Mastering today’s agile market landscape requires a level of efficiency rarely seen before.
Over the last 20 years, companies have evolved by implementing continuous improvements in their sales processes and operations. These ever-changing fields have converged into the discipline known today as sales performance management (SPM).
With SPM, Sales and Revenue leaders are empowered to build motivated, collaborative teams capable of bridging the gap between sales strategy and execution.
This article covers the basics of SPM, from the industry’s standard definition to its components and benefits, and proposes a roadmap for successful SPM implementation in the years ahead.
At the end of the article is a link to download a free copy of Forrester’s Sales Performance Management Landscape, Q4 2022 report — where Pigment has been featured as a leading SPM vendor — for further reading.
What is sales performance management (SPM)?
Forrester defines sales performance management (SPM) as,
“Automated solutions that help optimize incentive compensation, territory coverage, and quota assignment for direct and indirect sellers. These solutions enhance collaboration among stakeholders, increase sellers’ motivation, and provide business leaders with a systematic way to operationalize their company’s sales strategies.”
SPM is an umbrella term for core and extended use cases that streamline sales performance, including:
- Account Segmentation
- Territory Planning
- Quota Planning
- Capacity Planning
- Incentive Compensation Planning
- Sales Forecasting
- Advanced Analytics
Sales and Revenue leaders implement SPM to enhance the efficiency and effectiveness of sales operations. To further leverage these benefits, companies turn to SPM software solutions as part of the digital transformation revolution spurred by the COVID-19 pandemic.
Increased digital adoption and automation in account segmentation, pipeline optimization, sales forecasting, and other sales processes drives rapid growth in sales-oriented organizations. Forward-looking Sales and Revenue leaders therefore visualize SPM as a single strategic unit instead of a combination of distinct parts.
Essential components of sales performance management
The key components of SPM aim to address the disconnect between sales team efforts and the measurable outcomes of those efforts. These essential components include:
- Territory planning: Optimized sales territories create equitable opportunities for each member of the sales team
- Quota planning: Each territory represents varied sales potential, historical performance, and future trends, relying on accurate quota setting to best cater to its target segments
- Capacity Planning: Sales leaders maintain the delicate balance between the team’s capacity to perform against targets imperative to the company’s continued success, juggling variables such as ramp time and productivity
- Incentive Compensation Planning: The best compensation plans motivate sales teams to attain targets by incorporating a realistic view through multiple stakeholder input
- Sales Forecasting: An essential exercise to determine where Sales will land based on existing pipeline for a given period, that is fortified by real-time data fed directly from the CRM for accuracy
- Advanced Analytics: Forward-looking sales teams prepare for all possible outcomes while setting themselves up for the most optimal one, by leveraging past data to predict future trajectory
Benefits of Sales Performance Management
The success of a sales-led company is proportional to sales team empowerment.
When Sales is motivated and aligned with business goals, potential customers are matched with ideal solutions to their challenges, while the company achieves maximized revenue.
However, in competitive markets, sales teams win when they fail fast and succeed faster. To achieve this level of fast-paced growth, it is essential for sales teams to be backed by a solid strategy.
Tried-and-tested strategies must blend effortlessly with innovation to reinforce stellar sales teams. This is where the need for SPM comes to the fore.
With its encapsulation of data best practices, insights-driven analytics, and traditional sales ops & planning methodologies, SPM can help sales leaders and their teams execute the strategies that best push the company closer to attaining its goals.
SPM assumes a crucial role in heightening the efficiency, efficacy, and morale of the sales organization through the following benefits:
Align with Company Goals
It is essential for sales leadership to build a sales plan that aligns sales team capacity and talents with the goals of the company. To ensure this alignment, decision-makers must drill down to every detail of sales targets and territories to determine the relevant KPIs that are in sync with the company’s vision.
There are several tangible outcomes to be achieved by aligning sales strategy and execution with company goals, including:
- Shared vision that drives impactful cross-functional collaboration — where Sales and other Revenue teams, as well as Finance and HR teams, work together to drive pipeline and ultimately increase year-on-year revenue growth
- More accurate budgeting and forecasting — Sales assumptions are more in line with the company’s financial standing and objectives
- Simplified data definitions and models — a single database for the entire enterprise to act as a dependable source of deeper insights and confident decisions
Usher in Transparency
Transparent operation is a prerequisite for a successful company. Every department within the organization — Finance, Sales, Marketing, or Operations — must maintain transparency at all levels. This becomes even more crucial when it comes to employee motivation, especially salespersons.
