Adrian Alleyne | Content Strategist | November 30, 2023
What separates a mediocre salesperson from a superstar? Truth be told, there’s no magic formula for creating outstanding sales reps. However, thanks to evolving technologies and smarter use of data, sales organizations are becoming more strategic in their approach to performance, gaining greater insight into their sales processes and the ways to drive success, balance territories, and improve operational efficiencies. This article will delve into some of the key questions that sales leaders have about sales performance management.
Sales performance is a measure of how effectively a sales team delivers against their assigned revenue targets. It doesn’t just pertain to the individual results of each sales rep, but to how well sales leadership plans, forecasts, sets targets, and tracks results for the entire sales organization across territories. Sales performance also measures how well the sales team delivers on targets set by leadership, such as quote-to-close ratio, average sales cycle length, customer retention and churn rate, and customer lifetime value.
Sales performance management (SPM) is the process of gaining visibility and control over the core actions that a sales organization performs. This includes forecasting, planning, implementing, monitoring, and rewarding sales performance. Historically, many of these processes have been done manually. Now, successful sales organizations are adopting advanced digital tools to manage core functions more effectively, such as quota management, territory management, and incentive compensation planning. These digital tools have come to be known as sales performance management or SPM software. These systems are now able to use business data and machine learning in increasingly sophisticated ways, allowing sales leadership to better align broader sales and business strategy with individual sales goals and actions, thereby helping organizations increase revenue.
How do you break out your sales territories? Do you align reps by geography? By product? By industry? How much should your reps be selling? How should they be rewarded? How do you respond to a sudden change in your business environment? These are the types of questions that sales performance management is designed to answer. SPM involves the strategy, tactics, and analytics needed to monitor and improve all the elements that drive a company’s sales efforts. At the highest level, SPM strategy starts with companywide goals around growth, customer satisfaction, and other factors. SPM tactics concern how to ensure that each salesperson can achieve their target results and reach their full selling potential through functions such as compensation, quota setting, training, and pipeline optimization. SPM software supplies the analytics to track and apply these metrics.
Sales performance management solutions evolved from a long history of attempts to optimize people’s work output. The concept of performance management has been around for more than a century, dating back to Frederick Winslow Taylor’s scientific management principles. Applying scientific analysis to workflows over “rule of thumb” judgments, for instance, or reducing discord by establishing a common goal for workers and managers, are principles that can still be seen in modern performance management systems.
The need to identify and measure the most important drivers to achieve organizational goals is a constant in performance management. The technology to do so, however, has changed significantly over time. With the rise of enterprise software in the 1990s, this functionality became automated via incentive compensation management modules within ERP systems. This baseline technology evolved into more sophisticated systems as more data became available to sales organizations and as sales leaders looked to achieve greater operational efficiency.
A company might be able to run its sales organizations with simple territory maps and spreadsheet-based incentive plans for a while, but this approach won’t scale well in the long run. Recent data from Sales Insight Lab shows that 61% of salespeople consider selling harder or much harder than just five years ago. As sales operations become more sophisticated and customer expectations become more complex, robust sales performance management practices are essential.
Here are some of the most beneficial outcomes from SPM.
The components of sales performance management include two distinct elements: the parts and the process. Let’s take a look at both.
At its core, a sales performance management system is made up of three parts:
The sales performance management process is comprised of five cyclical stages:
A complete SPM strategy and system takes both the parts and the process of sales performance management into account, leveraging data via advanced analytics and machine learning to manage each element.
There are numerous benefits to sales performance management at all levels of an organization. These include the following:
Although the potential benefits of SPM are clear, there are several challenges that can hinder the effectiveness of a sales performance management strategy. These include the following:
By now, you should have a clear sense of what sales performance management is, why it matters, and the benefits and challenges it presents. Now, we’ll take a look at the steps involved in implementing the process.
It’s essential to understand the key performance indicators for your sales organizations and to connect that data with broader sales and organizational strategy. Quota management, territory management, and incentive compensation are just the building blocks of your sales metrics. From that starting point, you can drill down further with customized KPIs to help your organization meet its strategic objectives. If, for instance, your organization’s focus is meeting the needs of an established customer base, KPIs for retention and churn, annual recurring revenue expansion, customer lifetime value, and other metrics might be more important than cost per sales-qualified lead.
In a typical performance management scenario, you would communicate the vital sales metrics to your team. However, while it’s important for your sales team to understand what you’re measuring, it’s equally important that you understand your team and what motivates them. That two-way communication should be part of establishing sales plans and goals. Then, your systems should enable sales teams to access sales plans so they can see, forecast, and monitor their own plans.
Even if you have all the right metrics and a collaborative, tightly aligned process with your sales team, none of that matters if you can’t measure the results correctly. Charting a path to sales success requires complete visibility into past results, current progress, and future outcomes—something that manual processes and disconnected legacy systems can’t effectively provide.
Keep in mind that this is an ongoing process, not a set destination. You’re never done. As you learn more based on actual sales performance, you’ll come to understand what works and what doesn’t. This means you need to constantly iterate and refine what you’re measuring and what success looks like. With advanced analytics and machine learning, you can also uncover new insights regarding your sales environment, such as your processes, customer expectations, and competitive benchmarking, so you can continue to adapt and innovate.
As mentioned above, sales performance management offers benefits for all levels of a sales organization. Which is why it is important to measure sales performance at every level. How are your individual sales reps performing? How well have your sales leaders been able to monitor, manage, and coach their teams? How have you been able to execute on your sales strategy, and how did that strategy align to broader company goals? To accurately answer these questions, you have to create the right KPIs and measure them using the right systems and data.
Any sales performance management software should be able to track and monitor sales performance for individual sales reps and teams. It should also feature territory management, quota management, and incentive compensation components. A more robust system will go beyond these basic elements, integrating seamlessly with your core business systems and leveraging AI and machine learning for deeper insights. To derive the greatest benefits, you should seek out software that is comprehensive, intuitive, and clearly built with end users in mind. After all, if your SPM system isn’t easy to use, your salespeople may burn up precious cycles training on and navigating it instead of closing deals and serving customers.
If you’re looking for an SPM solution that can help you increase revenue and reach your company’s broader customer goals, Oracle Sales Performance Management offers advanced tools for incentive compensation, quota management, territory management, and other key functions. Backed by a strong data foundation and machine learning capabilities, the solution helps you increase revenue by aligning individual sales goals with your company’s sales strategy.
What are the five stages of performance management?
The five stages of performance management are planning, managing, rewarding, analyzing, and forecasting.
What are the three types of performance management?
The three most common types of performance management are the balanced scorecard, management by objectives, and budget-driven business plans. The three most common components of sales performance management software are territory management, quota management, and incentive compensation.
How do you measure performance in sales?
To measure performance, you must create and monitor key performance indicators (KPIs) that align with your company’s sales and business strategy. These KPIs often cover the complex relationships between rep performance, territory management, customer satisfaction, cost of sale, and other variables. Sales performance management helps balance these diverse factors.
Oracle’s strong data foundation and breadth of capabilities in Oracle Sales Performance Management position it as the leader in Ventana Research’s 2023 buyers guide.