Ultimate Guide to Sales Performance Management in 2023
If you aren’t investing in Sales Performance Management (SPM) to analyze and improve your sales team’s performance, you are missing an opportunity to create massive value for your team and your organization.
Investing in sales performance management is essential for any large sales organization looking to continue growing in the rapidly-changing modern marketplace.
So, what is SPM, and why is it worth investing in?
The Ultimate Guide to Sales Performance Management
- A Simple Definition of Sales Performance Management
- Why Does Sales Performance Management Matter?
- Incentive Compensation Management vs Sales Performance Management
- Key Factors That Affect Sales Performance
- Sales Performance Management Best Practices
- Components of a Winning SPM Strategy
- How to Measure Sales Team Performance
- Key Sales Performance Management Metrics
- How to Improve Poor Sales Performance
- Quick Tips to Improve Sales Team Performance
A Simple Definition of Sales Performance Management (SPM)
Sales Performance Management is the practice of guiding sales professionals to achieve organizational objectives. That is and always has been what sales managers and leaders do.
Over the last two decades — largely thanks to marketing created by Sales Performance Management vendors — Sales Performance Management has been formalized into a discipline with agreed conventions and an accompanying tech stack.The best sales leaders have one thing in common: They excel at data-driven sales performance management. #sales #spm Click To Tweet
Modern sales performance management involves training, developing, and monitoring individual sales reps and practices to ensure that employee behavior is aligned with business objectives. That is done through performance reviews, skill development workshops and mentoring, sales performance intelligence tools, and qualitative feedback.
Why Does Sales Performance Management Matter?
Sales performance management (SPM) employs a data-driven sales planning, managing, and analysis approach. A structured SPM strategy should include clear goals and objectives, an efficient sales process, and practices that set your sales team up for success.
Here’s why your sales organization needs to implement an SPM strategy:
• It builds a better sales pipeline – With the right strategy in place, you will have the framework needed to convert more leads into sales.
• It improves sales forecasting – A sales performance management system can provide valuable analytics, allowing your organization to predict future numbers better.
• It reduces turnover – The correct strategy aligned with the right incentive opportunities will better engage your sales team and increase retention.
• It improves sales rep performance – A performance management strategy keeps your sales reps motivated, helping them drive more revenue for the company.
• It makes compensation management easier – With an SPM system, your organization can better design, execute, and optimize your variable compensation plan.
Incentive Compensation Management (ICM) vs. Sales Performance Management (SPM)
Incentive Compensation Management (ICM) and Sales Performance Management (SPM) are often used interchangeably since both are concerned with aligning sales rep behavior with business goals.
Several legacy SPM solutions have tacked-on functionality that allows for calculating and communicating sales compensation. However, there is a significant difference between the two functionalities.
Sales Performance Management is an umbrella term for any management of the sales process and team. That means day-to-day hiring, training, and development of the sales team, sales ops, sales performance intelligence and analytics, and sales comp planning and management.
Incentive compensation is a subset of SPM that focuses on the reporting and administration of sales compensation. ICM solutions primarily deal with the operational aspects of calculating sales representatives’ pay, including commission calculations and crediting rules. These solutions occasionally include quota setting and territory planning functionality as well.
All ICM solutions are a type of SPM solution. But not all SPM software can do Incentive Compensation Management.
Key Factors That Affect Sales Performance
Several key factors that affect sales performance go widely ignored by most leadership. While many of the factors below are well-known, several sales performance levers go under-utilized in most sales organizations.
Understanding how all these factors interplay will help you leverage them to point your organization in the right direction during planning and course-correct when performance dips.
Although external factors (like the macroeconomic cycle or new regulations and competition) influence sales performance, internal factors have the most significant impact.
External factors cannot be controlled or avoided but can be anticipated and mitigated. How successfully we mitigate external factors depends mainly on internal factors, which we can influence.
1. Your Product or Service
Regardless of your industry, the quality of your product or service will largely determine its sales performance. More and more, the longevity of that performance will depend on the level of customer support you provide customers.
High-quality products and service provision drive sales growth in several ways:
- Increases customer loyalty, leading to higher customer Life-Time Value
- Increases referrals, which increases Net New Revenue and reduces Customer Acquisition Costs
- Increases Return-on-Investment because people will tend to pay more for higher-quality products
- Reduces returns and complaints, which can have a high cost attached and will impact future sales through diminished brand equity
Listening to your customers is vital to ensuring high product quality. Run focus groups, customer satisfaction and perception surveys regularly, and test products relentlessly before release. Detailing your product roadmap publicly can also help to ensure your product continues to be useful for your customers as it evolves.
