Our research has found a strong correlation between customer-centric business success and an organization rewarding its employees for doing the right job. Of course, some rewards are tangible ($$) and others intangible (recognition, enjoyment).
When it comes to sales, there’s some debate about just how customer-centric it can be. Especially since most sales compensation plans are oriented towards telling reps to “make your numbers or else.” That may be short sighted (my view) but that’s the way the Real World seems to work.
There are some nifty tools for managing sales incentive compensation, an industry segment usually called Sales Performance Management (SPM). But please note that SPM is part of the broader market for incentive management, which can include other employees and partners.
Callidus Software is one of the “old guard” in the SPM space, with 170 customers acquired in some 10 years in business—in high-tech, telecom and insurance, according to Vishrut Parikh, Director of Product Management. Callidus offers both on-demand and on-premise options to help sales organizations (generally 50 reps or more) maximize sales performance through compensation plans.
What that means is that you can plan and model sales comp strategies, and provide information directly to sales people (to motivate them to sell more of the right stuff) and managers (to keep tabs on what’s being sold). If you don’t think modeling is important, then you probably have never put together a plan and then wished you’d considered scenarios where reps followed it a little too, um, seriously. That can lead to embarrassing meetings with the CFO and CEO.
You see, the corollary to “you get what you pay for” is “be careful what you ask for, because you might get it.” Welcome to the world of unintended consequences.
Anyway, now Callidus has launched a new Commission Manager solution that was written on Salesforce.com’s Force.com platform. Parikh says that although Callidus has its own SaaS-based solution, a native Force.com app integrates better with Salesforce.com’s SFA than a “composite” approach, which should lead to faster adoption.
SPM is an interesting space that I plan to write more about later this year. Compensation drives behavior, so it makes sense to invest in systems to optimize incentive programs. And not just for the sales org.
The industry seems to be moving to a SaaS model, although there are still companies (e.g. banking and financial services) that may prefer to install a solution for security/control reasons. A SaaS-focused player to watch is Xactly, which recently acquired Centive. Earlier this year Steve Cakebread, formerly CFO at Salesforce.com, signed on at Xactly as CFO, which could mean that an IPO is in their future.
There’s also Synygy, which has been around for the better part of two decades, and seems focused on the larger enterprises (typically 1,000+ reps according to its web site). Smaller sales organizations can turn to Makana Solutions, launched just a few years ago.
The Makana web site share some interesting industry stats. I can’t vouch for the numbers, but this is an indication that incentive management is a potentially huge market.
Makana Solutions estimates that 28 million people in the United States are being paid sales or other incentive compensation—that equates to 60,000 companies, or approximately half of all US businesses, and a $500 billion annual payout. Next to salaries, incentive pay is the second-largest line item for many companies, on average accounting for 10 percent of total revenue. Over 90% of companies still struggle with spreadsheets to create and manage their sales compensation strategy. With as many as 40 percent of employees qualifying for some form of incentive comp, managing plan outcomes has become increasingly important and failures have become increasingly expensive.
Thus far, SPM has been a big enterprise concern, but SaaS solutions could change that. Incentive compensation is something every company should manage, and all but the smallest would be wise to move off of Excel to take advantage of modeling and real-time reporting/dashboards to influence behavior.
