the-minute sales performance and exactly how they stand to benefit from potential deals. What are you doing to meet those expectations?
3. Transparency is fueling demand for smarter incentive planning. As leading organizations embrace increasingly flat org charts, social media tears down the walls between the executive boardroom and the sales bull pen. In the same way that sales leaders must meet increasingly aggressive revenue targets, sales reps expect big incentives more than ever as payback for star performance. You need to allocate your territories to distribute incentive potential equally across your team.

Follow these three steps to harness these trends and integrate them into your territory strategy.

1. Know which territories you’re making the most money in and why. Examine your territory performance and drill into the best practices of your top performers, your product mix, incentive structure, and more.
2. Know the impact of possible changes before they go live. There’s a lot to be learned from your historical quota attainment. There are also big potential payouts if you reorganize your territories around what-if scenarios that you test before you implement big changes.
3. Understand your sales-data story. Using robust, real-time sales data, you can test and troubleshoot different solutions before you implement them.

Of course, reorganizing your territories for these trends is no easy task, but with the right strategy, you can prime your sales team to land on its feet and not on its face.

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