2. Your Go-to-Market Strategy
While a poor product or service can produce revenue with a well-executed go-to-market strategy, it will always be an uphill battle to maintain.
Your go-to-market strategy is a powerful tool to adjust customer expectations to meet your product or service quality level. It will largely determine the success of your product in the market.
There are several elements to a go-to-market strategy.
Correct pricing is an essential component of the go-to-market strategy. Selling a low-quality product for a high price won’t last long. But pricing your product low can reduce customer expectations. Most people don’t expect high-quality products or customer support for budget items; many will not bother to return ultra-low-priced retail products.
Understanding your customer and their expectations is critical for an effective pricing strategy.
Once you have calculated the cost of raw materials and delivering the product to market, and your minimum acceptable margin, benchmark it against your competitors. If there are significant differences, adjust accordingly, or figure out a message that explains the price difference.
Your product positioning and messaging is critical to your sales performance. It’s a far more valuable aspect of your brand than a logo or color palette.
If your brand story of quality, excellent service, unique experiences, or innovation resonates with your customers, they will often happily pay more to be a part of it.If your brand story of high-quality, excellent service, unique experiences, innovation, or responsibility resonates with people, they will happily pay more to be a part of it. Click To Tweet
Messaging and brand position are particularly important when selling premium products. If customers believe the return (benefit) they get from your product or service is more than the price, they will pay.
Sales & Marketing Strategy
Once you have developed your product positioning and messaging, you put it into the world through sales and marketing campaigns.
Define the sales and marketing strategy together — they are two halves of the same game.
Distribution activities will differ depending on the product and audience. Still, the aim is always the same: educate potential customers about your product story, and build trust until they’re comfortable investing.
Explore your industry and learn where potential customers gather, what they talk about, and the problems they worry about. Then create content that helps them overcome those problems and educates them on your product and service as they progress down the pipeline.
Learning what attracts and persuades your customers is an ongoing process, so do not be alarmed if efforts do not pay off immediately.
Test channels and messaging frequently, and analyze feedback and combined performance data as often as makes sense for your sales cycle.
Budget and Investment
The final component of your go-to-market strategy is the budget. Customer Acquisition Costs will vary between industries and organizations, so this is largely down to your Finance and Exec team and the business objectives.
3. Your Sales Compensation Program
Sales incentives are the driving force behind your sales team’s performance. It provides more leverage on sales performance than most enterprises realize, influencing sales team morale and output.
How Territories and Quotas Impact Sales Performance
Sales territories and quotas have a significant impact on individual sales performance.
The first element is the psychological factor: If your reps don’t believe in their ability to meet targets, they will underperform. Even if they believe in them, if your quotas are not determined on balanced territories, they are unlikely to achieve them.
Traditional geographic territory setting fails to consider the vast variances between territories: competition, saturation, population, potential customer workload, and account growth, to name a few.
It only accounts for one variable when variables like potential new customers are used to determine geographic boundaries. It doesn’t account for things like customer workload or competition level.
That can lead to significant imbalances between territories. Some are under-served, while others are over-served.
Think of it like a busy bar. A constant stream of orders and tips may be good for the barman (the sales rep). But it’s not good for the customers at the back who have to wait to place an order (or go somewhere else to get served), which is not good for the business overall. In an over-served bar, your sellers spend all day chatting to the same few regulars, who always pay the same.
To achieve balance, territory mapping and quota setting should be considered a single exercise, with the territory variables (and individual variables) determining the individual seller’s targets.
Forma.ai creates a custom data model for each customer, which allows us to create indexes for variables like customer workload and account growth potential. We combine them to develop realistic quotas tailored to each rep and their region’s capacity.
That also helps them rapidly adjust to changes, like rep turnover or new products, by entering the new variables into the model to see how they will impact sales volume.To create realistic, balanced quotas, territory mapping, and quota setting should be approached as a single exercise, with the variable integrated to reflect the region's true potential. #salecomp Click To Tweet
How Sales Compensation Function Agility Impacts Performance
While the above is nice in theory, it is beyond reach for many organizations due to their lack of agility in the sales compensation function.
