Sales Performance Management (SPM)

Sales Performance Management enables businesses to maximize the potential of a sales or other revenue generating organization while minimizing cost. Through efficient Incentive Compensation Management, Quota Planning, Territory Optimization and Performance Insights, businesses are enabled to significantly increase results. Effective SPM ensures that revenue generating individuals are aligned with corporate goals, highly motivated, properly incentivized, and paid accurately.

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Key SPM Terminology

Commission: A payment made to an individual as the result of a sale or renewal
Quota: The revenue goal for a period of time for a salesperson to sell for the business
Territory: The collection of accounts or geography that is assigned to a particular salesperson
Compensation Plan: An agreement outlining the commission payment terms for a salesperson. Typically also includes terms and conditions for a sale to qualify for commission.
Commission Rate: The percentage of sale or amount that will be paid for a given sale
Attainment: The calculated performance against a quota over a period of time
Accelerator: An increase in commission rate that is tied to set levels of attainment to quota
Ramp: Reduction or elimination of a quota for a newly hired sales representative that allows time for the individual to develop new business
Draw: A payment made to a newly hired individual that may come in the form of a bonus or a guaranteed commission payment for a period of time following the start of employment
Clawback: Clawback refers to any commissions or spiffs (see below) that have been given out, but are required to be returned due to special contractual circumstances
Spiff: An immediate bonus for a sale, or advancement of a sales opportunity. Typically, spiffs are paid, either by an employer or third party, directly to a salesperson for selling a specific product or service.

Sales Performance Management Components

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Quota Planning

Setting quotas too high creates unrealistic expectations in a sales team resulting in attrition. Setting quotas too low can cause commission expense to skyrocket. Strong quota planning processes lead to quotas that are set just right – attainable goals for sales reps that result in rewards for strong performance and achievement of company goals.

Quota Setting

  • Method to allocate the expected contribution towards revenue goals across territories.
  • Direction from management informs how territories are managed – how many sales reps needed, territories, time periods, etc. to make a target.
  • The process of setting the financial goal individual or team sellers must reach by the end of a specific time period by forecasting, allocating, adjusting, communicating, and managing sales activities and reps.

Quota Over Assignment

  • A strategy to proactively mitigate for employee churn, negative market forces, etc. where you assign > sales goal across a sales team.
  • When implemented poorly, where quotas are too difficult to achieve, can result in a demoralized sales force.
  • When implemented poorly, where quotas are too easy to achieve, will result in expensive compensation payment.

Top Down vs. Bottom Up

  • Methods to approach goal setting, budgeting, forecasting, or a range of other endeavors.
  • Top Down – Target determines Staffing Plan
  • Bottom-Up – Staffing Plan determines Target

Pipeline Analytics

Pipeline analytics are necessary to answer the question, "How or will a sales rep meet their quota?"

  • Pipeline Coverage (2x, 3x, etc.)
    18 month Deal Cycle Length vs. 12 month Pipeline
  • Deal Cycle Length
  • Historic Annual Churn Rate
  • Average Quota Attainment

Headcount / Workforce Planning

The continual process to align the needs and priorities of the organization with those of its workforce to meet legislative, regulatory, service, production requirements and organizational objectives.

Attrition Modeling

Planning for sales rep attrition, how to make up for a rep that is lost during the sales year both financially and w/ the customer relationship.

Benchmarking

  • Due to the enormous amount of cloud-based data available across thousands of businesses, data scientists have successfully anonymized data across industries to create accurate benchmarking. This new data can be used to help administrators and planners to make informed decisions around compensation, quota setting and even the appropriate number of components in a compensation plan.
  • In what industries is this really useful? Challenge the assumption that the average / what everybody else is doing is an input. Can Benchmarking weaken managers?

Territory Management

Territory Planning / Assignment is the process used to define equitable geographical sales territories, based on market factors and customer intelligence data, that enable a salesperson to meet their assigned quota. These are critical to any sales plan. SPM can take it even further by automation territory design based on opportunity and travel distance, minimizing travel time so that reps can spend more time selling. Identifying where territories do and do not give reps the opportunity to sell enough, or where you can sell X times more than you planned in an area because dollar for dollar if they overshoot they will sell more.

