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Sales Performance Management


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Sales Performance Management

  1. 1. Sales Performance Management Improving the Performance of Sales Organizations to Maximize Strategic Value Executive Summary Sponsored by Aligning Business and IT To Improve Performance Ventana Research 6150 Stoneridge Mall Road, Suite 350 Pleasanton, CA 94588 (925) 474-0060 Copyright Ventana Research 2008 Do Not Redistribute Without Permission
  2. 2. Ventana Research – Sales Performance Management MEDIA SPONSORS © Ventana Research 2008 Page 2
  3. 3. Ventana Research – Sales Performance Management Pleasanton, California April 2008 Ventana Research performed this research for a fee to determine the needs and practices of organizations that use sales performance management in their organization. This document is based on our research and analysis of organizations that we deemed qualified to participate in this benchmark. This research was designed to investigate the practices and needs of individuals and organizations that use or plan to improve sales operations and performance practices and processes. This research is not intended for use outside of this context and does not imply that organizations are guaranteed success by using only these results to improve sales performance. Moreover, gaining the most benefit from sales performance management requires an assessment of your organization’s unique needs to the benchmark to determine the gaps and priorities for improvement. We certify that Ventana Research wrote and edited this report independently, that the analysis contained herein is a faithful representation of our evaluation based on our experience with and knowledge of compensation management, and that the analysis and conclusions are entirely our own. © Ventana Research 2008 Page 3
  4. 4. Ventana Research – Sales Performance Management Table of Contents Executive Summary ........................................................................................ 5 What To Do Next ............................................................................................ 7 Assess your organization’s maturity and invest for improvement. .................... 7 Focus on the benefits of investments in sales performance management. ......... 7 Invest in sales performance management to increase effectiveness and efficiency. ................................................................................................ 7 Integrate Sales Performance Management systems into key existing enterprise systems. .................................................................................................. 8 Understand what you really need. ............................................................... 8 Plan your program for sales performance management. ................................. 8 How Ventana Research Can Help ...................................................................... 9 About Ventana Research ................................................................................. 10 © Ventana Research 2008 Page 4
  5. 5. Ventana Research – Sales Performance Management Executive Summary Managing sales performance is a key activity for organizations that want to maximize the value of their sales organizations. But sales performance management and the activities and systems that support it, from sales compensation to sales forecasting, are relatively young and not yet well established as enterprise systems. Nonetheless, Ventana Research believes an investment in sales performance management, wisely done, is a strategic step toward improving an organization’s performance, and our new benchmark research confirms this. Our research examined strategic directions in sales performance management, evaluated the maturity of sales performance management deployments, identified best practices and explored where organizations need education to improve their processes and systems. It reveals mixed feelings about the state of compensation practices. While almost four-fifths (79%) of the participants in this research told us they believed it is very important to improve sales operations and performance, far fewer – only 41 percent – said they are confident or very confident that their organization currently manages its sales operations and performance effectively. Together, these findings indicate that many participants see a need for improvement. The research uncovered numerous dysfunctions in the management of sales organizations that are motivating organizations to explore new investments. The most common problems, we found, are scattered information, which was cited by more than half of the participants, followed by inconsistent execution (47%) and lack of process (38%). These impediments are direct reflections of the state of organizations’ maturity in sales performance management, serving as indicators that they have not invested in the dedicated applications that would help improve these processes. While sales force automation (SFA) has played a role in improving the functioning of both the sales pipeline and account management processes, it has been adopted in only 42 percent of organizations, and satisfaction with SFA remains low, at only about 40 percent in those organizations. Our research indicates that of the four components of every functioning organization – people, processes, information and technology – the need for improvement was greatest in the process realm; in our Maturity Model analysis we found process maturity trailing the other components. The research reveals that many companies have information scattered across unconnected silos of systems and information repositories; 51 percent of organizations ranked scattered information at the top of their lists of impediments to optimal sales performance. On the other side of the coin, participants told us they want to address their sales performance largely to make sales performance strategic and to increase accuracy. As well, organizations say they must integrate their sales compensation system with accounting, payroll and SFA. Organizations seeking to improve sales performance management face many obstacles, we found, chief among them lack of confidence and problematic information access. Moreover, spreadsheets are the technology most used to manage sales compensation, and organizations reliant on this personal productivity tool face a challenge is developing an enterprise system that can work across the sales organization. Spreadsheets are error-prone and difficult to monitor and audit, versions proliferate and emailing and shipping them from server to server is neither an efficient nor a safe method for managing sales. © Ventana Research 2008 Page 5
