The Hidden Analytics Behind Effective Sales Compensation Programs

Sales compensation can be a great way for businesses to promote consistent growth, but it’s not always implemented strategically. When sales compensation is just another way to pay people, it may not provide consistent revenue generation or effective compensation to hard-working salespeople. With this guide, you can understand how analytics tools can help you overcome the sales challenges facing your organization. 

Challenges to Sales Compensation Programs 

Sales compensation programs face a number of challenges that can affect long-term sales success. 

Compensation Is Misaligned with Employee Expectations 

The most obvious problem is a misalignment between the compensation and employee expectations. The joke about not being able to pay your mortgage with “exposure” may be trite, but the principle still applies. Compensation needs to match what employees are expecting, what they can reasonably reach, and what they could get elsewhere with a similar effort. If you aren’t offering your salespeople something competitive enough to keep them engaged in selling, they will either leave or do the bare minimum not to get fired. 

Salespeople Lack Support to Reach Quota-Based Compensation 

You could have the greatest compensation program ever, but it won’t make a difference if your salespeople cannot attain it. Some organizations set benchmarks so high that salespeople can work relentlessly and still earn only their base salary. In certain cases, the compensation requirements are reasonable for some, but out of reach for those with less experience. In either situation, the inability to reach compensation goals may cause salespeople to stop trying, resort to shady tactics to boost their numbers, or get a job elsewhere. 

Compensation Becomes Disconnected from Strategy 

Sales compensation programs provide a necessary component of the sales process, but they must be deployed appropriately for the salespeople and company strategy. Some compensation programs rely on metrics that are too easy to game, like getting a certain number of people in the door but not requiring the salesperson to get them to buy anything. Others encourage salespeople to make the most minimal sales possible, instead of working harder on cultivating customer relationships that last longer. Either case leaves the company paying compensation without a strategy to sustain long-term revenue. 

Benefits Are Applied Inconsistently 

A lack of follow-through on compensation can create a number of problems for businesses, as well. If the system for tracking compensation is siloed from payroll or poorly supported, even salespeople who meet quotas may not get what they’re owed. For example, a salesperson may be due a significant bonus during a given pay period, but payroll processing delays prevent timely payment. Inconsistent application of compensation makes salespeople question whether the work is worth it at all, even the benchmarks they can easily achieve. 

Companies Can’t Tell if the Program Works  

Too many companies go through the work of implementing a sales compensation program, only to take a set it and forget it approach. If you want to know how well the compensation is appealing to the employees, and the tactics they use to meet quotas for the program, you have to track it. Tracking requires a system that collects data and compares it to metrics necessary for long-term sales success. Otherwise, when something goes wrong, you may have no idea why or what you could have done differently. 

How to Track Efficacy of Sales Compensation Programs 

Integration of a sales performance management system can address many of these issues, with the right implementation. 

Set Sustainable Metrics 

A proper SPM implementation starts with sustainable metrics that will help you discover what you need to do to achieve success among your sales team. Common metrics for a sales compensation program might include: 

• The number of salespeople attaining quotas within a given time period 

• Salesperson earnings in relation to actual sales 

• Close or win rates 

• Revenue generated from a single deal over time 

• Total costs in relation to revenue generation 

These metrics can help determine if your salespeople are doing the bare minimum or skipping steps to game the compensation system. 

Track Sales Processes 

In order to get the data you need, you must have more insight into sales processes. When a salesperson pursues a lead, organizations should track the offers presented and the tactics used to close the deal. For ongoing customer relationships, monitor how salespeople work to retain customers and the types of incentives they offer for continued purchases or service. Allow salespeople to track this information electronically and compare the data to revenue generation and other metrics concerning sales. 

Generate Insights About Compensation’s Effects on Sales 

Once you have the data, you can start to look for holes in your compensation program. If salespeople are consistently falling short of quotas, you may need to increase support or lower them to make them achievable. Conversely, if everyone achieves quota every time, you may need to raise the bar. If the compensation is imbalanced compared to revenue generation, you can adjust the types of goals or the compensation to restore that balance. 

Utilize Predictive Modeling and Scenario Testing 

You may not know how well your tweaks to the compensation program will work, but predictive modeling and scenario testing can help you paint a picture. Create a representative salesperson and run through different types of actions they can make that earn them compensation. Utilize different scenarios that help you assess how the program works for salespeople if you raise quotas, change compensation structure, or adjust the number of leads. 

Integrate Tracking and Compensation Systems  

To ensure that salespeople get what they earn, the tracking system for compensation should be integrated with the company’s payroll system. Salespeople should be able to view at a glance their quotas and other requirements, along with bonuses and other compensation they have earned during the pay period. This integration helps to boost recognition and provide critical transparency for the program. 

Employ Real-Time Dashboards 

Visibility is the key to making all this effort useful and sustainable. Real-time dashboards help salespeople track their progress and use insights to increase their earnings. Organized data assists sales managers in tracking the productivity of individual salespeople and identifying minor issues before they turn into major problems. Quick updates and adjustments can help struggling salespeople correct course, while rewarding high performers in a timely manner. 

Sales drives organizational revenue, making it a critical function that requires effective and timely compensation. By implementing analytics tools, you can assess the viability of your sales compensation program, identify misalignment between sales compensation and strategy, and pave an effective path for salespeople and the company. 

Guest Post from Scott Werstlein, Senior VP of North American Sales at OpenSymmetry

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