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What is Sales Performance Management?

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?

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. 

10 Fun SPIF Ideas to Boost Sales

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. 

Modern sales performance management involves the training, development and monitoring of individual sales reps and sales 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.

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 the calculation and communication of sales compensation. However, there is a significant difference between the two functionalities.

What is Incentive Compensation Management?

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.

The Components of an SPM Strategy

There are four pillars that every sales performance strategy is built on: what, where, who, and how to sell. The way 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 sales commission structures designed to 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 great 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. 

What is Sales Performance Intelligence?

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.

Why Do Companies Invest in SPM?

Companies invest in SPM software because they know that it can significantly improve the effectiveness of their sales teams. Their pipelines grow faster with less effort and attract better-suited and qualified prospects.

Improved sales performance management allows sales reps to build their skillset and leads to outcomes that align better with your business strategy. You’ll benefit from better-qualified sales opportunities since the same factors that enhance sales pipelines will also improve the quality of the opportunities within them.  

A comprehensive SPM system will help your team learn what works and what doesn’t in a given territory. This will allow you to assign representatives more effectively while also being able to manage their performance closely. You can also experience greater profit margins because your system will help salespeople promote the right solutions to the right customers.

How Sales Compensation Automation Boosts Profits

Improved sales analytics are another benefit of investing in sales performance management. The right strategy aligned with the right technologies makes it possible to identify critical leading indicators, allowing you to tackle threats before they escalate or cause significant damage to profitability.

Why Should You Plan Continuously?

Today’s markets are moving faster than ever before, and in the face of global disruption, it is glaringly obvious that planning once a year is no longer an option. Instead, we must focus more on continuous planning if we want to adapt plans as the business markets and industries change.

Sales performance management is not just about automation. It is a broad discipline with a wide range of functions and technology designed to empower you to transform raw data into strategic insights, driving better sales performance and target attainment across the organization.

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