Compensation

Incentive Compensation Management (ICM) is the core of SPM. Ensuring that commissions are paid accurately and on-time, coupled with real-time visibility to calculations translate to higher employee satisfaction and retention. Finance, Account and Sales Operations gain from process standardization and automation, resulting in more time to analyze enhanced data and optimize planning.
IN OUR OWN WORDS
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Today’s winning enterprise companies are transforming the way they manage their customers and revenue. This requires an elegant balance of sales, delivery, operations, legal, and finance. Proper alignment of compensation strategies for all revenue generating resources – either hunter or farmer – is essential to optimizing a company’s competitive position. For most of ATG’s enterprise clients, precision implementation of SPM technologies is a ‘must do,' and no longer a ‘nice to have.’

TOM STERGIOS
SVP, STRATEGY & ENTERPRISE DEVELOPMENT
ATG COGNIZANT

Who Benefits from SPM?

Sales Leadership

Benefits include increased visibility to calculation of commission payments, transparency and reporting, business insights and performance monitoring, analytics and reporting

Sales Reps

Adoption of SPM typically takes sales representatives from a monthly spreadsheet-based statement via email to on-demand summaries of commissions and performance to quota, all with significantly higher accuracy

Financial/Sales Ops

Finance and Sales Operations team see major gains in monthly close cycles through the automation of commission processing and a reduction in errors from manual processes. The real-time information flow means that disputes are resolved far in advance of a close process, rather than days of stress after distributing monthly spreadsheet statements.

Human Resources

Visibility into the compensation process assists in faster issue resolution, business insight and performance reporting

Accounting

Spreadsheets are replaced with a widely accepted system-of-record for variable compensation. Auditing capability is greatly increased.

Customers

When an organization's Sales Reps, Account Managers, and Customer Care teams are aligned with compensation appropriately this positively impacts the overall customer experience

SPM Key Concepts


Commission Calculation

Commission calculation is the cornerstone of SPM. Rules-based calculation engines allow for one-time setup of compensation plans, decreasing processing time and eliminating errors. Most commission calculation engines can perform complex commission crediting, overlay, and user-maintainable rate calculation logic.


Plan Document Creation & Routing
Many SPM solutions provide detailed template and workflow functionality to automate the creation, distribution and acceptance of compensation plans. Based on existing configuration, plan documents can be auto-created and populated with quotas, rate calculations, and terms and conditions. Workflows distribute plan documents to sales managers and representatives for electronic approval, providing a straightforward way to approach plan acceptance and tracking.

Dispute Resolution
Line item detail on commission calculation means disputes can be submitted related to specific line items for resolution. Increased detail, communication and tracking lead to transparency and fast resolution of any issues.

Approval Workflows
Audit capability is greatly enhanced through workflows for payment approvals, compensation plan routing, and dispute resolution. Many solutions offer multi-level acceptance or rejection, routing issues or requests directly where they belong.

Reporting & Analytics
Centralized data and tied-in reporting platforms allow for aggregation and reporting that doesn’t require compiling multiple data sources into spreadsheets or BI tools. Reporting on sales and territory performance, cost of sales, accruals or payroll reports are all typically available in an SPM solution.

Performance
Automation of performance and ranking reports foster healthy competition and motivation within a sales team. In many SPM tools, rankings are refreshed on demand. Performance tracking is streamlined and providing new business insights, even which contributors are at most risk of attrition based on compiled empirical data.

Benchmarking
Due to the enormous amount of cloud-based data available across thousands of businesses, data scientists have successfully anonymized data across industries to create accurate benchmarking. This new data can be used to help administrators and planners to make informed decisions around compensation, quota setting and even the appropriate number of components in a compensation plan.

