Once upon a time, organizations calculated commissions by hand. Seriously. Compensation managers pored over contracts and manually figured out how to divvy up commissions. Those old accounting calculators with the spool of receipt paper running out the top were the norm as were stacks of paper and file cabinets lining the walls.
In the 80’s, the process became digitized on Microsoft Excel. Commission managers built complex spreadsheets powered by custom formulas that automatically calculated compensation. Revenue was still manually entered but at least the math was streamlined.
Today, calculating commissions has changed again. This time with Sales Performance Management (SPM) solutions that not only calculate commissions, but can be used to forecast sales and payment commitments, and ultimately, influence sales behavior. Organizations can model proposed compensation plans and see how they will affect sales, gaining valuable insight into how they will impact the bottom line.
Here are three features that you should look for in an SPM solution that can impact sales behavior and better meet the needs of your organization:
It sounds simple, but it really works. Allowing sales reps to tinker with their quotes in real time to see how changing the discounted rate affects their own take-home pay absolutely influences behavior. They’re less likely to over-compensate with massive discounts just to make the sale if they see exactly how much commission they’d be losing.
Reporting for Sales Teams
Transparency is key. Sales reps need to see where they stand—both against their own sales goals as well as against other team members. Seeing that they are a sale or two from meeting quota or hitting a benchmark can be a great motivator.
Managers and business development teams need to be able to see how compensation plans impact sales behavior in real time so they can adapt and make changes on the fly before quarters and other sales milestones close. They should be able to see current and historical sales information as well as have the ability to forecast how changes to compensation plans will affect future sales. This gives them the valuable insight they need to make confident, data-driven sales and business development decisions.
The days of hand-held calculators and Excel spreadsheets are over. SPM solutions give compensation managers and sales leadership the tools to motivate sales behavior in ways that benefit the business. These SPM solutions need to give sales teams visibility into how different quotes impact take home pay and where they stand in terms of meeting quotas and other milestones. They also need to give management teams insight into how compensation plans impact the bottom line so they can adapt and make appropriate changes on the fly.
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Config Consultants is a systems implementer focused on creating Digital Transformations strategies. Our A5 methodology modernizes your lead to cash process and makes your supply chain lean by leveraging industry-leading packaged software, such as Salesforce, Oracle, Apttus, and Anaplan.
By Michael David, Practice Director & Senior Solution Architect at Config Consultants