Sales Performance Management evolution

Transcription

1 IBM Software Business Analytics Sales Performance Management Sales Performance Management evolution An overview of the four stages of SPM deployment

2 Sales Performance Management evolution: An overview of the four stages of SPM deployment Four stages of SPM maturity: Process integrity Process efficiencies Business agility SPM optimization Introduction Enterprises perennially struggle to revamp tactics to rouse sales channels to exert greater effort and help secure increased revenues with better margins. These initiatives usually involve a never-ending quest for strategies that better align sales structures, compensation structures, quotas and objectives, and/or territory coverage models with marketplace dynamics. Paradoxically, investments in technologies pertaining to relevant data concerns, business processes and analytic practices have been uneven, tentative and limited. Companies commonly rely on spreadsheets, while only a small minority of firms possess the wherewithal to develop and support custom-built applications. A marketplace for packaged software applications, called sales performance management (SPM), has emerged to help satisfy demand for more robust automation of sales operations processes and to improve associated planning and analytic disciplines. SPM represents a relatively new market, having gained visibility after 2005 as an outgrowth of efforts to automate variable compensation processing. This report defines and analyzes the four principal stages of development of the SPM market, detailing the progression of increasingly sophisticated requirements for SPM initiatives and the corresponding expansion of application functionality. Many organizations tend to deploy and evolve SPM solutions through four stages of maturity: process integrity; process efficiencies; business agility; and optimization of SPM practices. This model captures leading marketplace characteristics and stages of innovation for the next 3 to 5 years in order to aid executives, managers and practitioners in planning SPM initiatives that best match corporate needs and capacities for implementing new technologies. Foundational concerns with automating variable compensation processes are addressed as a departure point, followed by an examination of a combined deepening and broadening of functionality in progressive stages. Functional developments encompass expansion of planning, analytics and administrative tools, as well as the incorporation of adjacent functions for quota, objectives and territory management, complemented by integrated workflow and further cross-functional analytic and modeling environments. The underlying business rationale for each stage is reviewed, key associated functional needs are highlighted and recommendations are made to guide decision makers through initial steps in tackling SPM initiatives. Please note that the pace of adoption of capabilities in later, more advanced stages will vary by industry, geography and even individual corporate entity, depending on the needs and ambitions of buying centers to satisfy a critical mass of sales operations responsibilities, as well as related concerns within peer finance and administrative organizations. 2

3 Business Analytics Integrity goals help eliminate: Mistakes Sales conflicts Overpayments Stage One: Core process integrity Improving the governance and accuracy of payments to sales and third parties is a priority concern for enterprises and in reality often represents the basis for many nascent SPM initiatives. The main reason is straightforward a substantial portion of earnings for many sales channels are variable, meaning dependent on fulfilling predefined criteria before disbursements of commissions, bonuses and other incentives. Enterprises are logically averse to incurring errors that engender regular overpayments and disputes with front-line staff and partners. The recurring nature of processes can aggravate difficulties, which when overlooked, place continual burdens on administrative resources to address and resolve the repercussions of miscalculations. Hence, leaders in sales, sales operations, finance, and Human Resources (HR) are well-disposed to correcting this narrowlydefined, but substantive operational issue. Several circumstances can further heighten the need for improved process integrity. These include: When variable compensation exceeds 40 percent or more of total targeted earnings for sales Calculations need to process large volumes of transactions or events (such as 100,000 to more than one million within a single processing session) Repeated overpayments are suspected (i.e., the equivalent of 1 percent or more of total payouts) When sales partner networks are fickle and disinclined to return unearned payments Corrective measures for process integrity are relatively well defined. Payroll, compensation administration and supporting IT teams can fairly easily resort to technical solutions to displace ubiquitous spreadsheets and aging custom-built applications that prove too unreliable, inflexible or costly to maintain. Initiatives usually focus on acquiring and deploying commercial, packaged software, although additional custom work may be required to tailor solutions to specific needs, particularly for complex data integration requirements. Calculation engines, development tools, connectors and reporting functionality can be sourced from the compensation software market. Some organizations require custom ETL (extract, transform and load) processes in cases where legacy systems need to support the SPM solution. Custom integration could be necessary for accessing information from multiple bespoke data sources. These efforts could include deploying preprocessor tools to consolidate and summarize disparate data for consistency and performance purposes. Guidance: Enterprises supporting more than 75 persons for compensation requirements and expecting growth in sales staffing and partner networks should consider migrating from spreadsheets to packaged solutions established in the marketplace. For large, sophisticated projects, invest time and effort in integration issues to verify that essential, underlying data sources are properly accounted for, accessed and consolidated to support complex plans and processing requirements. During the implementation, benchmark the quality of data and errors experienced in legacy practices, and then schedule audits of payment cycles and disputes postimplementation to document whether the frequency of problems is declining. 3

