Compensating for Change

Services Offer Options for Automating and Optimizing Sales Compensation

With increasing portfolio complexity and a wide range of customer targets, resellers, master agents and service providers are wrestling with how to realign their indirect and direct sales channels to overcome a stagnate reality: Too many salespeople are unfocused, chasing the opportune sales instead of pursuing more difficult, highmargin prospects.

Fortunately, there's hope. Companies can make use of a new set of on-demand, Web-delivered software tools to help re-engineer the sales channel to focus on high-value sales, move obsolete or failing products, and allocate sales efforts to match company goals — while becoming more efficient in the process. Sales incentive management is now a competitive weapon.

"Distribution is a fundamental driver of revenue, profit and market share," says Shanker Trivedi, senior vice president and CMO at Callidus Software, maker of the TrueComp Enterprise sales incentive platform. "Take wireless, for example. In the major metros, there really isn't that much of a difference between plans, phones and coverage, so what matters is how you drive your distribution channels. If they work hard and gain the business, that goes straight to profitability and market share."

He adds, "Thus, the fundamental business challenge to solve is, how does a company reassign resources to meet the opportunities in the market?"

Enter the on-demand software platform. Hosted by the provider and delivered over the Web in a software-as-a-service (SaaS) model for a monthly fee (the platforms mentioned here are all available at $50 per user per month, on average), these tools aggregate and audit data from a variety of sources, apply business rules to calculate the appropriate compensation, present salespeople with a portal to track sales and commission totals in real time, and give dashboard tools to managers to identify and change where the sales efforts are being targeted.

AUTOMATIC FOR THE SALESPEOPLE

This process of optimizing the sales resource begins first and foremost with automation.

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The Callidus TrueAnalytics Dashboard gives sales managers real-time graphical representations of sales activities.

The Callidus TrueAnalytics Dashboard gives sales managers real-time graphical representations of sales activities.

"Most companies manage the entire compensation cost center within an Excel spreadsheet," says Karen Steele, vice president of marketing at Xactly Corp., which lists Polycom Inc. and Covad Corp. among its clients for the Xactly Incent platform. "Anyone who's managing comp in a spreadsheet will even be unable to tell you what the commission expense is going to be for the quarter. When you consider that even a medium-sized sales force of, say, 200 reps adds up to an average of $10 million per year in payments, that's unbelievable."

Manual tracking is complicated by an ever-evolving service portfolio and bundling strategies. "Large product portfolios, often comprised of a combination of products and services, inevitably yield complex commission structures as enterprises encourage the sales force to cross-sell and up-sell through special bundling and SPIF programs," says Callidus' Trivedi. "With often 20 to 50 different commission plans to simultaneously manage, it is difficult to manually track, manage and gauge the success of such a sales strategy."

There's also the tangled web-like sales environment in telecom. "The organization of reps is constantly changing, both geographically and by role," explains Bob Conlin, CMO at Centive Inc., which produces the Centive Compel platform. "Also, there's a deep complexity of comp plans. A rep should be paid on three to five measures, because otherwise, the salespeople don't understand their jobs. But you often have a mix of direct credit (say a phone call costs a dollar and the rep gets 10 cents), splits, rollups, special bundle pricing, SPIFs and so on, and it's confusing, and potentially leads to inaccuracy."

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The Centive Compel Sales Rep Dashboard provides sales representatives with an at-a-glance view into commission and bonus earnings, attainment and gap versus plan, with instant drill-down to detail.

The Centive Compel Sales Rep Dashboard provides sales representatives with an at-a-glance view into commission and bonus earnings, attainment and gap versus plan, with instant drill-down to detail.

Inaccuracies can lead to a range of troubles, from complying with Sarbanes-Oxley on the one hand, to sales rep dissatisfaction on the other.

Most telecom companies' pain in this regard is "somewhere on the spectrum of chronic to acute," Conlin adds, and that trickles down to dissatisfaction within the sales force: "Reps leave companies or don't put in the effort they should for the No. 1 reason of dissatisfaction with the comp plan, lack of transparency, inaccuracies, etc." And, often, salespeople keep their own shadow accounting sheets of what they think their commissions should be, which is time-consuming and takes away from overall productivity.

Sales compensation platforms manage the complexity behind the scenes. Xactly Incent, for instance, taps the ERP database for order information, human resource files for information for the hierarchy, role and geography of the salesperson, pricing data and SKUs for product information. It aggregates it all into an on-demand repository, then pushes appropriate files out to a payroll provider, and a portal gives salespeople a real-time look at what's happening with their sales.

A byproduct of this automation is improved time-to-market. "New promotions and bundling ideas are one thing, but those fantastic ideas won't have an impact on the market unless you get it out to the salespeople," explains Trivedi. Callidus' TrueComp Enterprise sales incentive platform provides a range of dashboards and analytical reports for direct and indirect channel partners. "You have to be able to rapidly roll it out to your channels, deploy incentives, bonus plans and so on. Until recently, systems didn't allow for rapidly deploying a plan to a dealer, and it took three months to a year, typically. If you can get a product out in 72 hours, that's great, but it still takes a while to get it into the call plan and channels, and to incentivize the channel around it. We can make that happen in 24 to 72 hours."

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