Successfully motivating and optimizing sales performance can be a challenging task for any business. Sales and Finance leaders typically deal with limited insights, convoluted systems, and employee demands wherever compensation is concerned. In the recent 2018 mid-market sales incentive study, CFO Alliance reviewed the relationship between Sales and Finance departments—and how this partnership can positively impact a company’s revenue potential.
In a recent webinar with CFO Alliance, we reviewed the findings of the study. CFO Alliance CEO Nick Araco, Jr. welcomed Erik Charles, VP of Strategic Marketing at Xactly, and Nandini Ramaswamy, VP of Global Sales Compensation Design and Operations at Salesforce, to the panel.
The study in review was distributed to more than 7,000 CFO Alliance members. It not only benchmarked salary data; it also allowed organizations to benchmark the compensation design and types that are offered, along with the key players and stakeholders involved. According to the study, there are several critical takeaways that department leaders should consider.
While the phrase “cash is king” is just as true today as it has ever been—cash isn’t everything. Sales representatives expect money in their pockets, yes, but other incentives play an increasing role in motivating behaviors. Short-term incentives, such as employee recognition and rewards, as well as long-term recognition, such as stock options and retirement plans, are top of mind for sales reps and crucial in retaining top talent.
According to the survey, when asked, “Which of the following metrics do you currently factor into your incentive compensation plans?” 66% of respondents reported that they are not factoring in these important non-financial metrics.
- Customer satisfaction
- Customer engagement
- Relationship strength
The value of a sales rep’s relationship with his/her customer cannot be overstated. While measuring reps against their quota performance is critical, taking other non-financial metrics into account should also have its place. Furthermore, when asked “which performance measure is most heavily used to determine sales incentive compensation?” respondents demonstrated several key takeaways:
- Companies are focused on growth through existing customers but are not compensating for it
- Quotas are often set from a collaboration between the CEO, CFO, and Head of Sales
- Companies may need to begin to innovate when it comes to traditional sales incentives
Putting a system in place that allows reps to be measured in a holistic and accurate way is paramount to long-term success—for both the reps and their leadership team. In fact, Xactly’s Erik Charles emphasized, “Quotas must be set intelligently. Territories must be set intelligently.” Developing a fair scale with which to compare rep performance is necessary for improving overall company growth.
Reporting and Record Keeping
The study confirmed that over 85% of participants say they use excel to manage sales acquisitions. In response, Charles commented that while this practice ensures job security for one person, using an excel spreadsheet, “is a nightmare for anybody else that needs to go and make changes—or even worse, make an audit.” In a later note, he reflected on this bizarre reality: while around 10% of a company’s total revenue goes to compensation plans, most financial leaders have almost no insight into the actual data or process. Based on the received responses, CFO Alliance and Xactly recommend including helpful components in a successful sales incentive plan, including:
- Incorporate powerful incentives
- Establish challenging goals
- Partner Finance and HR together to create unique incentive programs
- Understand reps want to be paid shortly after closing a deal
Engaging the Rising Workforce
Aon recently reported, “Millennials and beyond will make up to 75% of the global workforce by 2025.” In order to enhance rep motivation and satisfaction, and decrease rep attrition, companies should work to implement several beneficial operational behaviors.
- Align the customer and employee experience
- Embrace work/life balance
- Offer valuable feedback
- Be authentic
Neglecting to provide these values to sales reps costs far more than investing in the team from the get-go. Employee attrition is incredibly expensive—and losing top performers can take years to financially recover. In fact, the average cost to replace a rep is $115,000. Understanding the impacts and causes of sales attrition is the first step to decreasing attrition rates. Nevertheless, many companies do not act accordingly. The CFO Alliance study shows that almost 50% of respondents do not measure and adjust key attrition impacts.
Authenticity, in particular, is critical to creating a workforce culture and influencing performance behaviors that increase both morale and revenue. Salesforce’s Nandini Ramaswamy encourages employers and sales leaders to invest in, “transparency, transparency, transparency.” Implementing a sales performance management plan to increase visibility and trust—while streamlining compensation processes—is best for the sales team, executive stakeholders, and the resulting company growth.