While the data is there, analyzing and presenting findings clearly and promptly is still a significant obstacle for most businesses. Disparate strategic and executional elements are hindered by manual data processing and ineffective tools, limiting business agility.
Organizations built a unified, fully-automated sales comp function can use their incentive program to adjust to changing market conditions and mitigate competitive pressure. They process data rapidly and accurately, so they can model multiple changes and roll out adjustments to sales comp dashboards with minimal effort.
The more agile your sales comp process (from analysis and design to execution), the faster your organization can identify underperformance and course-correct it.
Sales Performance Management Best Practices
Sales management is more than ensuring your team meets its goals and objectives. It requires a holistic approach incorporating several best practices to build a system that works for you.
Let’s look at five best practices for your sales performance management strategy.
1. Base your decisions and strategy on data
Your data is the key to consistently high sales performance.
Too many sales performance decisions are based on gut feel, rigid frameworks, and competitor benchmarking. But the marketplace is constantly evolving, and your customers are not necessarily the same as your competitors. Your sales performance and incentive strategy must be agile, flexible, and unique to take full advantage of that.
Forma.ai is a simulation engine that allows our customers to balance territories and quotas based on real potential and deliver the right incentives at the right time to get the best from their sales team. It helps them quickly identify why territories or individuals are underperforming and map out dozens of potential scenarios to evaluate the impact of changes before they are ever rolled out.
2. Determine Sales Goals & Expectations
Sales management requires clear communication from the sales leader. You are responsible for ensuring that each sales team member knows their goals and expectations. That includes their individual and group requirements.
Communicating your sales compensation plan and performance goals is critical to success. Reps need to know their performance metrics and believe in their ability to achieve them. Sales compensation dashboards are one way to do this, as long as you can maintain them without draining resources.
A data-driven approach means defining sales quotas based on real territory potential and workload, not top-down revenue goals or gut feeling.
Your sales reps may also have individual career aspirations that can help you set goals outside of their quota. As long as their goals align with company objectives, it’s essential to consider them. High-performing companies are twice as likely to offer personalized training opportunities, which may interest growth-minded sales professionals.High-performing companies are twice as likely to offer personalized training opportunities, which may interest growth-minded sales professionals. #sales #salestraining Click To Tweet
3. Motivate Your Sales Team
One of your key priorities in sales performance management is motivating your sales team. That happens with a core sales compensation plan. Organizations with best-in-class sales compensation have more engaged and productive sales teams that produce better results and lower turnover.
Some businesses motivate their sales reps with incentives beyond the core compensation plan. That can include Sales Performance Incentive Funds (SPIFs), President’s Clubs, or sales kickers. These incentives can help close sales gaps, achieve short-term goals, and improve sales performance and rep engagement.
Alternatively, you can motivate your sales team with non-financial sales incentives like recognizing them in the workplace, creating a strong purpose for their job, or allowing for healthy competition with other reps. Understand that each person requires a different motivation method to keep them engaged, and it’s your job as a sales leader to unlock it.
4. Put Your Sales Process First
There is no sales performance to manage without focusing on the sales process. That is your systematic approach to managing your sales pipeline. Your team must ensure that each pipeline stage is given attention, including prospecting, lead generation, nurturing, and closing deals. Your job is to assign each step to a salesperson and communicate the assignments to each team member.
The sales process also includes managing accounts after the deal is closed. Your customers provide selling opportunities through upselling and cross-selling that a salesperson will have to work, and you must focus on all sales process stages to maximize your sales pipeline.
As a sales leader, you should consistently evaluate your team’s sales process. Consider how many new leads they earn, their upsell and cross-sell rates, their sales cycle length, or their client acquisition rates. Have a discussion with them on their process and how they take leads down the sales funnel.
Again, the best way to do this is by building data models that allow you to identify better opportunities in the pipeline, customers that could be upsold, and even how many reps to commit to a new market when scaling.
5. Ask for Feedback
If you want to go fast, go alone; if you want to go far, go together. The same can be said for your sales team. You must include your team if your sales performance management strategy delivers results. Surveying and discussion allow your sales reps to share their view of the obstacles they face and ideas about where to improve, giving you a better idea of what’s working and what’s not and how they perceive the plan overall.
