By: Matt Tyre, Director Client Services, Sales Resource Group
Management teams are grasping at ways in which to reduce costs and maintain productivity within their entire organizations in today's downward economy. Many companies are using layoffs as a cost cutting approach - which ultimately has an impact on productivity - but maintain the same level of expectations on performance. Profit is still, and will always remain king, while shareholders will continue to expect their investment to be managed effectively.
The downswing in the economy creates new challenges for today's management to overcome.
How will they handle it?
The great depression has been brought up in the media in relation to the current economy, but I don't believe our consumer confidence level is as low as that period (yet). We are deep into a recession right now, but what if our economy continues to slide further? A lot of people are nervous right now, and with good reason. However, we are fortunate that we live in a far more developed time period to realistically look at our challenges and confidently overcome them. What makes this era much different than the 1930's is the advancement in technology and experience of how to combat the economic ups and downs we face. Not to say today's management has gone through an experience like this but we can look at history to determine the best approach to mitigate the damage. However, management in the present day needs to look at the investment of cost saving, productivity strategies and technology as part of the solution, instead of a needless expenditures. Management's first thought is to cut cost so why invest? Well what if the investment actual reduced your costs and contributed to the productivity of your business, especially with less resources? If you think about it, this approach supports and reinforces the strategy.
Here are a couple of technology investments that I think are critical to supporting the reduction of Sales General & Administration (SG&A) costs and maintaining focus on improving productivity and performance.
- CRM - Customer Relationship Management
- ICM - Incentive Compensation Management
CRM products are widely known as productivity software designed specifically to support the sales force with tools to be more successful. This type of application is a need though, in any successful sales organization today. It plays a major role in documenting and following the sales lifecycle from prospect in the funnel, to probability of sale and forecasting, to closing the business. Thus, it helps the sales person, and the organization to communicate expected results to shareholders and management. CRM ultimately addresses the point of improving sales performance and productivity. Salesforce.com has predominant position in the CRM market place, but you can find small to medium business (SMB) solutions such as Maximizer as a viable solution.
Where CRM looks at the beginning of the sales life cycle, ICM supports the tail-end of the sales life cycle from a fulfillment and communication of incentives standpoint. This offers a true compliment to the sales process. ICM solutions are a relatively new offering to organizations and have been around for about 10 years, slowly catching the attention of organizations. En masse, these solutions have not permeated the market yet, but let me explain why the potential value is worth the investment. Incentive compensation programs can be very costly, difficult to manage, and have an overwhelming impact on a sales person's motivation to deliver business. CRM provides the tools to help sales people perform more effectively in the sales process. ICM helps to support the sales strategies by reinforcing the desired behaviours from management to the field, through effective compensation programs. With effective communication, sales people understand their sales incentive compensation plan and they have an online tool that provides accuracy and trust in the incentive payouts. Ultimately, companies spend millions of dollars on incentive programs to motivate the sales people to meet corporate objectives but drop the ball when it comes to reinforcing those programs with the proper incentive communication and tracking tools. Imagine, if you will, an organization with sales people that don't understand their plan, then, ask yourself if they don't understand the plan then how will they meet their goals? ICM solutions provide compensation plan design capabilities that enable a sales person to access their plan anytime. A benefit of this is that the sales person understands exactly how they are being paid, so they know where they should spend their time and effort. Compensation plans are typically designed not by incentive compensation professionals, but by the sales leaders. They tend to be complicated; containing so many measures that sales people don't know where to focus. The KISS theory (Keep It Simple Stupid) goes a long way, as does simple communication in the plan document. Sales people typically will get a compensation plan at the beginning of the year and file it under 'G' for garbage, while reinforcing the objectives of the company consistently will get you better results. Strategically placing plan detail information where sales people review their calculations allows for a constant reminder of focus.
Also, look at how much time your sales people spend tracking if they are being paid properly. If your company is not providing full disclosure on your calculations, your sales people will begin to have doubt and distrust the company. The sales people will end up spending several hours a week to ensure they are not being short changed. Well imagine a world where sales people can go online and see who they sold to, how much revenue a transaction has netted and, oh yeah, lets provide the compensation payout as well. You will find sales people focusing on selling activities and not on administration. In today's economy in particular, I think you might agree that productivity and efficiency are paramount.
Many businesses use excel to calculate incentives. If you do, i implore you to investigate the error rate in your incentive calculations? It is difficult to pin down what the exact error rate is, however, as humans, we are not infallible. It is common to see errors from miscalculation, missed formulas, missing data, manipulation of data, or even misunderstanding the plan and calculating incorrectly. That being said, if you assumed you had even a small error rate of 3% on a $1,000,000 incentive compensation payout, this gives you an over or underpayment of $30,000. Additionally, you can have five to 50 resources from hr, finance, sales operations, and administration working on incentive programs, when in fact, with the right solutions, you can cut each resources time down immensely.
Lastly, ICM solutions provide great communication tools to sales people on performance management. In a good sales compensation plan, the performance objectives should be tied to the sales person's plan. Through standard online reporting capabilities, sales people can not only see that they are being paid accurately, but also review reports that add value to their sales approach around customers, products and performance. Increasing the access and timing of communication to your sales people improves results and reduces costs. I used to work in sales for a small, start-up company by the name of Pepsi. We would be called into our branch once a week for a meeting and to receive our performance reports. One report in particular was a GAP report. This was a report on products that management wanted us to close and get into accounts with a sense of urgency. Well these reports were days old and the entire sales force had to drive into the branch, away from their accounts, and taking time away from the sales day. If the information was made available online we could have spent more time with our customers, reduced expenses for travel and had GAP's closed in a far shorter period of time based on real-time information. Technology has profoundly changed the way we conduct business sine 1930, so shouldn't we be taking advantage of it? Sales organizations have to embrace the tools that will make business more profitable, productive and reduce costs, which is the direction most companies are driving.
