The Evolution of Sales Performance Management
Sales Performance Management, A Look Back
Back when I started my professional selling career over 35 years ago, the term sales performance management meant sitting though weekly sales meetings and performance reviews every 3 months. Sales performance management in those days had little to do with analyzing productivity, team performance, sales enablement or incentive compensation, except, if you weren’t performing, i.e. hitting your numbers, sales management took the keys to the company car in return for your last check.
24 Carat Gold Calculators
From the early to mid-90’s, sales compensation management software started to hit the market. There wasn’t much science or empirical data to drive business outcomes based on historical or regression analysis, just a more streamlined and efficient calculator of sales commissions. This software was sometimes referred to as a ‘24 carat calculator’ because of its overall cost relative to its utility. A lot of IT organizations began building rudimentary commission calculators and reporting tools more cheaply. In fact, my team worked with our IT folks at Textron Systems to build such a proprietary system in 1990 using Lotus Symphony (before IBM) on Unix / Sun Solaris.
From SCM to EIM to ICM and Now SPM…
Over the next decade or so, sales compensation management (SCM) as it became known, morphed into EIM or enterprise incentive management as finance looked to increase its focus, and control, over incentive spend relative to performance. Then, by the early to mid-2000’s, incentive compensation management (ICM) became a more common definition as incentive compensation management moved across lines of business to now include other forms of incentives, both cash and non-cash for sales and non-sales staff with varying degrees of reporting and workflow.
As the new millennium was nearing the end of its first decade, sales performance management (SPM) became the defining terminology. With advanced reporting and analytics, territory and quota planning, improved workflow and flexible user interfaces, SPM software was now the quintessential tool designed to align sales performance with company goals. Sales operations suddenly had a new face, with new responsibilities and for some, a seat at the table.
From a technology perspective, the adoption of the Cloud (SaaS) and advanced integration technologies made the economics more attractive. The newer generations of SPM software became technically superior over just a couple of years prior. For better or worse, functionality also became quite similar across vendor offerings making vendor selection even more challenging, at least visually.
SPM Software, The Devil’s in The Details and The Requirements
Today, there are nearly 30 software vendors, including the leading ERP vendors, that perform many of the common SPM functional attributes. Out of these 30 software vendors, fewer than 10 are considered to be best of breed SPM software vendors. Of these best of breed vendors, most can satisfy at least 70% to 80% of the typical functional requirements found in technically challenging RFP’s. However, any one vendor can fall short on reporting, analytics, workflow, territory & quota planning, data volumes, managing overly complex compensation plans – the list goes on.
This is why it is imperative for stakeholders to take ownership of defining, gathering and documenting requirements for their particular line of business. The most successful implementations of a SPM solution occur when line of business owners are directly involved from the onset, executive sponsorship is established and realistic project goals are set. SPM projects are like ERP projects in some ways; there are a lot of fingerprints touching various segments effecting a lot of people, the way they work and the financial impact to the company. SPM is not a compartmentalized nor a departmentalized tool.
Human Capital Management Software
Human Capital Management (HCM), Human Resource Information Systems (HRIS) and Human Resource Management Systems (HRMS) also have variable compensation management capabilities. A few have rudimentary sales incentive compensation management functionality but none can manage the volumes of transactional sales data, perform complex sales crediting, perform simulated scenario modeling of plans, territories and quotas then analyze this data for outcomes against a prescribed forecast. That is a fundamental difference between HR tools and SPM, currently.
Many SPM tools can also calculate bonuses, assign and measure MBO’s while enabling scorecard functionality, a core function for HR tools. But, they cannot perform many of the core workforce management functions such as salary administration, equity or stock distribution, deferred compensation and merit pay, together known as total compensation or total rewards. In addition, HCM tools provide a unified view across all employees that can analyze role-based performance, measure skill levels and prescribe best-fit candidates for a particular job and provide a holistic view of the total workforce.
If a top tier HCM or HRMS vendor were to acquire a top tier SPM vendor, or, the other way, around, then integrating the two successfully, while offering either as a stand-alone solution or together as one, that would be a market moving game changer. I’m surprised that hasn’t happened up to this point given the speculation and rumors that have circulated throughout the industry for years. I think further consolidation of the SPM market is inevitable, which can be a good thing.
About the Author: For more than 15 years, Tom Troiano has been a successful senior sales executive with the leading Sales Performance Management vendors including IBM / Varicent, Synygy (Now Optymyze), Callidus Cloud and Oracle. Throughout these years he has helped 100’s of companies across many industries evolve from spreadsheets and homegrown tools to today’s data driven SPM solutions supported by a strong business case. Tom has been in sales and sales management his entire career. Starting in 1980, where he led a sales team at a small startup that grew into a big sales team while designing his first sales compensation tools.