In the blue corner, we have our CRO, or Sales Director, whose primary job function involves spending company money to attract new clients and customers to the business. And in the red corner, we have the CFO, or Finance Director, whose greatest responsibility is to keep a tight rein on spending.
While both roles are equally vital to a sales organization, how do we make sure that they aren’t arch-rivals each fighting their own corner, but rather, are colleagues collaborating to make their business successful?
Any CFO hoping to bridge the gap between Sales and Finance needs to have a firm stance on investing their time and resources in technology. If your company takes the initiative and automates their incentives and commissions process, you’ll easily remedy the main point of contention between Sales and Finance and bring your organization closer together as a whole.
An organization depends on a healthy relationship between its sales and finance departments, so here are seven reasons why companies should use technology to help gain a better grip on sales incentive commissions and wield it to the company’s advantage.
Reason 1: Plans and Afterthoughts
When it comes to incentivizing salespeople to generate revenue, the tendency is to separate this process from other business operations. Unfortunately, sales commissions then become an afterthought, with little consideration to the underlying data.
Aligning your entire organization, both finance and sales, around a single data source helps eliminate pesky inaccurate spreadsheet formulas, reduce the time your team spends on data analysis, increase forecast accuracy, drive growth, and give immediate access to key insights for planning—so companies can trust that their decisions are based in fact.
The message here is that you cannot separate the commission plan from the strategic sales plan—you must look at all the components of the incentive plan individually, then map them back to the business objectives to ensure strict alignment.
Reason 2: The Power of Three
A commission plan with too many incentives is sure to end badly. Incentives need to be transparent, orderly, easy to digest, and have minimal components. If sales incentive commissions plans have north of 6 components, reps won’t know where to focus. This means that their behaviors may not align with what the strategic plan calls for.
The optimum number of incentives is three; if you offer more measures than that, no one will be able to hit those goals.
For an incentive to motivate a sales rep, it must be both clear and achievable, otherwise, you’re effectively throwing money away on an easy objective or wasting time with objectives that are too difficult to fulfill. (To align your incentives, we suggest following the ABCs of incentive planning).
Reason 3: Too Much, Too Many
Are too many people, including the wrong reps, being rewarded? If Finance is crediting sales team members whose contributions to a deal aren’t crystal clear, then there is a very good chance that the company is oversharing its wealth with individuals whose efforts pale in comparison to others.
It makes no sense to compensate everyone with the same rewards, even for a big deal in which many people were involved. The sales rep that just happened to meet a future customer at a trade show is not as vital to prospect relationship as the sales rep that closes the deal after the introductions are made. Each one deserves a piece of the pie, just not the same size. And by the way, that pie should have no more than five slices.
(Get tips for designing incentives for different roles on your team in our Complete Guide to Sales Team Compensation.)
Reason 4: Ditching the Disincentives
The connection between sales behavior and rewards can be a powerful motivator or a destructive de-motivator. In order to procure the former, certain practices must be discouraged—especially, holds and releases, capped commissions, and delayed payment.
Cash flow is an accounting problem, not a sales problem. Don’t make the sales rep a collection agent harassing the customer base to write cheques. Pay your reps as early as possible, preferably when the deal closes. Fail to take this advice and see what happens—salespeople coast. Capping commissions virtually guarantees a rep’s deceleration; they won’t reach their full potential and neither will the company.
If your sales reps did what they were supposed to do and the time has come to pay them, then pay them–NOW!
Reason 5: Metrics, Metrics, Metrics!
Gut instinct, intuition, and conjecture are no replacement for solid metrics. Data is sustenance, the bigger the better. This is what gives meaning to big data – plans, performance, payouts, and positions compared across thousands of data points over time.
The first step in aligning both departments is adopting a data-driven strategy to get your data in order. This means you need to know what data you already have and where information gaps exist to get a true understanding of where your organization stands.
How Technology helps all of this
Automation helps you use your data strategically and operate efficiently—because you don’t have to waste time with tedious data cleanups. When you are able to trust your data, you can forecast more accurately and make strategic decisions for your organization, rather than focusing on tactical execution.
Here’s the problem: organizations can’t be efficient or aligned operating manually. And if organizations on a large scale can’t align due to the lack of data, how can we expect sales and finance to be on the same page?
Today’s competition is increasing at an unprecedented pace, so the need to be united on all fronts has never been as important as it is now. Sales and finance leaders must assemble data, identify key insights, and employ best practices when it comes to designing effective sales plans, forecasting accurately, and maximizing efficiencies in order for their organization to compete, let alone survive.
To ensure that this call to action does not fall on deaf ears, contact a member of the Xactly sales team to discern how to achieve the best results for your organization, increase the collaboration of your sales and finance teams and ultimately add to your bottom line.