Table of Contents
.png)
Sales have never been so hard.
It’s so tough that in 2023, 9 out of 10 sales, finance, and RevOps leaders said they were failing to hit their sales quota targets. Poor time management, misaligned sales activities, and Market conditions were among the top reasons cited.
If you are also in the same boat, sales performance management (SPM) can help you, no matter whether you are struggling to achieve your objectives or are simply looking to optimize your current sales strategy.
Read on to find out what SPM is, how it can benefit your organization, and how to manage sales performance yourself.
Let’s get into it.
What Does Sales Performance Management Mean?
Sales is a complex business (and you already know that). Creating a successful sales strategy requires aligning numerous smaller but equally important factors, such as managing target markets, training and motivating sales reps, and improving the accuracy of sales forecasts.
Each element affects the others. For instance, the size and number of your target markets will inherently influence the structure of your forecasts, which subsequently impacts how you incentivize your individual sales reps.
For that reason, smart SPM strategies take a holistic, big-picture view that leads to a more efficient sales operation.
5 Key Components of Sales Performance Management
Here are the most important factors for building an SPM strategy.
1. Comprehensive planning process
A successful SPM program begins with extensive sales planning, as with everything else in sales. It considers:
Optimizing your accounts and target markets in this way provides your sales team with the best opportunity to achieve their quotas. This creates a virtuous cycle: as any seasoned sales professional knows, when a sales team performs well, reps become more motivated to continue doing the right things.
2. Digitized management approach
Transparency is an important element of any SPM plan. Each member of your sales team should understand what’s expected of them, how they can achieve it, and how they are currently performing against quota.
In the past, managing all this was as simple as using a few hand-drawn wall charts. However, modern SPM demands a digitized approach, incorporating a log of agreed individual objectives, virtual sales dashboards, access to training resources, and more.
3. Incentives
Creating a well-designed commission structure goes beyond simply telling your sales reps, “The more you sell, the more you earn.” You want to incentivize the right kinds of sales behaviors, such as targeting specific types of customers or promoting certain products. That way, your sales reps will inevitably focus on activities that benefit your business most, making it more likely you will hit your targets.
For that reason, setting sales incentives is rarely a one-time task. More often than not, they will require regular updates to make sure your sales team capitalizes on new opportunities, priorities, and products. Incentives must strike a balance between being flexible enough to adapt to market changes and stable enough for sales reps to understand what’s expected of them clearly. It’s a delicate balancing act.
4. Analysis
SPM should never be based on your gut feeling. Instead, you should focus on capturing useful sales data and analyzing it regularly to inform your direction. Because if you fail to understand how well your processes and systems are working now, how will you make them better?
Ideally, you also want to determine how you perform against industry benchmarks. If your competitors have higher average total contract values or conversion rates, you need to understand why you are falling short. Then, you can course-correct fast.
5. Forecasting
Analysis leads us to another important component of SPM, that is accurate forecasting. The more accurately you can forecast changes in demand for your product or service; the easier it will be to adapt and succeed. However, only 45% of sales leaders have high confidence in the accuracy of their current sales forecasts.
5 Clear Benefits of Sales Performance Management
The ultimate goal of sales performance management is to create a high-performing sales function. But what specific advantages does it offer? Let’s explore:
1. Increased revenues
By improving efficiency, SPM boosts sales productivity metrics, which drives higher revenues. Top-performing sales teams are far more productive than their lower-performing counterparts: for every dollar invested in sales, teams in the top quartile achieve over 2.5 times greater gross margins than those in the bottom quartile.
2. More motivated and better-trained reps
When you have clear goals and provide your sales reps with the required training, tools, and processes to achieve them, they naturally feel more motivated to perform because they are set up for success.
3. Clearer forecasting
Accurate sales forecasting is a huge challenge for many businesses. In fact, fewer than one in four sales organizations achieve a sales forecasting accuracy of 75% or higher.
While sales performance management won’t provide a crystal ball, it does provide you with the tools and data needed to create more reliable sales and compensation forecasts.
4. Strong sales culture and lower turnover
Your sales team's culture reflects not only what you aim to achieve but also how and why you’ll achieve it. Building a positive culture is far easier when you have a strong SPM strategy in place to support and guide your sales reps.
Creating a positive culture motivates your sales reps to hit their goals. Sales reps are 2.6 times more likely not to look for another job when they strongly agree that they feel motivated at work.
5.Data-driven compensation and higher quota attainment
Implementing an SPM system reduces the chances of underpaying or overpaying sales reps. When reps know they will be fairly rewarded for their efforts, they are more likely to be motivated toward hitting quota.
This also feeds back into retention. Sales reps who feel they are not being paid fairly will soon apply for another job, which goes to show the importance of a comprehensive SPM plan.
What to Look for in a Sales Performance Management Software?
Choosing the right SPM software will help to improve the sales efficiency of your team by leaps and bounds. But, before making your decision keep these 5 factors in mind:
1. A centralized solution
SPM is a web of interdependent functions in which each part of the process influences the other. Relying on multiple solutions for your SPM program may not be the best use of your time and can sometimes even be counterproductive.
