Your 2021 Guide To Sales Compensation Management Software

What Is Sales Compensation Management Software?

As businesses grow and sales teams evolve, it often becomes difficult to track commissions across your organization. Sales compensation management software provides automated financial and administrative services in order to help managers track quotas and maintain sales plans while providing employees with accurate commissions and strong incentives.  Sales compensation plans and software puts current and historical data to work to calculate (or even predict future) variable compensation for employees.  These results provide valuable insights and incentives to members within your organization. 

What Are Common Applications Of Sales Compensation Management Software?

Sales compensation software is useful anywhere there is an employee with a variable income.  The most common example is sales representatives paid on commissions but there are countless other positions that rely on variable compensation such as members of the support team that retains customers, sales engineers who complete tasks, managers who track quotas, and many more. Compensation management software also can help track progress towards bonuses and other supplemental incomes. 

Sales compensation software is especially useful when individuals on a team have different goals and sales quotas or when a team spans multiple sales territories.  This software also provides great flexibility within an organization as individuals are able to quickly identify their incentives.

What Are The Critical Features Of The Best Compensation Management Software?  

There are a number of key features that must be included in order to provide the most insightful sales compensation software. Some of these features are: transparency, adaptability, forecasting, data-syncing, customizability, ease of integration, and security. Source 

Transparency

One of the most important features is transparency or visibility.  Believe it or not, most sales incentive plans are not very incentivizing.  This is because most of the time, the people who rely on these plans for motivation are unable to gain insights into their plan.  Instead, these individuals are stuck waiting until the end of the payout period to see how much of their incentive plan was delivered on. 

This can be remedied by providing detailed breakdowns of earned commissions at a deal-by-deal level in the compensation statements. Additionally, in the event that commission payouts are gated by customer payments or some similar event, providing good visibility of commissions earned versus commissions released can be critical for employees to understand how their pay is related to their performance.

Adaptability

Especially in today’s world, it is clear that things change very quickly.  This of course has only been made more clear by the ongoing Coronavirus pandemic.  With all of this change, members from your organization from top to bottom need to be able to change plans quickly.  In order to allow for the greatest business agility, managers need to have the ability to change plans on the fly all the while maintaining open communication to ensure success. This also ensures that employees are maintaining alignment with the overall company goals even as it changes.  

Forecasting

Similar to the need for transparency, sales compensation management software needs to be forward thinking to allow for planning scenarios.  This ability to look ahead allows employees to predict how their performance will affect their compensation and in turn, this will increase incentives. Unlike adaptability, forecasting applies more on the individual level while adaptability concerns management teams. 

Allowing individuals to access up-to-date dashboards that provide specific details related to their sales pipeline with regards to progress towards quotas and milestones can provide that extra motivating factor for them. It can also help them prioritize their near-term activities to maximize their next compensation statement, thereby driving behavior that is most beneficial to the company.

Another opportunity to increase forecasting effectiveness is by providing several different reporting formats.  These reports must be accessible to all audiences from individual employees to management groups and be must be updated in real-time.  It is also important that the individuals’ compensation is tied to measurable and finite goals.  This will greater increase one’s ability to predict compensation.

Data-Syncing 

Another key feature of sales compensation software is the ability to integrate with other software within your sales team organization.  For example, linking your sales compensation plans to your Customer Relationship Management (CRM) application can automate the process of pulling in the source deal data typically used to calculate commission payouts. The CRM data can also be used in order to accurately create sales territories and quotas. 

With data that is synced throughout your business, you are provided with a single source of truth for your information.  This results in more time making decisions and less time compiling data.  Up-to-date data can also be leveraged through a number of calculations that will keep leaders in tune with company activity.  Sales compensation planning software must also be customizable to provide greater insight into your data.  

Customizability 

In order to add real value to your organization, your sales compensation management software must work with you, not against you.  This means that you must be able to input your specific compensation plan into your system.  There are a large number of different types of compensation plans.  Whether you pay your employees using complex commission logic, or use draws, SPIFFs, and/or clawbacks, make sure that your sales compensation software is flexible to your needs.  The entire goal of these applications is the ability to increase efficiencies and the speed in which decisions are made.  This speed would be lost if your software is not able to adapt to your needs.

