No one really knows when this recession is going to end. It’s a safe bet, however, that companies with well-motivated and strategically focused sales teams will be the strongest out of the gate.
Global consulting firm Watson Wyatt recently released the results of a survey revealing just how badly sales forces have been hit by the recession as companies tighten their belts and rein in costs. For example, more than half of all companies surveyed cut sales headcount this past winter.
But the survey also presents a silver lining, suggesting the worst is past—at least in terms of staffing cuts—and companies are now looking at ways to increase sales performance with an eye towards an economic upturn.
According to John Bremen, Watson Wyatt’s global director of sales effectiveness and compensation consulting, “In preparation for the economy’s eventual recovery, companies are winding down their short-term cost-control initiatives. Instead, they are beginning to focus on sales productivity and growth.”
In transitioning to growth mode, it’s imperative companies make this shift in an effective manner. But many companies, if the past is any guide, will continue to reply on ineffective measures to try to drive sales productivity and growth going forward—from shoot-in-the-dark compensation plans that miss the mark, to non-cash rewards programs that fail to excite, to risky organizational changes with ramifications that aren’t thoroughly understood. In other words, business as usual, subject to some common stumbling blocks:
Spreadsheets. Manually modeling, calculating, and adjusting sales compensation plans in Excel is time-consuming, prone to error, and complex. And by the time many new compensation plans are finally ready to roll, a company’s sales goals may have changed, so it’s back to the drawing board. This lack of automation puts companies and their sales teams in constant catch-up mode, and often causes serious misalignment of sales efforts and corporate objectives. Moreover, spreadsheets are notoriously poor modeling vehicles, leaving companies to “roll the dice” when deploying important new plans, incentives, and changes.
Lack of ongoing education. Changing sales directions and implementing more sophisticated compensation plans typically require a re-education of the sales force. In addition, manual spreadsheet-based plans can’t illustrate the benefits in different selling scenarios quickly and easily – frequently leaving reps confused and managers disappointed. In contrast, you need Web-based visibility to communicate goals and attainment and any changes to sales reps in real-time, helping them align with new or adjusted objectives of the business.
Failing to encourage the right sales behaviors. The foundation of a good sales compensation plan is to base compensation on desired sales outcomes, with the idea good salespeople will be motivated to maximize their potential payout by bringing in better deals with better terms. Sounds simple enough, right? But multiply the scenario by hundreds of products or services and shifting business goals, and that is a lot of information for reps to compute, if done manually.
The more complicated a company makes it for a rep, the more likely they will not be getting maximum value from their sales team. In contrast, automating the compensation management process can enable each rep to model the potential pay-out of each deal, and thus aim for the deal that maximizes compensation while meeting company objectives.
Inadequate measurement. Especially in turbulent times, don’t wait until the end of the year to measure sales plan effectiveness. There are bound to be numerous bumps and sudden shifts along the way that will impact business. Companies need to stay on top of these changes with mid-year, quarterly, and even monthly sales performance reality checks, accompanied as necessary by fine-tunings of quotas, commissions, territories, etc.
It boils down to this: as companies move into, navigate through, and then try to break out of economic downturns, they need to review and realign sales efforts more frequently than ever. In some cases, this realignment requires businesses to completely re-think their sales focus and corporate objectives.
For instance, last year a company might have been focused on customer acquisitions…the more customers the better. This year, with the “potential” customer base declining or taking longer to close, the focus may be to upsell and cross-sell to existing customers. And soon, with an eye towards an eventual upturn, perhaps the new focus will be on taking customers away from weaker competitors—the ones who are slower to come out of the recession.
Companies that persist in putting their sales team at a disadvantage with outdated, manual sales performance management practices throughout this recession will find it difficult to power successfully through it, much less position themselves to take maximum advantage of an eventual recovery. It doesn’t have to be this way, as SaaS-based sales performance management solutions have put automated incentive compensation management within cost and reach of companies of any size.
If you’re waiting for the recession to end to leverage such a solution, you’ll be waiting too long.
Christopher Cabrera is president and CEO of Xactly Corporation.
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