Sales Quota: Setting It The Right Way

Sales Quota: Setting It The Right Way

by | Oct 13, 2020

In sales management, there is one task we obsess over – setting quotas. As soon as one sales period ends and another start, we cannot help but ask, how am I going to come up with sales quotas for my team? Yet for all the time we spend thinking about it, many of us do not have a game plan.

Let us walk through a planned approach towards determining sales quota.

1.Choose the Right Quota Strategy

As a Sales Manager, one of the first things you will have to determine is what type of quota you should set.  It is important to choose a quota type that best aligns with your company’s current strategy. For example, if you are following an expansion strategy, Units Sold or New Logos may be the right quota types for now. But, if your current focus is to maximize profits, choose a quota that measures margin contribution. Similarly, you can pick an Activity-based quota, if your sales reps can’t have a significant influence on customer’s purchase decisions.

Many organizations prefer using a combination of different types of quotas. It incentivizes sales reps to perform sales activities like scheduling meetings, making phone calls, and sending follow-up emails For instance, you can set a volume quota in addition to an activity quota. This way, reps are required to make a certain number of calls every week while also closing a certain number of deals.

But do not combine too many different quotas types as it will confuse your sales team and the sales reps will lose focus on what is important.

  1. Analyzing Past performance

If you feel that last year’s performance of your sales reps can predict the future, then you can rely on the past performance method. It calls for taking baseline numbers from last year and uplifting by a certain percentage as per market conditions, marketing activating, and management guidelines.

Once an estimate is made, you may divide it into sales quotas for every division, team, and individual reps. For mature companies operating in mature markets, the past performance method is a great fit. However, it is not the best method for new companies or new markets as the landscape may still be evolving rapidly.

  1. Establish a review period

Your review period is the time frame that will measure your team’s sales performance. If you have a short review period (such as monthly), you may be able to quickly correct your course. However, longer review periods (such as annually) can give you more reliable and accurate metrics for your reps’ performance. Most large enterprises go for an annual quota period. For annual quotas to be effective, you should be able to forecast annual goals with a high degree of confidence. If business situations don’t allow that, one must pick a shorter quota period. For example, someone selling a newly launched product line should not be loaded with an annual quota, until there are enough data points to predict the sales for one full year.

  1. Setting Sales Quotas that are Challenging yet Achievable

When hubris kicks in and you are a tad too ambitious with setting quotas, you risk the following:

  • A demotivated sales team
  • The wrong perception of their performance
  • No proper compensation for their performance
  • Sales reps overselling your products and services, leading to disgruntled customers and excessive amounts of pressure on the team who needs to deliver on the made promises.

Of course, sales quotas should push the sales team to do their best. It is important that the team moves forward together. Standing still is moving backward. But if you do not keep the quotas realistic, you will be setting your team up to fail as well.

  1. Reinforce your expectations

After the quota is crafted, not only should you share what the number is with your team, but also how the quota was determined and when and how it will be measured. You may then explain any bonuses or incentives the sales team might expect to earn for a meeting or exceeding their quota.

The best method to communicate a sales quota and its value is with a face-to-face meeting. This allows salespeople the chance to ask questions and gives you the opportunity to better explain the reasoning behind the sales quota as well as its value to the organization.

  1. Monitor and Evaluate Sales Effectiveness

Measuring your team’s sales effectiveness comes down to having access to the right data. Data plays a key role in every part of your sales planning, performance, and analysis. The best way to do this is to align your teams around a single source of truth. When your team has access to the same dataset, you can plan more effectively, make aligned decisions, and ultimately create a stronger organization.

Xactly Forms – A new way to interact with Incent

Xactly Forms – A new way to interact with Incent

by | Oct 8, 2020

I am currently working on a project for one of our enterprise customers that is leveraging Xactly Forms – a new module from Xactly with tremendous potential.