4 Sales Performance Management evolution: An overview of the four stages of SPM deployment Desired outcomes Greater self-sufficiency More flexibility Lowering IT and training costs Stage Two: Process efficiencies The next series of enterprise SPM requirements aspire to extract greater process efficiencies from compensation management practices by automating broader sets of key administrative tasks. Tools are sought to simplify and expedite tasks around constructing plans and constituent rules and formulas; delivering more visibility into compensation data; generating appropriate documentation; modifying plans and executing annual revisions. These projects tend to expose more diverse, non-technical roles to the possibilities of process automation, and consequently involve a wider circle of constituencies, notably sales operations and finance in addition to HR, core compensation administration teams and supporting IT staff. The defining functionality for this stage centers on providing simpler, more manageable environments for business users to design compensation plans. Desired outcomes include greater self-sufficiency for business users in executing tasks, more flexibility in implementing assorted compensation techniques, and lower training and IT support needs. To achieve these goals, systems should deliver intuitive screens with functionality that tangibly helps users define plan components, create different incentives and compensation arrangements, render rules, write formulas, and stipulate performance metrics for quotas, objectives, rankings, thresholds, tiers, accelerators and such. Moreover, easy, flexible access to completed plans is important for redesign exercises, to help users retain existing elements that proved effective, to institute necessary modifications or to introduce substantive additions. Along with acquiring strong plan design functionality, businesses will need administration capabilities that help users exert firmer oversight of ongoing compensation operations and respond more adroitly to unanticipated outcomes. Intuitive tools are necessary to provide non-technical staff greater autonomy and efficiencies in executing various routine and recurring tasks. Responsibilities usually span scheduling processing activities for different businesses, sales channels or regions; auditing calculation processes and payouts; and instituting adjustments or retroactive changes to data, sales structures and plans (such as quotas, crediting rules or effective dates for specific incentives). Integration with HR applications is valuable at this point for position control, to keep abreast of reorganizations, turnover, and other staffing changes that impact eligibility to compensation. Additional efficiencies can be acquired from automating outbound and inbound communications with sales, by decreasing timeframes and errors in generating content, as well as response times in fielding questions. Posting Webbased commission statements, in lieu of paper-based methods, is a simple, popular measure that resonates with sales. Moreover, affixing reports on key performance indicators to commission statements provides greater transparency to sales that can significantly reduce ambiguity on standings. Similarly, Web-based distribution of sign-up letters and plan details imbues greater speed, rigor and auditability to processes for informing sales and confirming acceptance on expectations. Furthermore, accessible links and workflows for submitting inquiries and disputes help compensation teams to follow up and research cases efficiently and effectively, resolve issues and improve overall communication. Guidance: Prioritize implementing capabilities for designing plans and administering calculation processes, and place significant emphasis on the user experience. The foundation for meaningful gains in process efficiencies is successfully simplifying plan design exercises for power users outside of IT while bestowing more flexibility in rendering and 4

