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Rapid change requires agile approaches

Alexander Group recently participated in a webinar hosted by SAP – Sales Compensation in the Age of Agility – to discuss the current state of sales performance management. A few of the insights from the conversation are below:

Sales Performance Management defined

Viewed holistically, sales performance management (SPM) is the series of job designs, methodologies, plan design and tools used to support and motivate salespeople to meet and exceed their goals.

The problem? Business models, customer needs and sellers’ objectives have changed significantly as the pandemic accelerated underlying movements in B2B selling.

New roles require updated compensation models

The pandemic highlighted a shift in customer needs and expectations. Sellers now interact with buyers differently, requiring a 24/7 presence that includes omnichannels from high-touch sales to automated e-commerce. These channels require new roles, as well as existing roles deployed in new ways. Alexander Group research in 2020 and early 2021 found that 30% of pre-COVID sales teams had already transitioned to a model where the core seller worked in a hybrid in-person and digital way. However, the pandemic forced nearly 100% adoption of hybrid sales, with many expecting the changes to be permanent: making hybrid selling an essential sales approach for the future.

When it comes to SPM, organizations must consider the type of seller as well as the hybrid nature of their deployment. Traditional internal sellers include Sales functions, but external players may include agents, brokers and business partners. All of which may require new SPM approaches.

The growing number of revenue-producing roles adds to the complexity of the sales compensation model. Alexander Group benchmarks indicate that approximately 15% of sales costs are commissions, highlighting the need to accurately compensate these new roles. Unfortunately, spreadsheets and outdated compensation systems have difficulty keeping up with this new agile model.

Key traits of an SPM Software Solution

Finding and implementing the right set of SPM tools requires an alignment of diverse leaders. Sales and Sales Management teams offer sales strategies while HR adds compensation insights. Finance provides audit and compliance requirements, and IT focuses on technical requirements, such as the potential transition to cloud-based applications. These leadership voices ensure proper motivation, accurate payment, and return on investment to evolving revenue-producing contributors.

Top five reasons to revisit your (holistic) SPM approach

  1. Business Model Change. Leadership has made a decision to focus the business in a new direction. If this requires a change in behavior from sellers, new designs and tools will almost certainly be required.
  2. Scaling. As a company grows, organically or through M&A, they need flexible approaches that support business changes, new roles and exponentially growing data sets. That means new processes and data architecture. SPM technology solutions outpace those of homegrown or spreadsheet systems, allowing companies to update their systems that reflect new strategies and workflows.
  3. Job Role Evolution. SPM plan designs and tools need to keep pace with hybrid models, internal sellers and external revenue generators. In one example shared, a single software sale compensated 35 people. Clearly directing compensation payouts to the appropriate teams is essential.
  4. Sales Comp ROI Decline. Updated sales compensation designs and systems offer improved returns on sales expense and infrastructure investment. One company increased its bottom line by over 66 M Euros in fewer overpayments, reducing their overpayment rate from an industry benchmark of 5%-8% to nearly 2%.
  5. Less shadow accounting, more trust. Traditionally, sales professionals calculate their own commissions to ensure proper payment. Unfortunately, this distrust means more time re-calculating and less time selling. Sales time is a critical asset for sales teams and should be optimized whenever possible.

Revisiting your sales compensation plans

Companies made massive changes to their sales organization during the pandemic. However, their sales compensation plans may not have kept pace with new sales strategies, customers and revenue-producing roles. Leaders should consider revisiting their comp plan every ~12 months to keep their team motivated and productive while offering tools with a positive ROI.

Sales Compensation in the Age of Agility captured the insights of leaders who are implementing sales performance management approaches and tools at companies who are ready to leave behind legacy programs, processes and systems to align their sales compensation strategies.

For more information on how to reset your compensation program to reflect new business realities, contact us.

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