  6. 6. Ventana Research – Sales Performance Management The majority of organizations identified Microsoft Office, Microsoft SQL Server and Microsoft SharePoint as the products they use for sales-related operations and performance management activities. This is an environment within which it is difficult for organizations to achieve the goal of managing sales effectively. Most organizations have not yet realized the value of applications designed specifically to enable sales performance management. Participants ranked many such applications, like quota and territory management, compensation modeling and asset management, lowest among the functional business areas they plan to address in upcoming deployments. The top two sales compensation management capabilities that participants told us they wanted were providing visibility on progress to sales forecasts and goals (49%) and being able to determine the performance of individual sales reps (44%). When we asked them about design and tracking capabilities, they asked for the ability to calculate sales commissions accurately (36%) and to design sales incentives to achieve business goals (31%). These findings are a clear indication of the importance of taking charge of sales compensation and sales forecasts – that is, of operations, finance and sales management being able to know more accurately where they should focus their time and resources. Our research also found some willingness to consider new approaches in how to access sales performance management software. The traditional approach of managing applications on the company’s own premises still leads (50%), but we found openness to using on-demand systems was quite high (27%), while interest in applications hosted by a third party (7%) fell behind those with no preference (16%). Viewed another way, in the aggregate half the research participants declared themselves open to considering new application delivery or access methods. In addition, more than a quarter of organizations are deploying these applications across all levels of the sales organization, the business, the channel and the operations teams. This also supports the research finding that usability and functionality are the top two considerations for selecting a vendor’s products. Our analysis indicates that for an organization to adopt sales performance management successfully, having the right leadership and sponsorship are essential. In fact, executive sponsorship (46%) is the most important factor in making a successful business case for sales performance management software, followed by having resources available to implement and deploy (43%). The finance department plays a very important role in these initiatives; only 18 percent of organizations do not have finance involved at all. Sales organizations that want to raise their strategic value to the organization should work closely with finance and operational management to develop and refine an efficient process that can meet the expectations of both executives and individuals. Sales performance management is evolving into a category of applications that can contribute significantly to enabling an organization to manage operations and performance to the desired results. If used properly, it can help the organization understand how to get full value from the talent of its sales force. Used optimally, it can even deliver a competitive advantage. Ventana Research advises businesses looking to innovate to add sales performance management as a capability and an investment priority. © Ventana Research 2008 Page 6
  7. 7. Ventana Research – Sales Performance Management What To Do Next Improving sales performance is a primary motivating force for most businesses that rely on a sales force to generate revenue. Thus, assessing and improving sales performance management processes is not just important but imperative. By ascertaining your organization’s maturity in this area and its shortcomings, you can focus your investment of money and manpower to ensure that you manage sales both efficiently and effectively by aligning it to your organization’s performance goals. We address the following recommendations to executives and managers in sales, finance and operations who are engaged in evaluating or implementing improvements to sales performance management processes and systems. They are derived from the results of this research, from our consultation with clients and from our knowledge of best practices involving people, processes, information and technology. Assess your organization’s maturity and invest for improvement. We assess organizational maturity using a four-level scale. In this benchmark research, the distribution of maturity levels among participating companies was fairly even but skewed somewhat toward the higher end. We found that slightly more than one-quarter (27%) of organizations have done sophisticated sales performance management deployments and are at the most advanced Innovative level of maturity. Those at the intermediate levels, Strategic (one step down from Innovative, 35%) and Advanced (another step down, 20%), are looking to satisfy their requirements and address existing impediments but have not done so fully and are still relying on scattered information and spreadsheets for sales performance activities. Those at the Tactical (lowest) level (18%) have no plans to improve or deploy specific sales performance and compensation systems for areas that could benefit sales. Use these results to assess your own maturity and to determine where you can apply improvements in terms of your people, processes, information and technology to benefit from sales performance management. Focus on the benefits of investments in sales performance management. Before an organization can take action to begin to realize the benefits of investment in sales performance management, Sales must determine its needs while also considering those of operations and finance. The benefits companies say they most desire are to increase revenue and profitability (70%), improve efficiency of sales processes (54%) and align the sales force to the business’s strategy (52%). The research identified making sales performance strategic as the top ranked driver for improving sales performance. With these benefits and drivers for improvement in mind, determine your own level of desired outcomes and then build a plan that will deliver these improvements. Invest in sales performance management to increase effectiveness and efficiency. Our benchmark research identified a disturbing disconnect between participants’ articulated needs for improving processes and confidence in sales through information and the small number of deployed sales performance management systems. The dispersion of information and the broad reliance on spreadsheets in © Ventana Research 2008 Page 7