Territory Planning
Creating equitable territories and makeups that enable a salesperson to meet their assigned quota are critical to any sales plan. SPM can take it even further by automation territory design based on opportunity and travel distance, minimizing travel time so that reps can spend more time selling.
IN OUR OWN WORDS
Moving from archaic spreadsheets and endless manual processes into SPM solutions puts any business on the cutting edge. Real-time, accurate calculations for sales reps provide transparency that was never available before. The complex and arduous process of compensation administration and planning becomes highly simplified and automated. Reporting and analytics create new visibility into the business. Everybody wins.
DAN HALL
PRACTICE LEAD, SPM
ATG COGNIZANT
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A Closer Look at the People, Process, and Technology of SPM

People

Sales Performance Management (SPM) is typically the domain of a company's sales organization, although, depending on the type of products or services offered, SPM may originate with either the Product or Operations group.

In most organizations, the Finance org is also heavily involved, while company's that are tightly-aligned to a common set of KPIs would also have Customer Success, Customer Service, and perhaps Marketing in the mix. And, as with all ecosystem domains, the folks from I.T. have their fingers in the pie as well.

Process

ATG maintains a set of 92 key business processes to support management of customers and revenue for businesses. Thirteen of these processes originate or are impacted by the SPM function, with the majority of those being performed within the Sales Organization. Below are the key processes that are touched in SPM, categorized by the organizational unit that owns the process:

Sales Organization

Territory Planning – defining equitable geographical sales territories, based on market factors and customer intelligence data, that enable a salesperson to meet their assigned quota.

Quota Setting – method to allocate the expected contribution towards revenue goals across territories

Commission Calculation – rules-based calculation engines allow for one-time setup of compensation plans, decreasing processing time and eliminating errors. Workflows can automate this process to include the appropriate managers and sales administrators.

Sales Reporting – collecting and analyzing data to inform on key sales metrics, including revenue and cost analyses, individual and team performance, employee churn, and sales to business model alignment.

Sales Credit Rollup / Rollover – the process of assigning sales credit for commission payout based on hierarchy (rollup) or horizontally to a sales ops organization (rollover).

Sales Credit Assignment – the process of identifying deal ownership and assigning credit or split credit accordingly.

Attrition Modeling – method of mitigating financial risks and risks to the customer relationship by modeling the expected attrition by sales reps' throughout the sales year.

Compensation Plan Administration – the administrative aspect of managing compensation plans for a sales organization.

Compensation Plan Documentation Routing – the template and workflow functionality to automate the creation, distribution and acceptance of compensation plans. Based on existing configuration, plan documents can be auto-created and populated with quotas, rate calculations, and terms and conditions. Workflows distribute plan documents to sales managers and representatives for electronic approval, providing a straightforward way to approach plan acceptance and tracking.

Finance - Billing Organization

Payroll Output – the process by which commissions are finalized for payment in a period; this includes data and calculation validation by the Sales department, as well as approvals and issuance of payment by the Finance department.

Currency Conversion – the point within a multinational company's sales cycle where currency is converted. This conversion may occur at the transaction or during the commissioning process, and must be carefully monitored to ensure accurate conversion rate and payment amount, and to enable standardized reporting.

Commission Dispute Resolution – submitting a commission calculation for review and resolution under the premise it is incorrect.

Clawback Processing – executing the payment back of any commissions or spiffs that were paid out but required to be returned due to special contractual circumstances

All Organizations

Daily, Periodic, or Ad Hoc Reporting (Extraction, Load, Report, Dashboard) – movement of data between domains to create a single source of truth for reporting and dashboarding.

Technology:

In the past, there were two main options for commissions processing: error-prone spreadsheets or expensive on-premise solutions.

Businesses that could not justify the cost of purchase and ownership of a home-grown solution had no little choice but to maintain complex spreadsheets. The entry of SaaS solutions for ICM with configurable user interfaces enables businesses to choose a cutting-edge solution at a reasonable cost. These systems are able to be maintained in-house as needed and have open platforms – eliminating the need for costly maintenance contracts.