Clear and effective communication is the foundation of any good business process, and your sales management strategy is no different. As a sales leader, you must reciprocate feedback effectively and meaningfully. Be receptive to what your sales team offers and make them a part of the process from the beginning. Use performance data at every opportunity to compare it with qualitative sales rep experience for the best results.
6. Automate as many low-value tasks as possible
Sales Performance and Incentive Compensation Management is not easy. There’s a reason 58% of sales managers say they have difficulty completing their work tasks in the given time. The good news is there are tools and technologies available to help you automate the process.
Using SPM software allows you to automate and integrate your sales processes with valuable data to improve performance and efficiency in your organization.
Here are some of the key benefits of sales performance management software:
- Sales Compensation – AI-driven SPM platforms can help you build a sales compensation plan and accurately pay your reps based on performance.
- Sales Motivation – Providing teams with a robust incentive program and real-time transparency motivates them to go above and beyond their quotas.
- Sales Optimization – SPM software will analyze your business for a suboptimal mix of accounts, revenue, potential, and workload across territories to optimize your targeting strategy.
The Components of a Winning Sales Performance Management Strategy
There are four pillars that every sales performance strategy is built on: what, where, who, and how to sell. How sales leaders see each of these will define their plan for success in the market. Let’s take a closer look at the components of SPM.
1. Sales Planning
Sales planning refers to how organizations divide the market and align their team to fit, including territory allocation, account segmentation, capacity planning, and quota setting.If you're not investing in sales performance and incentive comp optimization, you're missing a huge opportunity for incremental growth. #spm #icm #salescomp Click To Tweet
For your sales planning to be effective, you must have a good understanding of historical sales and the ability to adapt your sales strategy to changes in the workforce or the marketplace.
2. Sales Incentives
Sales incentives are commission structures that encourage salespeople to sell the products or services that benefit the company the most.
At Forma.ai, we believe that incentives are at the heart of outstanding sales performance management. What better way to direct behavior than money? 90% of the top-performing companies globally use incentive programs to reward their sales associates.
The best sales incentives can achieve two objectives simultaneously: allowing individual salespeople to maximize their earnings and advancing your company’s goals.
3. Sales Intelligence
Sales intelligence, or sales performance intelligence, is a relatively new discipline that focuses on understanding the metrics and trends within the sales cycle to identify areas to optimize or expand.
This area of SPM has experienced the most development in recent years, as advances in software and AI have allowed sales leaders to gather and understand data from throughout the organization in far more detail than ever before.
How to Measure Sales Team Performance
According to McKinsey, sales organizations that invest in measuring and centralizing critical sales metrics are more likely to outperform their competitors. But with ballooning tech stacks that allow us to measure anything and everything, which metrics matter for measuring sales performance?
Our approach to measuring sales performance is two-fold:
First, take your company’s unique context into account—don’t just rely on your competition’s benchmarks and metrics.
Second, prevent Sales Ops from being overwhelmed by focusing on the metrics that matter—the numbers that help you make intelligent decisions that ultimately lead to revenue growth.
What sales metrics reveal about sales performance:
A sales metric is any data point sales teams use to measure progress toward goals. Performance metrics track a sales rep’s tasks and activities over days, weeks, quarters, and years.
- Performance of an individual rep
- Performance of a sales team (or organization as a whole)
- Weaknesses or bottlenecks in the sales process that need to be improved
- Whether or not a rep qualifies for bonuses and other incentives
- How to prepare for market changes, slow periods, or company growth
“If you can’t measure it, you can’t manage it” might be a truism, but it’s all too accurate when it comes to measuring sales performance.
We know tracking performance metrics has become a sore subject in the Sales Operations world. Hop on LinkedIn, and you’ll find droves of thought leaders bashing an overemphasis on metrics like call volume.
Regardless, sales success still lives and dies by numbers. And if your team isn’t unified by executing on data-driven insights, they won’t hit their targets.
Alignment is critical because reps can become overly focused on the KPIs that maximize their commissions. At the same time, managers are more interested in the insights from forecasts that lead to revenue predictability and growth over short-term payout.
The Benefits of Measuring Sales Performance
1. Build a quality pipeline
Pipeline metrics give you a visual overview of how close opportunities are to closing. You’ll see which sales activities yield the best results and where deals are stalling.
