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Typically, many businesses tend to start, stress and develop more on the incentive compensation aspect and completely ignore the sales performance management once it is in place. SPM software and ICM software are like two sides of the same coin. Without an efficient and effective ICM, you cannot have a robust and effective SPM. In fact, your sales performance truly pivots on your incentive compensation plans. Before we start differentiating these two vital pillars of your sales management model, let’s attempt to put together a good definition for each.
What is SPM Software and ICM Software
Sales Performance Management is a business tool used by sales management to keep a tight leash on sales pipelines, sales territories, quotas assigned to reps and their performance against assigned quotas and goals. Many software tools are now available that help automate these operational aspects of sales management. Such tools are called Sales Performance Management Tools. Sales Performance management according to Gartner is “a suite of operational and analytical functions that automate and unite back-office operational sales processes”. SPM suite of tools is designed around objectives of improving sales productivity and performance, positively impacting the sales revenue.
Incentive Compensation on the other hand is the reward that is on offer to sales reps for achieving their sales targets. Incentive Compensation Management (ICM) also called Sales Compensation Management (SCM) is a suite of tools that facilitates designing, administering and evaluating compensation plans for your sales reps. Incentive Compensation Management solutions according to Forrester are “solutions that make the design, creation, administration and evaluation of compensation plans more accurate and easier to administer”. In many traditional setups, these two business tools are implemented on spreadsheets and become tedious to manage over a period.
How SPM software and ICM software are different from each other
As mentioned, both SPM software and ICM software are closely interrelated. Let’s look at each from a capabilities or functions perspective and draw out their differences. SPM software can be thought of as a suite of functions that broadly include the below-listed functions or capabilities
Design and build models
For you to run an effective sales performance program, you need to be able to first design the sales program, define stakeholders and the workflows between these stakeholders. This should be consistent across the sales organization. Sales programs are typically modelled to align with corporate goals and objectives, breaking them down to regions, territories and sales reps.
Define Targets and Allocate Quota
Based on the sales performance model, you need to define targets, allocate quota, handle territory management and all related approval workflows.
Quota Agreement
Tied by approval workflows, reps should be able to accept or reject quota allocations. This part of sales performance management deals with getting sales reps on board for sales quota allocations.
Administration, Reporting and Redressals
Here is where the chunk of the administrative portion resides, in the entire sales performance model. This part involves the validation of quota attainments, calculation of incentives, routing of payouts, collecting and building data around attainments, incentives and finally reporting for transparency and visibility. A closely tied aspect is dispute management and redressal related to attainment and incentives. As you can make out these typically translate to administrative tasks and workflows that can be easily lifted and shifted as a single unit as will be learned later.
Sales Coaching
The most visible part of sales performance management is sales coaching. Based on the reports, intuitive and easy to access dashboards, management can drive sales numbers. This is usually supported by knowledge management and training systems.
Sales Operations Analysis
Sales Performance Management systems are incomplete with built-in data analytics functionality. The management would be keen to find out if their sales plans are working for them. Analytics functionality allows the senior management to continuously assess sales performance and course-correct if needed.
Incentive Compensation Management as discussed before is everything to do about designing and maintaining an effective sales incentive model. A sales compensation model based on OTE (On Target Earnings) motivates sales reps to overachieve their targets. As you might already be able to make out by now, Incentive Compensation Management is a subset of tools within the Sales Performance Management suite of tools. It involves more operational and administrative tasks and thus makes sense to unplug it out from the Sales Performance Management suite. To be precise, it is the administration, reporting and redressals component within the Sales Compensation Management suite that we discussed above. This allows businesses to start their sales automation from incentive compensation management and build a sales performance management system around it.
Conclusion
Typically, when businesses start out, they tend to start out with an Incentive Compensation Management tool, only to later design and build a sales performance management system around it as they progress. SPM software and ICM software are thus interdependent business tools. Incentive Compensation Management, although part of a complete Sales Performance Management program, can be considered as an independent component in itself.
At Kennect we understand this very well and have designed our Incentive Compensation Management module to work as an independent suite of incentive focusing capabilities. Its design also allows seamless integration with our Sales Performance Management suite. We invite you to explore our innovative products at Kennect.io.
