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How to Increase ROI of Sales Incentive Compensation with Automation

Mar 21, 2019
2 min read
Discover how automated incentive compensation management (ICM) can improve the ROI of sales compensation, increase data accuracy, and improve efficiencies.

Today’s companies face a competitive landscape when it comes to sales. The most successful organizations are those that have figured out how to competitively pay their sales teams while achieving a high ROI on sales compensation. However, this isn’t an easy feat to accomplish when you consider that 69% of companies miss their revenue targets each year.

It isn’t entirely surprising then that the average quota attainment is only 53%. Sales compensation is your biggest investment, so the ROI should be worth it. Why do 85% of companies continue to rely on manual, outdated spreadsheets—especially when 80% have at least one error?

Because it’s what they’ve always done. However, to be successful in today’s competitive sales environment, manual sales compensation management just doesn’t get the job done. So then, how do companies better manage compensation and increase ROI? Automation.

Here are four ways automation helps increase the ROI of your biggest (and most important) expense: sales compensation.

1. Increased Efficiencies

Consider the resources you spend each month on compensation payouts. Each month a handful of your compensation administration employees spend way too much time calculating and paying out commissions.

On average, companies using manual compensation management have four full-time employees spending up to 10 days per month on compensation—that’s a ton of resources.

By automating sales compensation, companies use fewer compensation resources and see huge improvements in their efficiencies, including:

  • 60% reduction in time spent on incentive compensation
  • 80% reduction in time spent on creating and routing compensation plan documents
  • 50% reduction in the number of returned or disputed compensation plans

2. The Advantage of Digital Insights

The most successful sales teams rely on data insights to drive sales planning. Manual incentive compensation management doesn’t provide the necessary analysis and insights that are critical for a strategic sales plan.

However, taking advantage of automation can mean a big boost in performance. For example, companies using Xactly Insights to manage and analyze their sales performance, as well as gather valuable data insights for future planning, see up to 10% higher quota attainment overall.

3. Improved Compensation Payment Accuracy and Timeliness

Consider the following example:

You pay 5,000 sales reps $100k per year in compensation. That equals a $150M investment in compensation. If you accidentally overpay 3% of reps as a result of compensation errors, that equates to a $15M loss.

Research from the 2018 Sales Compensation Administration Best Practices Survey shows that 83% of companies have compensation inaccuracies and must make adjustments.

The same report found that organizations using manual spreadsheets spend more time calculating and paying sales reps. On average, nearly 50% of companies using spreadsheets spend four or more weeks to pay out compensation.

On the other hand, using automated compensation management, 71% of organizations complete payout in three weeks or less, with 36% completing in under two weeks. Companies also achieve 99% payment accuracy, eliminating spreadsheet errors and reducing the time, resources, and revenue lost to adjusting for compensation errors.

4. Boosted Sales Productivity

To hit quota and meet revenue goals, sales reps must be focused on selling. A result of inaccurate or slow compensation payouts—and ultimately, a cause of low compensation ROI—is distracted reps. Using automation, sales reps spend less than 0.5% of time shadow accounting, and instead, are focused on closing deals.

Streamlining ROI for Your Entire Sales Organization

Truly increasing the ROI of your entire sales organization requires more than just automated incentive compensation management. This is an important and necessary first step, but there’s more to increasing ROI. The strongest sales organizations need to optimize their entire sales process, from planning to executing to analysis.

Optimized sales planning is data-driven. Automation of the entire sales process—sales capacity, quota, territory, and compensation planning; plan execution; and performance analysis—ensures that data is accurate and can be used strategically. That way, companies can focus on hitting and exceeding revenue goals and see the true ROI of their sales compensation.

  • Incentive Compensation
  • Sales Performance Management
Kelly Arellano, Senior Content Marketing Manager at Xactly
Xactly News Team

Led by Editor-In-Chief, Kelly Arellano, The Xactly News Team reports on the latest products, events, and market trends taking place within Xactly and throughout the revenue intelligence industry.