2. Improves sales forecasting
When your pipeline is up to date, you can accurately forecast sales, whether your team will hit their targets, and how much revenue growth you can expect.The best sales leaders have one thing in common: They excel at data-driven sales performance management. #sales #spm Click To Tweet
3. Reduce turnover by providing better incentives
Metrics allow you to gauge rep performance and reward them appropriately. Incentivizing sales reps with performance bonuses is crucial to loyalty and engagement.
4. Provides better visibility into sales performance
When you can see how far a rep is from quota attainment, you can intervene and course correct or encourage them to keep the momentum up.
5. Makes incentive compensation more efficient and effective
With accurate historical metrics, you can design, execute, and optimize the best variable compensation plan possible.
Outperformers make data and analytics a strategic asset and invest heavily in building foundational skills. The results: 72 percent of the fastest-growing B2Bs say their analytics are effective in helping them with sales planning, compared to 50 percent of the slowest-growers.McKinsey & Company
Key Sales Performance Management Metrics
With ballooning B2B tech stacks, it seems like there are more stats than ever to measure. While the list below is by no means exhaustive, it’s an excellent place to start if your goal is to start driving revenue by improving an underperforming team.
1. Sales Productivity
ales productivity metrics ensure that reps are “keeping the first thing first” and focusing on activities that close deals.
Some of the most critical sales productivity metrics:
- Meetings held / demos booked
- Sales cycle duration
- Time to productivity
With two-thirds (64.8%) of reps’ time spent on non-revenue-generating activities and only 35.2% spent selling (Forbes), monitoring productivity metrics is critical.
2. Lead Response Time
Lead response time measures how long your leads wait to hear from your company after inquiring. Response time is critical because quick communication increases the likelihood of that lead converting into a paying customer.
According to Chili Piper, it takes the average B2B sales team 42 hours to respond to a new lead, and 38% of those leads never respond.
3. Average Deal Size
The average deal size reveals how much revenue comes from each deal.
If too many deals are coming in below your average deal size, it could mean that your reps are opting for smaller, quicker wins or discounting to close the deal.
Average deal size reveals where you need to adjust your sales goals and compensation plan. It will also show you when to double down on lead-generation efforts.
4. Win Rate
Win rate, also known as the opportunity-to-win ratio, measures how many deals close versus how many enter your pipeline. Win rate reveals how effectively your reps are moving deals from negotiation to close and where they can improve.
Some of the contributing factors that affect the win rate are:
- Lead volume
- Seasonality (Timing)
5. Quota Attainment
Quota attainment gauges whether a rep has met their goal within a set period. Measuring quota attainment allows you to evaluate your team’s success.
If only 40% of your team attained the quota, it could indicate issues beyond the individual sales rep’s performance.
Where coaching an individual rep to meet their quota is self-explanatory, quota attainment forces you to evaluate the quality of the plan you created. Even the best agents won’t hit an unrealistic or poorly-planned quota, which is why your compensation plan is critical.
How to Improve Poor Sales Performance in 4 Steps
Why are compensation plans usually the last place sales leaders look when a sales team is underperforming?
While low performance is due to several factors (your company’s reputation, GTM strategy, hiring process, etc.), your sales compensation plan is one of the most powerful levers for influencing seller behavior.
If meeting and exceeding your targets is challenging, you’re far from alone. Only 6% of CSOs feel highly confident about their team’s ability to reach their revenue goals. This post will share four steps you can take today to improve performance, including creating a solid compensation plan that incentivizes winning behavior.
Let’s dive into how you can create a data-backed sales strategy that leads your team to success.
Step 1: Is Your Sales Comp Plan Helping or Hindering?
What if we told you how you compensate your sales reps impacts your company’s reputation in the market?
If this seems far-fetched, take the reputation of car salespeople as an example. How their commissions are calculated has created a notoriously bad taste in consumers’ mouths, resulting in industry disruptors like Carvana bypassing the dealership model entirely.
Think of your sales compensation program as the spine of your sales organization. Your comp plan incentivizes and guides behavior. It also connects individual goals to corporate goals and communicates explicitly (or implicitly) where reps should focus their efforts.To overcome biases leading to suboptimal sales comp plan designs, ensure your corporate context is the guiding principle during incentive program design. #salescomp #icm Click To Tweet
Despite the considerable expense, many organizations struggle to develop and manage an efficient and effective sales incentive program. Below are the most common compensation struggles.