Sales professionals receive compensation based on the data accrued from various departments. It is hence imperative to offer them better visibility into sales plans, to provide a better understanding of their total earnings.
This clarity is a major driving force behind successful performance fueled by attractive incentive compensation plans. When sales leadership ensures transparency in variable compensation plans, salespersons are motivated to deliver their absolute best.
Connected cross-functional data sources make such levels of transparency possible. By consolidating CRM, ERP, and Accounting systems, for example, sales orgs can rely on accurate and timely data to drive strategy forward and to optimize sales performance.
Sales leaders should remember that no two salespersons are the same, and no two sales territories are the same. Accordingly, sales leaders should develop customized sales quotas for individual sales team members. Quotas must be measurable, attainable, and relevant to the specific territory. Realistic quotas are likely to motivate salespersons to be highly driven towards achieving the targets.
Key Steps for Successful Sales Performance Management in 2023
2022 taught companies of all sizes across industries and geographies the importance of agile decision making.
2023 brings more uncertainty while competition remains as high as ever. It is imperative, therefore, that companies remain nimble enough to navigate tricky situations with near-instant, confident decisions.
SPM can help sales leaders deliver results by offsetting volatility with a backbone of collaboration, actionable insights, and decisions in real-time, through the following steps:
Identify the sales metrics that matter most
Meeting and exceeding Revenue targets is the north star for sales teams everywhere. To better achieve this ultimate goal, certain metrics act as levers to quickly align the sales plan to company goals and achieve faster results. These key metrics often include:
- Conversion Rate: The percentage of leads converted to customers
- Sales Productivity: How efficiently the sales team achieves set targets
- Quota Fulfillment: The percentage of sales quotas met over a period
- Pipeline Coverage: The ratio of pipeline to net new revenue targets
Get the sales team onboard
It goes without saying that sustainable, repeatable results are impossible to achieve without sales team buy-in. Communicating sales goals, plans, and targets in advance allows the team to better prepare to translate strategy into action.
If the team shows concerns, such as pushback against aggressive sales targets, sales leadership must either alter the metrics or help the team understand the reasons behind such targets.
Up-skill the team
After the buy-in of the sales team has been secured, it is vital to ensure that the salespersons have the necessary resources and skills to achieve those targets. This is where the sales leaders must take the initiative and encourage each team member by setting out a clear career progression roadmap.
Additionally, equipping the team with the right skills, technology, and tools will help achieve in a timely manner. Sales team loyalty is fortified when the team feels empowered with best-in-class means to excel at their jobs.
Provide Regular Feedback
Both during and after an SPM solution is implemented, regular feedback keeps targets, plans, and execution in line with the shifting tides both internal and external to the sales team. Feedback should also possess the following qualities to truly improve team performance:
- Communicated on time
- Followed up with action
- Constructive and delivered with empathy
- Relevant to personal, company-wide, and long-term goals
Why is it important to implement a sales performance management platform?
Agile companies are always looking to optimize their operations. An SPM platform eliminates the need to start from scratch and employ manual, tedious methods to achieve optimal sales performance. Here are a few other reasons why it’s important to implement an SPM platform:
- Operations: Through an SPM platform, sales leaders can monitor the capabilities and performance of their teams in real time. Moreover, they can compare this data with strategic input and operational procedures to derive valuable insights. Utilizing the latest tools and standardized processes, leaders can reduce the complexity of operations and thereby make it simpler to close the deals.
- Sales: With SPM software, sales leaders can ensure that salespersons are on track to achieve specified business goals. This success in sales forecasting is achieved based on reliable data collected in real time. Companies can eliminate errors in payout to retain the best personnel and empower them with precise capacity and quota planning to achieve their goals.
- Finance: Sales performance management helps automate data changes originating from employee events and contracts. Automated processes and the resulting high quality data boosts revenue forecasting accuracy and mitigates risks involved. Some SPM software packages also help improve the accuracy of revenue forecasts by delivering key insights related to commission expenses.
- Workforce planning: Leadership is better positioned to align business needs with workforce strength as well as performance requirements. SPM platforms process huge volumes of data to increase employee engagement in the sales process meaningfully. Highly motivated and engaged employees offer a better return on investment and also reduce attrition rates.
SPM has assumed greater importance in competitive markets where the margin for error is virtually non-existent. Modern sales leaders with agile strategy and execution on their minds will stand to benefit from the enhanced efficiency and stability brought in by an SPM platform — to foster innovations that change the face of Sales in 2023 and beyond.
Read how Pigment featured as a leading vendor in Forrester’s Sales Performance Management Landscape, Q4 2022 report.