Sales compensation gets a face-lift through software as a service, making Xactly's sales performance management products affordable for smaller businesses. And effectively motivating your sales force -- and even rewarding them -- can have a positive effect on your revenue.
Small and midsize businesses are fighting tooth and nail for every sale as consumers and businesses cut spending to the bone. With dollars growing scarce, businesses can't afford to leave the incentives and compensation that motivate sales staff to chance or blunt instruments such as winner-take-all sales contests. Yet armed with only rudimentary tools for managing incentive compensation, many business owners don't know another way to manage sales compensation. Recently, bMighty spoke with Chris Cabrera, founder, president, and CEO of Xactly, a provider of software-as-a-service sales performance management products. He shared his insights about the value of managing sales compensation with precision, the impact that effectively motivating a sales force can have on business revenue, and how SaaS has made incentive compensation management affordable for smaller companies.
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bMighty: Let's begin by defining terms. What is sales performance management (SPM)?
Chris Cabrera: Let's start with what we're not: CPM [corporate performance management]. What CPM vendors like SuccessFactors provide is base compensation management for every rank-and-file employee in an organization. Xactly doesn't play in that space.
Now SPM, what we do, is commission-based, variable compensation. Unlike base pay, this commission compensation is at risk every month -- it's tied to sales or to a set of behaviors. Today, most businesses manage this type of thing almost exclusively in Excel. What businesses need is a broader view than basic performance or compensation management; they need a way to make those commission dollars pay, to make them more effective. To do that you need modeling, analytics so they can know -- in real time -- what's working, where it's working, and where it's not working. And not just for straight commissions but for SPIFs [sales promotion incentive funds] as well.
bMighty: You say most businesses manage SPM in Excel. Why should they spend money to upgrade to another solution, especially in this economy?
Cabrera: Today, 90% of businesses still manage SPM in Excel [according to Gartner data]. That's the paradigm today, and it's a huge problem. There's up to a 10% error rate in what the system knows [from Gartner, which also estimates that sales compensation represents up to 10% of total company budgets]. What's worse is that these manual systems provide no real-time visibility for the sales team. There are potential SOX violations, not to mention version control headaches. You can't dangle a carrot in front of your sales team three weeks after the month closes; that's not motivational. You need to tell them how they're doing every day.
bMighty: That sounds great in the abstract, but what kinds of results can a business owner who implements an SPM solution expect?
Cabrera: I'll give you an example. One customer of ours, a retailer, recently ran a three-month pilot program. They were paying their behind-the-counter staff without any variable compensation [base salary, no commission]. They moved a portion of that to variable pay, and two months into the pilot, same-store sales were up four times above the expected results. They stopped the pilot program and started rolling it out at all their stores.