5 Business Analytics Stage Three: Business agility Building upon investments in automating and consolidating administrative processes, analytic concerns begin to receive more serious consideration, primarily with enhancing the effectiveness of SPM planning competencies and helping ensure reviews. At this stage, enterprises want to instill more intelligence in compensation plan design and revision practices, as well as help business stakeholders evaluate, hone and adjust SPM strategies and tactics with greater agility in response to changing conditions within market segments and sales channels. Usually the scope for projects at this stage extends beyond conventional variable compensation to account for administering quotas, territories and objectives or other targets, and to help planners capture valuable, timely insights and devise practical responses. Figure 1: The Four Stages of SPM Evolution administering varied compensation schemes. Strive to establish suitable self-service environments for users in compensation administration, sales operations and finance, but set expectations for IT assistance for more demanding responsibilities (like integration with new data sources, feeding Business Intelligence (BI) and other corporate systems). To demonstrate benefits, target earlier release dates of new annual compensation plans, as well as reductions in processing cycle times for regular payment cycles. Increase agility for: Planning cycles Deploying strategies Setting quotas Defining territories Analyzing results Responding to trends Adjusting plans This shift toward analysis and planning usually deepens the involvement of business constituencies, especially with business analyst roles in sales operations and finance, potentially sales managers, as well as the possible addition of marketing in certain cases (like channel managers and field marketers). As a result, issues concerning system usability and support for end user self-service escalate in prominence as they relate to helping ensure effective adoption of increasingly sophisticated and broader sets of functionality, especially for modeling and analysis. Modeling tools support simulation environments that allow multiple variations of plans, or plans for different sales roles to be easily assembled, reviewed, further modified and then made available for reuse. Test scenarios should be able to draw upon sample data, detailed historical data or hypothetical figures for what-if analysis. Users should be able to explore potential outcomes for scenarios in regard to different proposed plan components, rules, formulas, rates and such. Ideally, sophisticated graphing features are provided for reviewing results and drawing comparisons, as well as functionality for migrating select elements to more formal plan design or test environments. In certain cases, organizations may want to apply changes rapidly and directly to active plans, such as minor, mid-period revisions to a limited number of or rules or calculations. 5

6 Sales Performance Management evolution: An overview of the four stages of SPM deployment Complementing modeling, analytic tools are important for providing business users new, sophisticated methods for detecting, scrutinizing and drawing conclusions on trends and developments. Typically, data marts are set up to amass data accumulating from incoming transactions, sales information and sales compensation payments, but analytic needs usually exceed the limitations of report writers constrained to conveying static data. More accessible and flexible reporting functionality for ad hoc queries is often desired to permit business users to define and run reports autonomously. Similarly, support for multidimensional analysis should be available, in helping users review the implications of several factors in combination, as well as to examine information at different levels of summarization (such as by sales region versus specific sales territories based on postal codes). To better support business agility, the sphere of planning activities must expand to address adjacent needs with quota and territory management, as well as to incorporate objectives into compensation plans. Requirements for defining, distributing, modifying or reassigning quotas are closely bound to variable compensation planning because progress in quota attainment represents an important measure for determining remuneration. Managing quotas gets significantly complicated as the size and complexity of sales channels increase, when a measure of negotiation on expectations normally occurs, or if local insight is required from line management or frontline staff in estimating targets. Basic territory management is necessary when crediting rules for sales people are impacted by demarcated geographical boundaries, specific account assignments, or specialties segmented by product line or industry vertical. Similar to quota management, territory crediting becomes more complicated as staffing and sales structures increase in size and complexity or experience greater frequency in changes (i.e., turnover). Objectives are vital for encouraging specific activities that do not rapidly result in a transaction (such as increasing client interactions), and for protracted sales cycles (like 9 months or more, with certain capital goods), that oblige a level of recognition and incentive for sales channels to marshal opportunities to fruition. Wider use of workflow rises in importance at this stage, in guiding responsibilities for multiple functions concerning compensation, quotas, territories and objectives. Usually enterprises expand from basic implementations of dispute resolution workflow, to facilitate tasks with plan development and updates, namely to verify appropriate notifications and approvals are attained when changes have been made and activated. Similarly, workflows expand upon basic document distribution exercises, to deliver clearer, more efficient communications through line management, to convey quotas, plans, territories and objectives to selling resources, and to attain necessary feedback and consent at each tier of a selling structure. As confidence in the quality and handling of SPM-related data increases, more efforts can be considered to expose further details to sales channels, usually with charts, tables or reports inserted in appropriate screens within sales automation systems. Aside from depicting progress to date against goals or levels of attainment, functionality allowing sales people and partners to invoke provisional calculations of commissions for the estimated values of opportunities and specific products is gaining popularity to guide selling activities (such as prioritizing opportunities or assembling proposals). 6