Problem #1: Unattainable quotas
Why it happens: You designed your comp plan based on general benchmarks instead of your company’s unique context.
Using your competitors’ compensation programs or infusing elements of past programs leads to the dreaded “Frankenplan.”
Solution: Emphasize your unique corporate context during comp planning
To overcome biases that lead to a “Frankenplan,” make your unique corporate context front the guiding principle during incentive program design. Context ensures that compensation plans are kept simple and focused on what truly matters to your success. The best way to understand your company context — besides values and internal philosophies — is through historical data.
Two companies that may seem very similar at first glance will look very different once you take a granular look at their customer profiles, historical transaction data, average contract value, etc. Structure your compensation plan components, quotas, and territories based on objective historical performance data for best results.
Problem #2: Unbalanced territories
Why it happens: New sales leaders come in with comp plans that worked in the past. The problem is they lack the context of the new company. Here’s where it gets messy: the new leader wants to impose their playbook on the current comp program, and existing leaders in Finance, HR, and Sales want to preserve elements of the existing comp program.
The result is that they wind up meeting somewhere in between, resulting in a Frankenplan with disjointed elements that lead to suboptimal sales performance.
Solution: Make sure your comp plan is incentivizing the right behavior.
Be careful with individual product or service incentives, which lead to salespeople dropping products and shifting their focus away from improving sales for the business, or worse — unintended perverse outcomes.
Instead, use SPIFs to promote individual lines and non-monetary incentives like President’s Clubs and monitor plan performance regularly — ideally monthly.
Problem #3: Lack of rep engagement
Why it happens: You’ve checked all the boxes of a winning compensation plan, but there’s one problem: your reps didn’t engage with it. Besides design and administration, communication is one of the three pillars of sales compensation excellence. Without it, your representatives won’t understand the plan or how to make money from it and will fail to produce the desired results.
Solution: Improve Communication
Communicating compensation to sales reps is an ongoing process. Monthly spreadsheets or PDF summaries aren’t enough.
Reps need to understand how their commission was calculated quickly and efficiently so they can tie it to deal elements and identify opportunities in the pipeline that can bring similar value.
Your reps AND your bottom line will thank you.
Step 2: Create Your Sales Coaching Plan
Sales leaders tend to fall into two traps when dealing with poor performance. First, managers immediately think more sales training is the solution, investing too much time and resources into reps that aren’t a great fit. Or they default to PIPping the representative too early.
While Performance Improvement Plans (PIPs) sound great in theory, understand that most reps take PIP as step one in an eventual termination process. Knee-jerk reactions to performance issues have costly consequences.
Instead, take a step back and strategically assess the next best move when dealing with underperforming reps:
1. Clarify expectations early and often
You should bring mandatory KPIs and metrics up in every group and 1:1 meeting. It’s human nature to want to know where we stand within the larger group and the “why” behind our jobs. You may feel like a broken record, but when reps always understand how they’re measuring up, you create a culture of “no surprises.” Most importantly, explain how these KPIs relate to your compensation plan and how they will be used to assess performance (aka. will it impact their job security).Even the best sales compensation plan will fail if you don't properly communicate how it benefits reps or if they don't trust you to calculate it correctly. #salescomp #sales Click To Tweet
2. Take a hard look at your compensation plan
If your reps hate their commission plan, they will miss their targets. If top sales reps are walking out the door, it’s probably your compensation plan.
Common reasons sales reps hate their commission plan:
- They think the program is designed to limit their earnings
- They believe the quotas are unfair
- They don’t understand how to make money from the plan
- They don’t trust you to calculate commissions correctly
Even the best sales compensation plan will fail if you don’t properly communicate how it benefits reps or if they don’t trust you to calculate it correctly.
3. Be open to constructive feedback about your management style
There is no one-size-fits-all management style, and your reps may react negatively to yours. Low performance is a symptom and not a root cause. CloserIQ recommends questions like, “Is there anything I could be doing to support you better?” or “How would you like to be managed?”
You might not be able to implement the changes they ask for, but the goal is for your rep to feel heard, which can go a long way for morale.
Developing a winning culture starts with understanding your people’s “why,” earning their trust and being transparent about your path and need for change. People will get in the boat with you when they feel included, and their feedback and input are heard. When they are part of the change, the likelihood they are bought in increases exponentially.Carson V. Heady, Author of Salesman on Fire.