Adopting a centralized solution helps for accurate tracking of sales metrics at any scale across teams, for faster data consolidation, and simplifies analysis significantly.
2. Real-time performance tracking
Time is of the essence in this hyper-competitive world. Traditional performance reports are useful but limited to only showing past events. When you analyze, identify trends, and predict any failure, it might already be too late to make that right fix.
Real-time performance tracking helps to identify problems faster and take immediate action.
3. Adaptive and scalable
As your business grows, so does the number of teams, processes, and employees.
Sales managers should configure these changes with their SPM tool quickly to prevent any lead leakage or conflicts. The tool you choose should be capable enough to scale, and intuitive enough for new members to use it easily.
4. Gamification
Gamification can increase a company’s productivity by 50% and employee engagement by 60%.
Most competitive SPM softwares in the market today are built with psychological principles in mind. Features such as leaderboards and achievement recognition not just keep employees motivated but also help improve their performance.
5. Insights and forecasting tools
Your SPM software should be able to analyze performance data and identify patterns that can affect your sales performance.
With the help of sales forecasting, sales managers can share data about future sales with finance, supply chain, and the other departments of the company for better decision making. So, ensure your SPM software has the features to use the data points your sales teams generate daily!
5 Keys to Successful Sales Performance Management
1. Transparency
Transparency will help your sales team understand their compensation plans and earnings. Sales professionals should have clear visibility about how much they are making, how are they getting paid, and when are they getting paid.
This keeps them motivated to hit their quotas and achieve goals. A transparent incentive plan also validates processed POs, closed deals, and completed paperwork. This creates a direct link between effort and reward.
2. Payment Timeline
Pay your sales team members quickly and frequently to sustain motivation. Monthly payouts are more helpful than quarterly or annual payments.
Remove caps on commissions to motivate your sales team to chase larger opportunities without feeling constrained.
3. Smart Quotas
Set quotas for individual sellers, considering their potential, territory, and abilities. Quotas should be measurable, attainable, and aligned with specific objectives.
Avoid overly complex structures that divert attention from selling, and instead, prioritize achievable goals that drive performance.
4. Alignment
Align compensation plans with company KPIs and objectives, down to the territory level. Incentives and quotas should reflect market challenges, and potential as well as the regional differences. Fairness and equity in opportunity help sellers stay focused and motivated and minimizes concerns about unequal territories or quotas.
5. Analytics and Evidence
Use data to take informed and evidence-based decisions. Analytics help change overwhelming data into actionable insights by predicting performance and forecasting trends. You can turn data into a competitive advantage by continuously refining transparency, quotas, payouts, and alignment.
Sales Performance Management vs. Incentive Compensation Management (ICM)
ICM is one of the core components of SPM. It joins quota and territory planning as the three elements that make up a well-rounded SPM strategy.
If ICM is a subset of SPM, you might ask why the two concepts are used interchangeably. This is because of the significant influence that ICM has within SPM.
Quota and territory planning are only performed periodically. The processes involved in planning for these areas are simple enough that most businesses just need a little more than a spreadsheet to do them well.
But, incentive compensation is an ongoing process that requires continuous performance monitoring, adjustments, and payouts. ICM is far more complex than quota or territory planning, especially for businesses with more than a handful of sales reps.
Although many businesses try to use spreadsheets for ICM, it isn’t a reliable long-term solution. Using spreadsheets for ICM is incredibly time-consuming, fails to provide transparency, lacks security, introduces errors and redundancies, and is unable to scale with a business. By the time your team grows to around 50 sales reps, spreadsheets will create more problems than they solve.
5 Steps for Implementing Sales Performance Management in Your Organization
Now that you know why SPM is important for your sales teams, let’s look at how to implement an SPM process in your organization that gets results.
1. Identify sales performance metrics
The first step is to define your sales performance metrics. These metrics should align with your business objectives so that your sales reps understand how their efforts directly impact the company’s success.
Here are some sales performance metrics to use for your sales reps:
a. Lead-to-opportunity conversion rate
Lead-to-opportunity conversion rate refers to the number of leads your sales reps convert into customers. Ultimately, your goal is to get paying customers, so the lead-to-opportunity conversion rate is a performance metric that aligns closely with your business goals.
If the conversion rate is not as high as expected, you should look into why. Perhaps your offer isn’t attractive, or maybe your sales rep is not selling the benefits.
b. Sales quota attainment
Looking at your conversion rates will give you insights into the number of deals required to meet your targets.
And sales quota attainment shows you how close you are coming to those targets. As an important part of the SPM strategy, tracking the sales quota attainment metric shows you how well your sales team is performing at an individual level and as a whole.
You can also compare it to other metrics, such as the lead-to-close rate, to determine whether quotas are realistic or need adjustment to maintain sales reps' motivation.
c. Sales productivity metrics
The rate at which your sales reps achieve their quota and the activities they spend time on is recorded by the sales productivity metrics.