7 Business Analytics Guidance: A strong modeling environment for compensation plans is central to this phase of technology investment and demands close attention. Effective, successful use of simulation will, in turn, benefit more conventional analytics in identifying the most relevant indicators, in assisting planning on targets, and in improving regular reviews of sales performance. Expect closer engagement with business units for insight and advice, to increase the validity of analytic models and to verify that user experiences for proposed dashboards and workflows meet expectations. The role of sales operations and marketing can expand considerably as liaisons on SPM initiatives to ales line management and channel partners respectively, especially as more types of information and activities visible to staff are impacted. Optimization balance and significantly enhance: Fairness Predictability Validity Performance Cost savings Stage Four: SPM optimization The final stage of SPM evolution focuses on intensifying investments in advanced analytic tools to capture and integrate insights across the key disciplines of SPM (i.e., variable compensation, territories, quotas and objectives) and more effectively anticipated sales outcomes. The eventual objective for SPM optimization is to increase transparency into key factors affecting SPM strategies, accuracy of assumptions and predictability of outcomes. Effective strides toward this stage and exploitation of tools will demand greater business knowledge and expertise, drawing more commitment from business analysts in sales operations, marketing (with campaigns and channel management) and finance departments. However, the sophistication of the analytics will still require close engagement with IT to verify efficient, timely roll outs of sophisticated analytics and necessary data. Key types of analyses under SPM optimization can vary in character across a continuum between hands-on interaction with data, metrics and calculations on a more manual, comprehensible basis, to the opposite extreme of applying sophisticated statistics and programs to generating automated outputs. Cross-functional modeling characterizes the former approach, in extending visibility and manipulation of compensation models to allow drill down into related models for elements impacting quotas and territories. The latter, more programmatic approaches can include calculating estimates for quotas, parameters for territories, forecasts on costs and estimates of future revenues and margins. With cross-functional modeling, considerations around quotas and territories are more thoroughly addressed. With modeling quotas, prior year histories, inputs from the field and revenue targets or other factors (numbers of sales people, partners, accounts, new products, etc.) can be compared to derive targets more likely to be deemed fairer, reasonable and achievable. More importantly, each factor can be explored in greater detail and used to communicate to stakeholders the rationale for final conclusions. Similarly, the richness of territories in terms of size, demand or account density (or other factors like competition) can be investigated, modeled and contrasted with quotas to help ensure that selling resources have sufficient span of control and opportunity to meet expectations and professional success. 7