Forms offers a simple and intuitive User Interface layer to interact with Xactly’s leading SPM solution – Incent. Since Forms interfaces with both Xactly Incent and Connect, one can easily create new custom Forms for a variety of purposes including Data Entry, Data Reviews, Approvals, and some basic reporting.

Forms allows for user specific filtering.  So, for example, if navigation within Incent GUI is difficult, one can now build a custom Form to restrict the data visibility as per individual user’s role and responsibilities. This filtering by the user is not limited to Analysts or Administrators. Forms can be released to managers and sales reps as well.

Here are additional examples of how enterprise customer can take advantage of Forms:

  • Reviewing a batch of manual transactions and approving the lines to be sent to Incent for processing.
  • Entering Objectives and corresponding Scores by Sales Managers
  • Manual Transaction Adjustments
  • Direct Credit Entries
  • Periodic Sales Compensation Results review

Xactly Forms

Xactly Forms Screenshot

Per my experiences, implementing a new custom Form for simple tasks such as data reviews is straightforward. But for complex multi-step tasks or tasks that require Connect integration, expert-level knowledge is required. I am fortunate that I had the opportunity to do some hands-on configuration work on Forms at this early stage.

Because Xactly Forms has access to all the data in your Xactly environment, there are unlimited possibilities of how to automate operational processes in Forms. If you want to learn more about Forms or if you have a Use Case where Forms may fit, please don’t hesitate in contacting us at SpectrumTek. I will be more than happy to help you navigate this exciting new Xactly module.

To learn more click here

Why Do You Need A Health Check For SPM Implementation

Why Do You Need A Health Check For SPM Implementation

by | Sep 24, 2020

Just as a tune-up makes a car run better, periodic health checks on SPM implementations can optimize SPM processes and improve the overall ROI. This is especially true for SaaS products which are frequently updated, making it difficult to keep abreast of all the new features constantly being rolled out.

In fact, due to the impact of COVID-19 on businesses, a health check is not only recommended, it’s imperative. Why? Almost all businesses are seeing significant gaps between the sales forecasted at the beginning of the year and actual sales to date. Businesses have had to adjust their sales compensation plans to reflect the current situation And if you’ve changed any aspect of your sales compensation plan, you need your SPM tools and processes to be updated accordingly.

So, there are many reasons – both from a technical aspect and from a business aspect – for conducting a health check. Here are just a few of them:

Compensation Plans Evolve

As mentioned above, due to COVID-19 most businesses have had to make ad-hoc changes to the sales compensation plans. Aside from COVID, think back to when you first implemented your SPM tool – be it Callidus, Xactly, Varicent or some other tool.  What did your sales comp plans look like then? You may not even recall the nuances of your comp plans at that time. More than likely your plans have evolved since the initial implementation and you’ve made small ongoing tweaks along the way or perhaps, you’ve done a major overhaul.

I suggest stepping back and taking a holistic look at both your SPM system design and underlying business processes. For example, in a recent health check performed for a client, we found several versions of similar lookup tables, built by various team members over the years, which could be consolidated into one single lookup table for easier maintenance and better performance. Because most comp administrators are focused on their “day jobs”, they don’t realize that they can speed up the process by working ‘smart’ instead of just ‘hard’. A health check identifies all such improvement opportunities.

Business Processes Evolve

Just like compensation plans, business processes evolve as well. But has your SPM system kept up? A health check presents a good opportunity to take a fresh look at your current business process to determine how to best leverage your SPM tool. For instance, your sales team may still be submitting inquiries via emails even though the SPM tool may have Dispute resolution functionality you should be taking advantage of.

Other factors such as business growth, M&A, and IT upgrades can also impact the ROI of your SPM implementation. All the changes incorporated on an ‘as-needed’ basis in piecemeal fashion add up over the years and it becomes necessary to reset the course and steady the ship. Conducting a health check lets you reassess and determine if there are ways your SPM system can work more effectively.