Ease of integration

While choosing a sales compensation software to use, it is important to choose a software that will quickly add value to your business.  While some software applications might wow you with its features, it is important that these features are easy to use and understand.  Managing sales compensation is often already a headache, don’t let your solution become part of the problem.  Furthermore, it is important that the implementation of your software is quick.  Business operations are continuous, and any extra time spent setting up your system is the time taken away from other, more meaningful tasks.  

Security 

Finally, as with any system that deals with private information, your software must be secure.  Many individuals rely on sales compensation to earn their living, make sure that these employees are protected.  When choosing a solution, look for options that are GDPR (General Data Protection Regulation) and CCPA (California Consumer Privacy Act) compliant and SOC II certified.

Common Pitfalls or Disadvantages Of Sales Compensation Management Software

The most common pitfall of sales compensation management software is that it commonly is not all that incentivizing.  With limited visibility into their compensation, employees are stuck waiting until the end of the payout period to find out how their compensation worked out.  This is a major problem as it disrupts what causes motivation. 

Motivation, as explained by Yale Professor Victor Vroom’s expectancy theory, states that motivational force is equal to expectancy multiplied by instrumentality multiplied by valence.  This means that motivation is equal to one’s understanding of the task multiplied by the trust that they will receive compensation, finally multiplied by the value placed on their compensation.  If the employee cannot see exactly what it is they are earning, the equation no longer works. 

The last thing sales compensation software should do is cause teams to begin to lose trust in their organization.  Similar to the need for transparency, if employees don’t trust that they are being paid fairly they will end up spending more time calculating their own compensation than driving sales.  Returning to the motivational force equation, when this trust goes away instrumentality becomes lost.  

How To Get The Most Out Of Your Sales Compensation Management Software

In order to get the most out of your sales incentive plan, you must allow your business to take advantage of all the key features of your software.  Whether it is setting up data integrations, creating custom reports or any of the other features your software offers, it is important that these features are utilized.  Although these applications are designed to be easy to use, it is especially helpful to utilize the help of industry experts and implementation services.  These experts are not only very familiar with the ins and outs of the solution but can also provide advice on best practices in the field.  

Another way to truly get the most out of your sales incentive plan is to create it with your sales reps, support staff, and/or anyone that may be paid a variable compensation in mind.  There are many different ways to track one’s compensation. Whether employees are paid straight commissions, are supplemented by a salary or anywhere in between, your sales compensation plan will only be incentivizing if your employees understand what it is they are being compensated for. 

What Does Successful Sales Compensation Management Look Like?

VECTRA is a network security company based out of San Francisco.  Before choosing an integrated solution, VECTRA HR teams were “calculating commissions in one excel file and transferring that same information into separate, siloed spreadsheets to pull together our journal entries related to commissions accounting under ASC 606.” This led to immense use of extra time and effort as compensation was calculated one by one, and these calculations then needed to be checked to ensure accuracy. 

Further compounding the issue was the fact that VECTRA uses up to 10 different compensation structures across over 150 employees and they needed a solution compatible with the latest ASC606 accounting standards.  In order to implement an effective solution they needed compensation management software that was robust and flexible enough to adapt to the various different structures. 

VECTRA decided to implement CaptivateIQ’s Sales Compensation Management solution and instantly found themselves saving 30 hours a month no longer hand-calculating compensation as well increased trust and accuracy as they now had a single source of truth for over 150 employees.  VECTRA chose CaptivateIQ because they provide compensation management that is low maintenance, flexible, and makes ASC606 a breeze.  After CaptivateIQ,  VECTRA now has, “end-to-end visibility into the commissions lifecycle in a single source of truth” and are able to reinvest their time into add-value efforts. Source

How Can QBIX Help?

QBIX Analytics provides a team of industry experts with extensive experience in sales incentive management.  Our goal is to provide users with robust and low maintenance solutions that will continue to add value for years to come.  With a number of different solutions to choose from it is easy to understand why the task of implementing new software can feel daunting, but the time and value-added by the correct solution cannot be overstated.  Schedule a call with the QBIX team today to learn how we can help improve your business agility.