- Your Sales Performance Management (SPM) team is vital to your business. Good salespeople often leave organizations due to issues with sales compensation and its administration. Ensuring an effective and consistent SPM effort, then, is crucial to retaining sales talent.
- The effects of turnover on SPM teams may be rising. SPM teams are often smaller today, which means turnover has an even greater impact. And, statistically speaking, younger team members stay only a short time before leaving organizations, further adding to churn.
- Options for responding to SPM team turnover. External resources can help overcome challenges related to turnover. And ensuring SPM roles have greater involvement in data analytics can make these roles more appealing, potentially slowing churn.
Providing effective and consistent sales performance management (SPM) services should be critical to any organization that offers variable compensation to salespeople — and in my experience, that’s well over 95% of private companies.
Sales are vital to the health of most businesses, which makes it important to have the right SPM team in place and to reduce performance-draining churn within that group.
Salespeople are often risk takers who need to trust that:
- They are being paid accurately.
- Their sales compensation processes are fair.
- They will receive frequent visibility into their performance.
When these compensation-related needs are not addressed, the result is often a lack of trust —and that can cause organizations to lose their best salespeople. To prevent that from happening, organizations must ensure consistent and reliable service from their SPM teams.
The Effect of Technology
Sales compensation payments are expensive, often accounting for 50% of salespeople’s on-target earnings. The good news is that technology can support these efforts and reduce costs. (See our 2023 SPM Vendor Guide to start gathering information.)
Event: WorldatWork Sales Comp'23
As technology improves, the experience of administrators is made easier and, in some cases, fewer people are needed. In smaller organizations, often only one or two people manage sales compensation — and herein lies a risk that is often not fully appreciated or planned for: You still need a team.
The Growing Effect of Turnover
I have recently spoken with several customers who have lost members of their sales compensation team. Especially on smaller SPM teams where a single resignation may mean the team has been reduced by half, the impact of turnover can be serious.
Potential consequences include:
- Delayed payments to the salesforce.
- A growing backlog of queries and disputes.
- The focus returning purely to payments, rather than valuable reporting and analytics.
- Reduced time to find, hire and train new administrators.
If your new sales compensation administrators tend to be younger, you may face even greater turnover. Generation Z is becoming a larger presence in the workplace, set to take over the more junior roles (initially) from Millennials and Generation X.
According to a study by Career Builder, Generation Z employees typically spend two and a half years in a role. Assuming it takes new hires a year to get up to speed, you may be looking to replace Generation Z employees only 18 months later. This is not a sustainable model.
What Can You Do?
When managing turnover on your SPM team, one option is third-party managed services, which can provide coverage for part or all of your SPM operation needs.
If you want to keep things in-house while mitigating the risks of losing key people at crucial times, a sales compensation administration short term support service can get you out of a tight spot, no matter what technology platform you are using.
Aside from the external support, it’s important to consider the benefits of a switch in mindset. For many organizations, managing sales compensation (people and technology) is considered a cost of sale — something to be minimized and simplified. However, I don’t think this does justice to the value of leveraging the rich data associated with sales compensation.
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Technology can do more than just pay people accurately and on time. Using advanced analytics, you can use your sales compensation data to help predict which of your salespeople are at greatest risk of churn. You can match proven skills to roles. And lastly, you can use data to understand the attributes of the best salespeople in your organization, thus informing the recruitment process and improving the odds of mutual long-term success when you make your next hire.
What’s more, incorporating analytics into your sales administrator roles can make these positions more appealing, which can reduce churn. Yes, the role of a sales compensation administrator will inevitably include an element of repetition throughout your regular sales cycle, but incorporating powerful analytics can help your organization maximize the value of your data while making the compensation administrator role far more rewarding, interesting and valuable.
By switching from a mindset that sales compensation administration has a negative impact on your bottom line to one in which it is driving top line growth, you can add value to your business and to your administrators, which makes their jobs more engaging.
In this scenario, it’s likely that they will stay for longer, which means less disruption for everyone.
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