Examples of some sales productivity metrics include the percentage of:
Once you have identified the sales performance metrics you will use, you need to inform your sales team. This communication process will help your sales team to digest the information.
At this stage, it’s important to have an open dialogue about company objectives and goals to ensure your sales team is on board. If they raise genuine concerns, adjustments should be made as needed. You can also clarify the rationale behind the goals and explain how they will be used to recognize and reward top performers.
2.Provide feedback and training
Determine the training resources and tools needed by each sales rep.
Allocate time in their schedule for both individual learning and formal classroom training. You will also need to assign SMEs or mentors who can provide training and mentoring.
Create a performance plan that includes sales performance quotas as well as learning and development targets.
You will need to schedule regular performance reviews to:
3. Cut and assign territories
The next step is to allocate and assign territories strategically to optimize the efficiency of your sales team.
It’s important to ensure that your sales reps don’t step on each other’s toes. They should have enough prospects to work with, and top performers should be working on the most valuable accounts.
Good sales planning involves analyzing performance by territory to ensure resources are allocated appropriately.
4. Create a healthy level of competition
Sales reps thrive off competition, and a sales leaderboard is an excellent way to keep them motivated. You can create leaderboards based on various performance metrics, such as appointments set, deals won, conversion rates, or revenue generated. Run separate competitions and offer performance incentives to inspire and energize your sales teams.
No matter the approach, leaderboards provide reps with real-time insights into how they stack up against their teammates.
5. Monitor rep productivity
Finally, you should monitor your sales reps’ performance daily to understand exactly what they are doing. By tracking their activity, you will know when to train them based on their skills rather than effort.
Are they covering their territory and making the expected number of visits but struggling to close deals? Or are they taking too long to reach appointments, resulting in missed sales opportunities?
Tracking sales rep productivity helps to improve accountability in the field.
5 Tips to Improve Your Sales Performance Management Process for Better Results
1. Build transparency
You have probably noticed a theme as you read through the rest of this article. Transparency is a big factor in team performance. Without it, your team will always struggle with communication breakdowns and trust issues that hurt sales performance.
Here are a couple of tips that will help you make immediate progress in developing transparency in your sales team:
Speaking of incentive plans…
2. Create a useful incentive plan
Top-performing sales teams financially incentivized their reps. Your compensation plan should motivate your team members to move in the right direction and tie their financial success to your business growth.
The most obvious way to do so is by offering bonuses and scaling compensation to meet performance goals.
You can also provide other types of incentives, such as opportunities to chances to share in company profits, earn shares in the business, special recognition, extra time off, and some major contest prizes. See what motivates your sales reps and test creative ideas.
As you build this plan, keep track of how much of their pay will be incentivized and how much their base salary will be. If you choose to offer spot incentives based on performance, how frequently will you use them to drive results?
Finally, carefully consider things like payout frequency, eligibility, and overall cost. The goal is to increase your team’s motivation and link a financial reward to good results in a way that is mutually beneficial and financially sustainable for everyone.
3. Give your sales reps the content they need to close deals
Have you ever attempted to complete a task without the proper tools? Frustrating, isn’t it?
Sales enablement content is an important tool for your sales reps. It helps inform prospects, creates credibility, and reduces the time and effort required to move prospects through the pipeline.
If you don’t have a content strategy in place yet, now is the perfect time to create one. Ask your reps what kind of content they need to do their jobs.
If you already have content, see if your sales reps are using it the way you thought they would. Content management is another part where sales teams often lose efficiency, which drains their performance. Use a sales tool that will help your reps quickly find, customize, and send content as needed.
4. Encourage friendly competition
Healthy competition is a hallmark of many high-performing sales teams. This kind of positive and motivating competitiveness can only happen when:
Teams have the tools they need to do their jobs well
Your sales reps feel confident that they can reach their goals
It’s easy to track results
Everyone has access to performance information
That’s where a sales leaderboard can help. Posting performance results publicly encourages peers to motivate one another and themselves to go the extra mile.
Amplify the effect by hosting incentivized contests in which an individual rep or team can earn a reward for top performance.
5. Take advantage of sales automation
If you remove all the hurdles, your sales organization will perform much better.
Calculate how much time an average sales rep spends on non-selling tasks. Manual data entry alone consumes hours each day, and when you add up the time spent filling out form fields over a month, the total is astonishing.
That’s where you can use automation to your advantage. With sales automation tools at their most advanced and cost savings at an all-time high, there’s never been a better time to make use of them.
By automating manual tasks, you can not only see an immediate boost in productivity but also a shorter sales cycle for your prospects. Plus, you will see fewer errors in your data, and your sales reps will make more money.
Final Words
Sales management goes beyond excelling as a sales representative. It requires a deep understanding of the sales process, the target audience, and the ability to inspire and guide your team.
Sales performance management (SPM) provides a comprehensive approach that examines all the moving parts of your sales operation and analyzes their metrics. By focusing on performance data, you can address challenges, optimize processes, and achieve and even surpass your revenue goals.
.svg)
.png)