Step 3: Create Data-backed Sales Goals
Here are the two necessary ingredients for creating a high-performance sales team:
- Make your reps feel involved in creating their goals.
- Help team members understand how their day-to-day activities get them closer to their sales quotas and long-term goals.
Making these two activities central to your sales management technique is known as Management by Objectives (MBO). MBO was popularized by management guru Peter Drucker’s 1954 book, The Practice of Management.
Here’s how to execute MBO management techniques within your team:
1. Get buy-in from other departments on your goals
Too many sales managers are setting targets in a silo. Lack of company-wide collaboration leads to organizational misalignment. Including leadership across several departments when creating your goals results in high performance.
2. Present those goals to your team and fine-tune them
Have a one-on-one with reps to establish their personal goals. Avoid one-way conversations. Be open to their feedback about what’s realistic and what isn’t so you can fine-tune your strategy.
3. Build a system for continual performance and progress monitoring
Once you’ve created a plan, it’s critical that you monitor progress daily, weekly, and monthly. Your team will go into a heads-down mode, so stopping to assess progress gets overlooked, causing reps to go off-track.
Ensure your tech stack has easy-to-read reporting and dashboard features that allow you to pull up progress in seconds. Visibility is a crucial component of motivating behavior. If reps can’t see how they’re performing regularly, then the power of the incentive will wane.
Schedule your feedback sessions ahead of time so reviewing these reports becomes mandatory.
Step 4: Know When It’s Time To Cut Your Losses
Letting reps go due to performance issues is never easy, but handling it correctly prevents these events from eroding company culture. It’s the people behind a company that determines its success. Every day, the right players will improve your culture, while the wrong ones slowly eat away at it.
Every sales team (even the highest-achieving) will have underperformers. Ironically, sales leaders spend the most time on reps who consistently fail to hit quota. While coaching is essential to help lower performers improve and reach their potential, as leaders, we need the ability to discern when that potential is limited.
That may sound harsh, but in many cases, there isn’t ROI to gain from continuing to invest in a failing rep. Keep these two principles in mind when letting a sales rep go.
#1 Before you identify an underperforming sales rep, understand what constitutes overperformance
When you know what greatness looks like, you’ll make better staffing decisions and be able to spot poor sales performance sooner.
Model the data around the activity and performance of your sales reps. Use that as your guide to making objective decisions about how long is too long to ramp up and signals that a representative isn’t a good fit for the company or product.
#2 Focus on retaining your top performers
Realize that every organization experiences rep turnover and that it’s the nature of a merit-based role like sales. Underperforming salespeople are usually just as unhappy at the bottom of the leaderboard, so letting them go frees them to do better in their next role.
Sales Hacker recommends measuring your team members on these four elements:
- Performance and cooperation — Do they consistently miss their sales quota? Do they avoid admin tasks like updating Salesforce?
- Competence and accountability — Have they proven they’re capable of doing the job at hand? Are they knowledgeable and focused enough to complete their responsibilities?
- Commitment and attitude— Are they willing and enthusiastic about performing the activities needed to hit their goals? What’s their attitude toward going the extra mile to succeed?
- Cultural fit — Are their values aligned with the company? How well do they interact with team members?
The Bottom Line on Managing With Poor Sales Performance
First, analyze your compensation program to understand the root cause of subpar sales performance and make a plan to fix it. It is often playing a more significant part in underperformance than organizations realize.
Use data to get a meaningful and objective picture of what “good performance” looks like across your sales organization and instill company context into the plan design.
Coaching your reps back to success when low performance requires good communication and constant reminders of the KPIs. By analyzing your compensation plan, you can ensure that you aren’t limiting rep earnings, giving unfair quotas, unequal territories, or creating a program that is too complex to be motivational.
When your sales team is bought in on the company’s overall goals and feels understood and acknowledged, you’ll develop a high-performing sales culture that consistently meets and exceeds goals.
Final Tips to Improve Your Sales Team’s Performance
We asked around our crack team of salespeople and sales consultants for their best tips for increasing sales productivity.
1. Run a SPIF
This is the go-to way to improve your sales performance and deserves mention because most enterprises still get SPIFs wrong (or at least don’t get them right).
