What is Sales Performance Management?

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Definition

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. To excel at SPM, one must possess visibility into personnel activity and have a clear understanding of what their people are doing right. 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.

Download our guide, “Inspiring Sales Rep Performance,” for top tips from industry experts on how to inspire sales reps and maximize their selling power.

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 allows companies to get the most out of their people, which in turn improves the bottom line.

Rules to Follow with Sales Performance Management

The practice of Sales Performance Management is futile without a firm understanding of the following:

Visibility
Why is visibility important?
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.

How can this occur? Progress reports might be sent to certain team members, but a key player could be left off the thread. Or maybe your sales people aren’t able to easily track their metrics, and end up falling behind as a result. When companies use a manual process to calculate compensation, there are a number of ways that a lack of visibility can manifest itself, with none of them being positive for the company’s bottom line.

How to ensure visibility
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), while managers should be able to easily tell which team members 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.

Accurate Forecasts
Why are accurate forecasts important?
A Finance professional’s worst nightmare is inaccurate numbers. It falls on their shoulders to ensure that all of the company’s financial data is exact, and one of the ways they do this is by forecasting compensation numbers. If they don’t have the tools at hand to properly forecast, then they may find some not-so-nice surprises waiting for them at the end of the quarter—like cash-flow issues and missed numbers.

How to ensure accurate forecasts
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, without error. To achieve these aims, 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.

Motivation
Why is motivation important?
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 to keep your people motivated
Sales gamification, and virtual leaderboards specifically, bring out a rep’s competitive side 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. It’s likely reps will want to make it to the top of the list, which ultimately leads to greater revenue for your organization. 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.

Payment Accuracy
Why is payment accuracy important?
One simple spreadsheet error could cause a multitude of major problems—with a simple errant key or formula, you could end up paying your reps $80,000 instead of $8,000. While not all errors are going to be this glaring or catastrophic, 88% 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 to ensure payment accuracy
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 now takes its place. The overall goal is to bring trust, compliance, and control to your incentive comp.

The Role of Sales Performance Coaching

One key facet of Sales Performance Management is sales coaching, and the ability to ramp up reps quickly, and on a path to achieving full quota-bearing status.

Of the sales coaching skills you should possess, some of the most important include:

Observing
Observing in this sense means physically witnessing 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. 

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.

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

If the final destination of SPM is reaching your company’s strategic goals, then sales performance metrics are the roads 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.

Of course, the challenge is pinpointing which metrics are the best for your organization.

Here are a few suggestions from Sales Compensation: Get Performance Metrics Right.

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.

Pick and choose. 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.

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 them real-time insight into their progression with commission software.

Sales Performance Management Software & Tools

As you can see, going about managing sales performance manually can be challenging, leading 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. According to Gartner, “the SPM software market grew 10% in 2015.” Thus, if your organization isn’t currently using such SPM solutions, there is a good chance competitors are, or soon will be.

Gartner Magic Quadrant for SPM

Again, 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.” In a report that evaluated 13 different SPM vendors on 15 criteria, Xactly has been positioned as a “Leader” in the Magic Quadrant for SPM.

SPM Resources

If you’re interested in additional resources, here are a few of our favorites:

What is Sales Comp?
What is Incentive Compensation?
Measuring Sales Performance, Fully & Completely
SPM Blog

Updated 2/14/17


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