  8. 8. Ventana Research – Sales Performance Management almost half (47%) of participating companies are so widespread that even small improvements should yield benefits. Examine approaches such as software-as-a- service that can reduce the time and cost of deploying these applications. Do not expect that the capabilities you need are available from your SFA or CRM systems; they were not designed or intended to be used for sales operations or management needs but rather for the management of the accounts, opportunities and pipeline for the sales organization. Organizations should consider and assess applications that are designed to support specific sales operations, compensation and performance needs. Integrate Sales Performance Management systems into key existing enterprise systems. Some organizations are focusing on sales compensation processes as a sales performance management undertaking. This research found that the integration of accounting (41%), sales force automation (39%) and payroll (35%) systems with the sales compensation system are most important and can help provide the enterprise integration of sales compensation. Unfortunately, participants placed spreadsheets next on the list of importance, reflecting the fact that a majority of organizations use Microsoft Office, including Excel, for their sales management efforts. Your organization should explore ways to streamline the integration process; with a system of record for sales compensation available, the repository can contribute to the delivery of a single view of sales performance at every level, from individual to management. Understand what you really need. Make sure you understand what your management and managers want and need from sales performance management so you can determine the appropriate type of application to use. Specific sales performance management software systems differ in their strengths and weaknesses compared to generic SFA or custom-built systems. Some are better at managing variable pay components, while others have better analytic or forecasting capabilities. By clearly defining your business, user, information and technology requirements, you will be better equipped to evaluate how well providers of sales performance management applications will satisfy your particular needs. Bear in mind that it may be that no single dedicated application will meet all of your sales performance management needs; perhaps bringing together specific capabilities from different systems will be required. Plan your program for sales performance management. In our research, 79 percent of participants said sales performance management systems are very important. This belief and a lack of confidence in existing processes and methods are two compelling reasons to make building a plan for sales performance management a top priority. Enlist sponsors from finance and executive management who will support the required investments and provide organizational leadership for the program and its goals. With improved processes and systems that work together efficiently, you can focus the workforce on driving performance improvement. © Ventana Research 2008 Page 8
  9. 9. Ventana Research – Sales Performance Management How Ventana Research Can Help Ventana Research helps organizations develop, execute and sustain a Performance Management program that aligns people, process, information and technologies essential for success. As an objective, trusted advisor we are your insurance that your Performance Management initiatives drive immediate and long-term improvements to your business. We offer a variety of customizable Performance Services to meet your specific needs including workshops, assessments and advisory services. Our workshops, led by analysts with more than 20 years of experience, provide a great starting point to learn about hot Performance Management topics – from Compliance to Business Intelligence to building a Performance Management strategy and driving adoption of best practices. We also offer tailored assessment services to help you connect the business and technology phases of your project by leveraging our research foundation and Performance Management methodology. We also deliver access to our analysts for trusted and objective advisory services on an as-needed basis to help you keep up with market trends, technologies and best practices. Everything at Ventana Research begins with our focused research on Performance Management. We work with thousands of organizations worldwide – conducting research and analyzing market trends, best practices and technologies with the purpose of helping our clients improve the efficiency and effectiveness of their organizations. Through our Performance Management Community, we also provide opportunities for professionals to share challenges, best practices and methodologies. Sign up for Basic membership to and gain access to our monthly Performance Management newsletter and learn about upcoming educational and networking events – such as webinars, conferences and network roundtables – in your area. We also offer the following membership levels to view entire research notes for expert advice and recommendations: Premium membership: For business and IT professionals* interested in full access to our research notes - including assessments of market impact and recommendations on technologies and trends. Premium Plus membership: Get full access to research notes plus a two-hour inquiry with our analysts on your specific strategy, technology and implementation questions, as well as one research report and other exclusive content such as white papers and presentations. To learn more about Ventana Research services – including workshops, assessments and advisory services – please contact *Premium Community membership is for end-user professionals. Additional services are available for solution providers, software vendors, consultants and systems integrators. © Ventana Research 2008 Page 9
  10. 10. Ventana Research – Sales Performance Management About Ventana Research Ventana Research is the leading Performance Management research and advisory services firm. By providing expert insight and detailed guidance, Ventana Research helps clients operate their companies more efficiently and effectively. Ventana Research delivers these business improvements through a top-down approach that connects people, processes, information and technology. What makes Ventana Research different from other analyst firms is a focus on Performance Management for finance, operations and IT. This focus, plus research as a foundation and reach into a community of more than 2 million corporate executives through extensive media partnerships, allows Ventana Research to deliver a high-value, low-risk method for achieving optimal business performance. To learn how Ventana Research’s Performance Management workshops, assessments and advisory services can impact your bottom line, visit © Ventana Research 2008 Page 10