8 Sales Performance Management evolution: An overview of the four stages of SPM deployment Optimization software programs are employed for the automatic generation of plausible scenarios on maximal, attainable benefits (like revenue growth), while accounting for downside (i.e., higher sales costs) and reconciling various possible constraints (or limitations), such as number of sales people, available accounts, competitive activity and such. Independently, territory optimization had been employed in the life sciences and other industries traditionally reliant on field forces to produce balanced territory alignments based on specific criteria (like drive times) and marketplace data. Enterprises are tentatively beginning to investigate applying such innovations across SPM concerns, to acquire better guidance that is sensitive to significant interdependencies, more quickly obtainable and more effective for organizing and directing sales channels. Integration to corporate performance management systems is useful for providing high-level revenue figures and margin targets devised in finance for optimization and forecasting exercises. Similarly, tracking data on sales staffing levels is also invaluable, to aid annual sales force sizing efforts and provide reference points on sales capacity for optimization exercises (such as the realistic number of productive sales people likely to be available to execute sales objectives). A similar continuum between hands-on analysis and programdriven projections exists with predictive analytics and forecasting. Leading indicators, transactional data, payout histories and inputs rolled up through sales hierarchies can be utilized to arrive at assumptions on realistic quota changes or likely compensation costs over different time periods. However, statistics can also be applied to generate forecasts to limit subjectivity in assessments, exploit larger data sets more efficiently, and to enhance accuracy. A key obstacle to more automated approaches is attaining buy-in from line management, front line staff or partners, on the credibility of the tools and methodologies employed. Optimization faces similar challenges, and hence automatically generated forecasts, projections or predictions have to be revisited, audited with sales teams and rerun regularly to validate results, as well as to tune and hone analytic processes to increase accuracy. The results of modeling, forecasts, optimization exercises and predictive analytics can be applied to a number of specific responsibilities, including the aforementioned sales force sizing function, but also for call planning and sales coaching. Call planning benefits from territory optimization, particularly mapping features, for defining routes and schedules for appointments. Coaching is dependent on analysis of trends to deliver predefined prescriptive advice to sellers, either to remedy specific deficits or to encourage specific actions likely to raise productivity. Guidance: Expect SPM optimization projects to shift investments toward a smaller circle of skilled business analysts and professionals, capable of adopting advanced tools, interpreting results and communicating findings to managerlevel audiences. Invest time, resources and effort in analytics teams and tools to verify results from predictive analytics, optimization and forecasting practices are sufficiently appreciated and effectively exploited in planning and review processes. Project teams implementing these new technologies will require executive sponsorship, and should plan on iterative cycles of experimentation and validation with business constituencies to demonstrate advantages vis-à-vis competitors and prior practices. Hence, be prepared to document the contributions of optimization and advanced analytics in predicting, organizing and driving sales to higher performance levels while constraining costs. 8

9 Business Analytics Conclusions The four stages of SPM development present a course for progressive technology investment for enterprises to follow and realize intrinsic improvements to common, longstanding practices for managing sales channels and expectations. Through technical innovation, greater efficiencies and insights can be extracted from key SPM processes (i.e., compensation, quota, territory management), with further benefits acquired from exposing interdependencies between the different disciplines. From process efficiencies, basic analysis and planning, on to more sophisticated analyses, each wave of investment should aim to deploy incrementally those assets that empower enterprises with greater influence over the behaviors of sales channels. About this whitepaper This whitepaper, commissioned by IBM, was authored by Michael Dunne, Senior Vice President of Creative Executions, a part of the Advocom Group Global Network. Michael brings to his clients extensive experience in advising executive teams of leading organizations worldwide on business innovation and development strategies. He was an industry analyst for over 16 years, and a longstanding observer of the SPM space. He previously worked at the Gartner and Decision Drivers, and is a graduate of Wake Forest University. About Business Analytics IBM Business Analytics software delivers data-driven insights that help organizations work smarter and outperform their peers. This comprehensive portfolio includes solutions for business intelligence, predictive analytics and decision management, performance management, and risk management. Business Analytics solutions enable companies to identify and visualize trends and patterns in areas, such as customer analytics, that can have a profound effect on business performance. They can compare scenarios, anticipate potential threats and opportunities, better plan, budget and forecast resources, balance risks against expected returns and work to meet regulatory requirements. By making analytics widely available, organizations can align tactical and strategic decision-making to achieve business goals. For more information For further information please visit ibm.com/business-analytics. Request a call To request a call or to ask a question, go to ibm.com/business-analytics/contactus. An IBM representative will respond to your inquiry within two business days. To learn more about IBM Cognos Sales Performance Management visit ibm.com/business-analytics/spm 9

10 Copyright IBM Corporation 2013 IBM Corporation Software Group Route 100 Somers, NY Produced in the United States of America March 2013 IBM, the IBM logo and ibm.com, and Varicent are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at Copyright and trademark information at ibm.com/legal/copytrade.shtml The content in this document (including currency OR pricing references which exclude applicable taxes) is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. THE INFORMATION IN THIS DOCUMENT IS PROVIDED AS IS WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided. Please Recycle YTW03320-USEN-00