New Features

Let’s be honest. Do you really pay attention to all the software release notes? Chances are you missed something interesting along the way, or dismissed something you didn’t need when it was first released but may be useful to you now. There may even be new offerings from the software vendors at no additional cost that you may benefit from. Performing a health check allows you to discover such features and offerings. For example, Analytics may have been an add-on module in the past, but is now available for all base subscriptions. The knowledge you gain from a health check can help you carve your system roadmap more efficiently, thus increasing your ROI.

Irrespective of the tool you use, if you’d like a no-obligation Health Check for your SPM landscape, please contact us at info@spectrumtek.com.

Ten Reasons Why Customers Pick SAP Commissions

Ten Reasons Why Customers Pick SAP Commissions

by | Jun 2, 2020

Working for Callidus (now SAP) for 20+ years implementing SAP Commissions, I had a front row seat to see how the product matured and why customers choose SAP Commissions for managing Sales Performance Management (SPM). Whether your organization has 50 people on variable pay or 100,000+, SAP Commissions has proven itself to be a one-stop shop for every customer. Whether you are a high tech business, med-devices manufacturer, an insurance /banking service provider or a retail organization, SAP Commission’s robust functionality works well for all industries.

I have seen customers moving from Excel or home-grown legacy tools to SAP Commissions. I have also seen customers migrating to SAP Commissions because they had outgrown their current SPM vendors. If you look at the Gartner Magic Quadrant for SPM over the past five years, one constant they cite is the robust functionality of SAP Commissions. The core architecture perfected over 20 years has allowed customers to scale up the software as their businesses grew.

Granted, the last two years have required customers adjusting first to SAP’s ecosystem, and then to HANA. They also had to deal with implementation partners who may not have in-depth product expertise. I was happy to hear that SAP is focusing on SAP Commissions and is investing heavily in ensuring customer success.

Below are ten reasons why I believe businesses are choosing SAP Commissions:

  1. Complexity – SAP Commissions state-of-the-art architecture designed 20 years ago and is updated to scale. It has been the backbone that has handled complex calculations and millions of transactions. There is no other tool that can handle complex calculation, as well as allocate transactions to multiple people based on complex criteria, as done by SAP Commissions. SAP Commissions’ formulas, multi-dimension lookup tables, territories, legal rule editors are the best in the market.
  2. Scalability – SAP Commissions is a one-sized tool that fits for all customers, whether they have 50 people on variable pay or 100,000+.  Many current enterprise customers started their SAP Commissions journey when they were small startups. As they have grown, they have never had to think about switching their SPM tool.
  3. Performance – SAP Commissions can handle millions of transactions for their customers. The last time performance metrics were published, their average calculation runtime was less than 30 minutes. For smaller payee/transaction customers, this means a calculation runtime of minutes.
  4. Auditing – SAP Commissions provides extensive auditing functionality allowing customers to be SOX compliant. Audit logs can be easily extracted and reported on.
  5. User Interface – SAP Commissions’ new UI is easy to use. Its task-based functionality using the Walk Me feature makes it much more intuitive. Navigation is seamless and response to the queries is fast. Research Views allows customers to trace from transactions all the way to payments.
  6. Effective Dating – SAP Commissions’ pervasive effective dating functionality is across all its objects, allowing users to make changes at the granular level. This ensures accurate calculations without any workarounds.
  7. Integration – SAP Commissions leverages SAP’s Cloud Platform Integration and Smart Data Integration tools to connect to other applications like SAP ERP, Successfactor, Salesforce.com, NetSuite, Workday, and ADP to bring the data into SAP Commissions and push the data back. Spectrum was the first partner to use CPI for integration with SAP Commissions and had first-hand experience with SAP CPI.
  8. Dashboard – SAP Commissions’ dashboard and widgets are rule-based and easy to configure. They can be updated in minutes and do not require IT involvement. Given that dashboards are dependent on rule configuration, it is recommended that they are designed sooner and not left till the end.
  9. Workflow – SAP Commissions provide out-of-the-box easy to use Communicator workflow, which allows configuration of plan distribution and dispute management. For customers having complex workflow requirements, SAP Commissions come with Enterprise Workflow applications.
  10. Analytics – SAP Commissions comes with a built-in SAP Analytics Cloud license for users to access pre-built analytics reports via Performance Optimizer. Customers can purchase enterprise SAP Analytics Cloud license to build additional analytical reports and dashboards.

