Sales Performance Management (SPM) is the process of overseeing and training employees to advance their sales skills, processes, and results. SPM involves observing sales practices either manually or with software, comparing to metrics, drawing conclusions, and then implementing changes for advancement and motivating sales reps to perform at the best of their abilities. According to Gartner, "Sales performance management (SPM) software comprises tools and process functions that automate and unite back-office sales processes. It is implemented to improve sales execution and operational efficiency."
To excel at SPM, a leader should have clear visibility into personnel activity and have a clear understanding of what their people are doing well. Likewise, they must also be able to identify which employee actions can be improved, and again, what motivates reps to perform at the peak of their abilities.
Additionally, there needs to be clarity around the impact of adjustments, which requires a focus on using the correct metrics in order to ensure alignment with the company’s overall goals. Given the level of involvement required, many organizations opt for Sales Performance Management software to assist with such tasks.
At the end of the day, succeeding in SPM enables reps to achieve higher quota attainment, which in turn improves the bottom line.
Effective Sales Performance Management
The practice of Sales Performance Management is futile without a firm understanding of key "must-haves" for sales and finance leaders—including visibility, accurate forecasts, motivation, and payment accuracy.
Why: SPM isn’t easy, and involves many different departments and various stakeholders within a company. At the end of the quarter, the last thing you want to deal with is unforeseen, unfavorable results.
Additionally, if your sales reps aren’t able to easily track their metrics (and end up falling behind as a result) everybody loses. When companies use a manual process to calculate compensation, there are a number of ways that a lack of visibility can manifest itself, and none of them have a positive impact on the company’s bottom line.
How: The goal should be to enable sales reps, managers, and executives to see sales progress in real-time. Specifically, reps should be able to readily access pertinent data to see how close they are to making quota (and how much they’ll make when they get there). It should also be easy for managers to see which team members may need assistance.
The only way you can ensure your entire sales process is running as smoothly and effectively as possible is to have visibility into employee performance. With increased transparency, you’re able to make smarter, more strategic decisions about the way that you incent and manage your entire sales process.
2. Accurate Sales Forecasts
Why: A finance professional’s nemesis is inaccurate numbers. It falls on their shoulders to ensure that all of the company’s financial data is exact and one of the most critical ways they do this is by forecasting compensation numbers. If they don’t have the tools at hand to properly forecast, they may find some not-so-nice surprises waiting for them at the end of the quarter—including cash-flow issues and missed numbers.
How: To take control of this facet of your Sales Performance Management system, and avoid unexpectedly high incentive compensation expenses, you must ensure that you are always closing the books on time and without error.
To achieve these goals, consider creating “what-if” scenarios that predict how much your company will make if your sales organization performs in certain circumstances. You can further ensure sales forecast accuracy by conducting historical analyses and by experimenting with new plans.
3. Sales Team Motivation
Why: A critical part of SPM is keeping your reps feeling inspired and motivated throughout the entire quarter. However, it’s not uncommon to see motivation dwindle. Reps can get distracted, wait until the end of the quarter to try to close deals, or even get discouraged to the point of quitting altogether.
How: Sales gamification, SPIFs, and virtual leaderboards bring out reps' competitive sides by letting them know how they stack up in comparison to the rest of the team—a surefire way to motivate your sales force to move up the ranks.
In addition to increased visibility, being able to accurately estimate bonuses and track progress throughout the quarter will ensure reps never lose sight of their goals while remaining motivated.
4. Payment Accuracy
Why: One simple spreadsheet error can cause a multitude of major problems. With one simple errant key or formula, you could end up paying your reps $80,000 instead of $8,000. In fact, a 1% error rate in commission calculations costs a company $22,500 error expense.
While not all errors are going to be this glaring or catastrophic, over 80% of spreadsheets contain errors, so the chances are high that yours do too. These discrepancies lead to lost accountability with your sales and executive leadership teams and are incredibly detrimental to your organization.
How: Automating the incentive compensation aspect of your Sales Performance Management solution allows you to eliminate the element of human error and give employees the freedom to spend more time analyzing incentive compensation, rather than just processing it.
Where complicated workflows and slow processes once existed, a new and efficient process that eliminates days or even weeks of wasted time will take its place. The overall goal is to bring trust, compliance, and control to your incentive comp.
Sales Performance Coaching
One key facet of Sales Performance Management is sales coaching, including the ability to ramp up reps quickly and set them on a path to achieving full quota-bearing status. Of the sales coaching skills you should possess, some of the most important include observing, questioning and listening, and continued skill building.
Observing in this sense means physically monitoring your reps in action in order to make corrections and provide feedback in real-time (and not saving it for the next time a sales performance review rolls around).
That said, it also has to do with visibility into their performance and being able to understand, through data, sales conversion rates from stage to stage. Here, it’s important to uncover whether issues stem from a skills gap, or are more rooted in their attitude.
2. Questioning & Listening
To supplement observing, you need to also be a professional questioner, while wholeheartedly listening to your people. To encourage dialogue, your questions should be open-ended and allow your reps to answer while you actively listen. It always helps, too, if your questions relate to specific observed behaviors and experiences.
3. Continued Skill-Building
Continual improvement allows reps to reach greater potential while keeping them fresh and ready to handle new trends. Role-play often, host one-on-one teaching sessions, and keep training/guidance materials updated. Don’t just set goals for improvement, but set SMART (Specific, Measurable, Attainable, Realistic, and Time-Specific) goals—and follow-up regularly.
Sales Performance Metrics Tips
If the final destination of SPM is reaching your company’s strategic goals, then sales performance metrics is the road you need to take to get there. Follow the wrong path and you might eventually reach your goal, just not efficiently, but even worse, you might miss your goal completely.
Mind Your Bottom Line
Sales managers may want to reward reps for sales funnel progression. But only the final balance sheet really counts. Where possible, use your bottom line to measure sales performance.
Choose Metrics Wisely
When you use only a few metrics, you can be sure reps know each one is important. Use only three or four to measure sales performance. This is an industry best practice to achieve peak sales performance. Bring everyone to the decision table. Involve all department leaders in selecting metrics. This way, you know everyone will work towards the same goals.
Most importantly, it’s all about visibility and control. Reps need to know they can directly influence their sales performance. Use metrics that measure results they can control. Give reps real-time insight into their progression with commission software.
SPM Software & Tools
Managing sales performance manually can be challenging and lead to costly errors and supreme under-utilization of a talented sales team. Luckily, there is software to help you manage your organization’s sales performance processes through automation.
Such automated tasks include (but are not limited to) incentive compensation management (ICM), sales quota and territory management, analytics capabilities, sales coaching systems, and much more. What's more, if your organization isn’t currently using such SPM solutions, there is a good chance competitors are, and you may be falling behind.