Most reactive SPIFs are poorly planned or badly executed, but that doesn’t mean there isn’t a place for them as part of a well-planned SPIF strategy.SPIFs are great, but without proper planning, they can change rep behavior in a way that negatively affects the business — and that might not be immediately obvious. #salescomp #spifs Click To Tweet
We always advise caution with SPIFs because, without proper planning, they can change rep behavior in a way that negatively affects the business but isn’t immediately obvious.
2. Uncap commissions
We’re not saying that you should never cap commissions, but there is rarely a time when a cap is beneficial for anything other than protecting the business from some freak event.
Look for areas in your sales comp plan that could benefit from removing the cap and experiment with it to see if it influences behavior. Remove it if it is. Remember to include protections for the business should some freak event produce a flood of unplanned sales.
3. Positive reinforcement
Positive reinforcement works very well for dogs and also very well for humans. That doesn’t mean you give out a treat every time a rep makes a sale (although that probably wouldn’t hurt). It does mean giving public praise and random prizes for doing the right things and closing deals.
4. Healthy competition
It’s a cliche that salespeople are competitive for a good reason. One tried and tested way to lift the sales team is to introduce some friendly competition.
There are dozens of ideas for sales competitions (we’ve listed a few fun SPIF ideas here), and they all work to some degree.Introducing the element of chance is a great way to incentivize "middle-of-the-pack" reps who might not be motivated by incentives aimed at top performers. #sales #salesmanagement Click To Tweet
Introducing the element of chance is a great way to incentivize reps in the middle of the pack, who may not be motivated by other bonuses targeted at top performers.
5. Check they understand the sales comp plan
One of the most common reasons for underperforming sales is confusion about the sales comp plan. Sales reps want to make sales. Don’t confuse them with overly complicated commission structures.Sales reps want to make sales, and they want to know how much they're making from them. A great way to get more of that former (sales) is to give them more of the latter (visibility into commissions). Click To Tweet
Check-in with the team regularly to ensure that they understand why each element exists and, most importantly, how that relates to their territory and what they need to do to maximize their commission.
One easy way to boost sales and increase motivation is to give them real-time feedback about their commissions. That will reduce the amount of time reps spend trying to figure it out themselves (find out more about the costs of shadow accounting to your business here).
6. Check the comp plan is producing the right behavior
The incentives we create don’t always have the effect that we expect.
An incentive for one product may reduce sales for a different one. Without reliable data, it’s challenging to tell what impact a change will have until it’s made.
Sales managers must monitor the impact of changes to the comp plan and how sales reps modify their behavior to take advantage of changes to the program over time.
7. Reduce commission disputes
The single most demotivating factor for a sales rep is when commissions are miscalculated or withheld, regardless of whether it’s justified.
High-performing sales reps are the least tolerant of pay errors and far more confident in finding another job.
Commission disputes usually happen for one of two reasons:
- miscommunication or misunderstanding about the plan
- human error
The first can be solved with a more transparent plan or better communication. If you’re experiencing issues because of human error, you should look into ways to alleviate the pressure on that team, such as automating payroll or investing in better Incentive Compensation Software.
8. Invest in sales intelligence (Analyze the customer data you have or buy tools)
Sales intelligence or revenue intelligence tools and activities can help to produce significant, ongoing improvements in sales. There are far too many sales intelligence solutions to cover in detail here, so we recommend reading this blog for more information.
It is important to note that you can benefit without investing thousands in new software.
The foundation of all those tools is the quality of the data used. Invest in tools to help you validate and automate as much of your data gathering and processing as possible, making it more useful and valuable.
9. Integrate customer support and marketing
As more product-led-growth enterprises see success in the public markets, the role of customer support teams in account and revenue growth is expanding. The line between sales and support teams is becoming increasingly blurred.
That’s not to say that sales teams will disappear — there is a place for “hunters” as well as “farmers” in the sales team of tomorrow, but the better you can integrate sales and customer support (and product and marketing), the better they will all perform.
Unify Sales Performance Management
For your sales performance management (SPM) strategy to be successful, you must create a holistic system that encompasses many, if not all, of these best practices.
Your goal as a sales leader is to lift your team’s performance while generating more revenue for the organization and creating a better work environment. It won’t happen overnight, but your team will have success with the right SPM strategy in place.
Our work at Forma.ai is to make sales compensation more valuable to your business as part of your overall sales performance management strategy.
We use a collective data model to drive unparalleled results for our enterprise partners.
Book a call and discover how our platform automates your entire incentive compensation design and execution process here.