The SPM market is crowded, with the various options seemingly quite similar. SAP Commissions is a great solution for many companies. If you are evaluating SAP Commissions, feel free to reach out to me . I’d love to have a conversation about how it best fits your needs and your best steps for getting started.

Read more from Abhijit and about SAP Commissions:

How to Implement Commission Capitalization Using SAP Commissions

From SAP/Callidus to Spectrum: Q&A with Abhijit Sant

Spectrum Technologies Welcomes Abhijit Sant as Senior Vice President of SAP Practice

Beyond Commissions Basics: How to Implement Commission Capitalization (ASC340-40) using SAP Commissions

Beyond Commissions Basics: How to Implement Commission Capitalization (ASC340-40) using SAP Commissions

by | Apr 22, 2020

As a result of ASC606, there is a continuous need from Commission Accounting to capitalize commissions. Businesses are in dire need to automate the manual process of capitalizing commissions in order to comply with ASC606. As long as the function can be narrowed down to commission capitalization and not revenue recognition, SAP Commission’s built-in rule writing functionality can solve this problem by allowing companies to spread the commission payment over the contract term. Spectrum has leveraged that functionality and has built a commissions capitalization solution for our customers without requiring them to purchase additional software.

What is ASC 606 and ASC340-40

ASC 606 focuses on the transfer of control rather than the satisfaction of obligations prescribed by ASC 605. The underlying principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that they expect to be entitled to in the exchange for goods and services provided. A five step process has been designed for individual or pools of contracts to keep financial statement preparers focused on this principle. The steps include:

  1. Identify the contract(s) with a customer
  2. Identify the performance obligations in the contract(s)
  3. Determine the transaction price
  4. Allocate the transaction price to the performance obligations in the contract(s)
  5. Recognize revenue when or as the entity satisfies a performance obligation

ASC 606 requires more comprehensive and detailed disclosures than what is currently required under ASC 605.  ASC340-40 deals with Commission Capitalization.

Implementing ASC340-40 using SAP Commissions

Commissions customers for whom ASC340-40 rules apply, need to spread commissions capitalization over the contract term. Contracts could be a one year or ten  year contract. Each company has different rules with respect to how to spread the commissions over the contract period. Spectrum has built functionality using the SAP Commissions application allowing customers to define commission capitalization rules down to the contract or customer level. In addition, we have developed easy to follow out-of-the box reporting and the ability to integrate with the ERP systems to enter journal entries.

  • Defining Commission Capitalization rules / criteria — Spectrum is using SAP Commission’s features including state-of-the-art rule writing to define the commission capitalization criteria. SAP Commission’s calculation/ pipeline process takes these rules into account and calculates how to distribute commissions over the contract term.
  • Reporting – Spectrum has built out-of-the-box reports to show commission capitalization over the contract term at the lowest granularity required. These reports can be configured to meet customer requirements. For SAP Analytics customers, Spectrum has created analytical reports that show slicing of these information.
  • Integration – Spectrum can integrate with your preferred ERP to send journal entries automating using SAP Cloud Platform Integration (for HANA customers) or Connect Enterprise (for Oracle customers).

If you are interested in learning more about Spectrum’s commission capitalization functionality for SAP Commissions, feel free to contact me.

This post is part of series by Abhijit Sant on 21st Century Commission Calculations – taking your SAP Commissions implementations beyond the basics.

About Abhijit Sant:

Abhijit Sant is the Senior Vice President at Spectrum Technologies leading SAP Practice. Before, joining Spectrum, Abhijit worked for SAP / CallidusCloud for 20 years in many roles including North America Implementation and Business Development Vice President.