Automating sales compensation has obvious and immediate benefits for sales and for the people who facilitate sales. Comp plan managers have more time to work strategically with sales managers to create more effective plans and spend less time dealing with sales reps’ complaints.
Salespeople can see exactly where they stand on their current compensation. Information goes where it needs to go to help with coaching, forecasting, and territory development. It helps create a healthier and more harmonious environment while improving your sales numbers. Who could stand in the way of that?
According to the 2021 State of Global Enterprise Sales Performance Report, it’s not a who - it’s a well-known what. The study showed the most influential factor in sales planning decision-making - cited by 29 percent of respondents - was “doing things the way they have always been done.” That was one point higher than “data analytics and intelligent analysis,” which is revealing.
Yes, change is a challenge - perversely, more so when your sales organization is successful. “If it ain’t broke, don’t fix it” is a pleasant way to justify putting off repairing a squeaky washing machine or a creaky door hinge, but it’s a dangerous way to rationalize delaying improvements to how you manage compensation. Your competitors may not be so keen to keep things the way they are - and that will put you at a disadvantage.
Besides, compensation plan automation doesn’t only affect sales managers and comp plan administrators - it has far-reaching positive implications for the entire business. Need some examples?
Here’s the most obvious one. Collecting performance data about every one of your sales team members in a single system provides you with a real-world, historical view of their performance - not just this quarter, but over time.
That allows you to understand how their selling abilities are improving (or not), how they’ve reacted when they’re assigned to new territories, the accuracy of their past efforts at judging their pipeline, and other performance data that you can apply to your current forecast.
Using the manual method, these analyses are time-consuming and take a lot of time just in the assembly of the data - which, to be perfectly candid, usually means these analyses never happen. With an automated compensation management system, this data is available literally at the push of a button.
This level of detail in the forecast leads to better forecasts - and better forecasts make sales a hero to the entire organization.
2. Managing Comp Expenses
Speaking of being a hero, finance should be a major ally in your efforts to automate compensation. The average company spends 10 percent of annual revenue on compensation, according to Xactly’s 2019 Sales Compensation Administration Best Practices Survey. And according to Gartner, 3-5 percent of all sales compensation expenditures are overpayments. If your business does $100 million a year in sales, and you pay a 10 percent commission, that means you’re giving your sales force $300,000-$800,000 a year for work they’re already being paid for.
With poorly-managed commission systems, in a team selling scenario, it’s easy to credit the wrong people with sales, or apply the wrong credit to multiple people. When that happens, it results in over-payments - something few salespeople are likely to bring to the attention of their comp plan managers. Quite obviously, paying more for the sale drives up the cost of selling, and takes a bite out of your business’s bottom line.
Automation allows you to identify and eliminate those overpayments, and squeezing those overpayments out of the comp plan - and putting them back into the company’s quarterly results - should make your finance team very happy with you.
3. Human resources
Sales reps may keep mum about compensation errors made in their favor, but they are exceptionally vocal when it comes to mistakes that cost them money. The mistrust between comp plan managers and sales reps is legendary within some organizations; according to one comp plan leader, the first four hours of every day was spent managing disputes with reps over commissions.
That’s a drag for the comp plan manager, but it eventually becomes a problem for human resources, too. As the 2021 State of Global Enterprise Sales Performance Report revealed, sales turnover ticked up in 2020, with 58 percent of companies reporting that voluntary sales turnover was higher in 2020 than in 2019.
Part of that is due to changes in the sales landscape that have opened more opportunities, but part of it is because companies failed to create environments where sales reps felt valued by their organizations - for example, by making concern over accurate commissions a constant source of stress. That turnover pushes the burden on to HR, which has to find new candidates; in 2020, according to Workable, the average sales slot took 48 days to fiil.
If you have the industry average 27 percent sales turnover, your HR team is likely to be in constant sales recruitment mode. Cut that number to 15 percent, and their workload decreases, and they have more time to recruit for other parts of the business and to devote more time to your sales hires.
Succeeding with Automated Sales Compensation
When companies invest in compensation automation, they do it for specific reasons - but the benefits extend far beyond the sales department. If your organization is looking for improvements in forecasting accuracy, sales turnover or in maximizing profits, compensation automation is a secret weapon that can deliver surprising but helpful results.
To learn more, download our 2021 Guide to Successfully Managing Sales Compensation.