IN OUR OWN WORDS
Sales is an integral piece of any organization’s revenue model, and a strong Sales Performance Management strategy not only drives optimal performance for sales teams, but also increases organizational alignment, employee engagement and therefore customer satisfaction. Our customers see improved visibility, transparency and accuracy in their sales processes, leading to a decrease in attrition and time spent on dispute resolution and an increase in precision reporting, strategic alignment and payment accuracy. SPM is a game changer for our customers, and is quickly becoming an imperative piece of their overall business strategy.

KELLY KRAFT
STAFF CONSULTANT, SPM
ATG COGNIZANT

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Key SPM Vendors

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ESSENTIALS

Founded: 2005
HQ: San Jose, CA
Company Type: Private
Website: www.xactlycorp.com
Delivery Method: Cloud

OVERVIEW

Xactly Corporation develops cloud-based, enterprise-class incentive compensation solutions that enable employers to design and automate compensation plans which align employee incentives with business goals.

The Company’s SaaS solutions optimize sales performance, employee behavior, and strategic decision making while reducing risk and error rates in compensation calculations. Xactly is the first fully cloud-based, multi-tenant provider focusing solely on the incentive compensation and employee and sales performance management markets.

PRODUCT & SERVICES:

  • Sales Planning
    • AlignStar – territory management and optimization
    • Sales Resource Planning – plan sales quota and capacity
    • Benchmarking – benchmark sales plans and performance across team and industry
  • Execution
    • Incent – incentive compensation calculations
    • SimplyComp – DIY incentive compensation
    • Commission Expense Accounting – compliance with ASC 606/IFRS 15 standards
  • Optimization
    • Insights – visibility into real-time pay and plan performance
    • Objectives – sales MBO plan management
  • Data Integration
    • Connect – open API platform for data integration

TARGET MARKET

Xactly target organizations in many industries of any size.

CUSTOMERS

  • LinkedIn
  • SanDisk
  • Salesforce
  • Rosetta Stone
  • Workday
  • Honeywell
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ESSENTIALS

Founded: Acquired Varicent 2012
HQ: Armonk, NY
Company Type: Public
Website: https://www.ibm.com/spm
Delivery Method: Cloud

OVERVIEW

Varicent Software Incorporated, an IBM company, is a global pioneer in Incentive Compensation and Sales Performance Management that delivers innovative, industry-leading solutions for finance, sales, human resources and IT departments in high-performing companies across industries.

PRODUCT & SERVICES:

  • Reporting, dashboards, and analytics
  • Composer and calculation engine
  • Workflow routing and scheduling
  • Integration with Watson Analytics

TARGET MARKET

IBM Varicent target organizations in many industries of any size.

CUSTOMERS

  • Siemens Healthineers
  • Louisiana-Pacific Corporation
  • Tektronix
  • Ferguson
  • Colt Technology Services
  • Zions Bancorporation
  • S. Bank
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ESSENTIALS

Founded: 1996; Acquired by SAP 2018
HQ: Dublin, CA
Company Type: Public
Website: www.calliduscloud.com
Delivery Method: Cloud

OVERVIEW

CallidusCloud is a global enterprise software and SaaS company. The company is best known for its cloud-based solutions for sales effectiveness, sales performance management and, sales execution software and services.

PRODUCT & SERVICES:

  • Commissions – automated sales compensation
  • Territory and Quota – optimize sales territories and quotas
  • RevSym – Automate rev rec and ASC 606 compliance
  • Thunderbridge Analytics – Analyze past and predict future
  • Thunderbridge AI3 – enhanced performance with AI-powered recommendations
  • Datahug – forecast and manage pipeline
  • Producer Pro – simplify producer lifecycle management
  • Telco Dealer Pro – enable dealers to drive more revenue
  • Insurance ICM – manage incentive compensation for insurance
  • Direct Selling Pro – calculate real time volumes and awards

TARGET MARKET

CallidusCloud target organizations in many industries of any size.

CUSTOMERS

  • Barclays
  • Caterpillar
  • CDW
  • Citrix
  • KeyBank
  • Lenovo
  • LexisNexis
  • Rackspace
  • Thomson Reuters

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