Welcome to WebProNews Breaking eBusiness and Search News
Advertise | Newsletter | Sitemap | News Feeds News Feed 
 WebProNews Search Part of the iEntry network iEntry inc. 

Leveraging Sales Compensation To Drive Sales Performance

Michael Torto
Expert Author
Published: 2007-01-04

WebProNews RSS Feed


Sales executives have long embraced the vision of leveraging incentive compensation to drive performance within their sales teams.

In this vision commissions are the reward, the proverbial carrot used to motivate reps to achieve and exceed specific revenue and performance metrics. But the gap between vision and reality is apparently deep and wide.

According to two recent surveys of senior sales and finance executives by Growth Solutions, an Illinois sales compensation design firm, and Arcadia Solutions, a Boston sales effectiveness consultancy, reveal some startling and disturbing statistics:

While 92% of executives believe they are calculating and paying commissions accurately
  • 72% believe it takes too long to get commission payments out - often 30 or more days after the close of a period


  • 68% believe their sales compensation systems fail to drive behavior or align their teams towards specific goals related to products and services.


  • 68% described the "pain" associated with commission management as somewhere between chronic and acute


  • 87% attribute turnover of their top reps with issues related to commission compensation
In general, companies allocate nearly 10% of corporate revenue for commission costs. Given the investment, it's astonishing to learn that more than two-thirds of the executives surveyed believe their commission system does little to motivate behavior, align their reps with corporate goals, or drive sales performance in a meaningful or measurable way. Companies are paying commissions to reps for closing sales.but not necessarily the right sales. Clearly there is a gap between the performance desired at a granular level - by product, margin, territory, etc - and the ability of incumbent sales compensation systems to support that performance.

This gap exists because companies have relied for too long on inadequate systems for managing sales compensation. Excel spreadsheets are the de facto standard for sales compensation; they are also the most commonly attributed source of "pain" associated with sales compensation management. Survey respondents relying on spreadsheets reported significant delays in modeling and rolling out new plans each year, or modifying existing plans mid-year, due to the complex macros needed to meet plan logic requirements. Several companies reported paying draws for over 3 months at the start of each year while new plans were being coded and tested.

So how should sales compensation work? First, compensation plans should be designed so as to ensure that reps are motivated to sell in alignment with corporate product, service and revenue goals. Then, the plans should be managed in an automated sales compensation management system that enables them to be quickly deployed and easily modified - without IT support. The system should provide transparency into the compensation process, accuracy in calculations, audit tracking of all changes, visibility into daily performance metrics, and timely reporting and payment of all commissions and bonuses.

When sales compensation is properly managed, reps will be motivated by their plan and focused on closing the right business at the right price. When reps gain visibility into individual performance metrics such as attainment and earnings-to-date, many of the disputes and trust issues associated with sales compensation go away. The analyst firm Gartner reported that organizations that provide this level of visibility gain 4 to 8 hours of selling time per rep each period, leading to dramatic increases in productivity and better control of turnover.

Where do you turn to leverage sales compensation to drive performance, eliminate disputes and payment errors, and generate increased revenues and profits? You really have 3 choices:

1.Build an automated system
a.Advantages - built to meet your specific requirements

b.Disadvantages - requires huge commitment from internal IT resources who may or may not have sufficient domain knowledge to anticipate, design and build a system with the flexibility to change as your business grows and changes
2.Buy "on-premise" Enterprise Incentive Management (EIM) software - available from best-of-breed vendors and enterprise software companies
a.Advantages - extremely flexible and customizable, can usually be configured to meet your requirement today and tomorrow

b.Disadvantage - big upfront costs, expensive to license and install ($500,000 or more with 6-10 month implementations). Requires significant IT support.
3.Subscribe to a "on-demand" sales compensation management solution
a.Advantages - true on-demand systems (beware hosted versions of on-premise applications) offer low cost and low risk since there is no software to license, install or maintain - service is provided on a subscription basis.

b.Disadvantages - none compared to Excel-based systems. May not be the desired solution for very large companies with tens of thousands of sales reps.
If your sales organization is like most, you have commission pain associated with accuracy, trust, and system management issues. But more importantly, your organization isn't leveraging sales compensation strategically to drive sales performance. You have choices, so explore them today to realize your vision for sales compensation as a performance tool.

Tag:

Add to Del.icio.us | Digg | Reddit | Furl

Bookmark WebProNews:

View All Articles by Michael Torto



Receive Our Daily Email of Breaking eBusiness News


About the Author:
Michael Torto, President and CEO, Centive

WebProNews RSS Feed

More Expert Articles Articles

Contact WebProNews
Advertisement





TOP NEWS

WebProBlog
The official blog of WebProNews.

Go to WebProBlog

Targeted Information for Business
WebProNews is part of the iEntry network

Internet Business: Marketing: Small Business:
WebProNews MarketingNewz SmallBusinessNewz
WebProWorld AdvertisingDay PromoteNews
EcommNewz SalesNewz EntrepreneurNewz

Software: Search Engines: Web Design:
WebMasterFree Jayde B2B DesignNewz
NetworkingFiles SearchZA FlashNewz
SecurityConfig SearchNewz WebSiteNotes

Developer: IT Management: Security:
DevWebPro ITManagement SecurityProNews
DevNewz SysAdminNews SecurityConfig
TheDevWeb NetworkingFiles NetworkNewz

The iEntry Network consists of over 100 web publications reaching millions of Internet Professionals. Contact us to advertise.
eBUSINESS RESOURCES






 Advertise | Contact Us | Corporate | Newsletter | Sitemap | Submit an Article | News Feeds
 WebProNews is an iEntry, Inc. ® publication - $line) { echo $line ; } ?> All Rights Reserved
WebProWorld
Ten most recent posts.


SearchBrains.com
NetworkingFiles
Featured Software


About WebProNews
WebProNews is the number one source for eBusiness News. Over 5 million eBusiness professionals read WebProNews and other iEntry business and tech publications.

WebProNews provides real-time coverage of internet business.

Free Email Newsletters:
WebProNews SearchNewz
WebProWorld DevWebPro
Marketing SecurityNews
Plus over 100 other newsletters!

Send me relevant info on products and services.


iEntry.com WebProWorld RSS Feed WebProWorld Contact WebProNews Print Version Email a friend Bookmark us SearchBrains.com SearchBrains RSS Feed