Managing Commissions to Boost Sales Productivity

Ask salespeople and they’ll tell you: They don’t have enough time in the day to sell. That’s not because the laws of physics cause salespeople to move through time faster than the rest of us — it’s because salespeople are pulled in many directions over the course of a day, and every one of those activities cuts into their selling time.

Actual selling takes up just 36 percent of the average salesperson’s time, a recent Salesforcestudy indicated.

Another recent study was slightly less encouraging — only about one-third of the average salesperson’s time was spent with customers, and 40 percent of that time was occupied by lower-tier customers, Bain & Co. found.

Don’t make the mistake of thinking that other two-thirds of a salesperson’s time is wasted, though. Other activities that are important to the sales organization — admin, service tasks, internal meetings, data management, and so forth — are a necessary part of the salesperson’s job. While they may elicit grumbling, those things do have an indirect impact on the salesperson’s commission checks.

There are things that eat into a salesperson’s limited time that are far less productive, however. A great example of this is evident in commissions management, an often-overlooked discipline that can have dramatic ripple effects on sales productivity.

The Perils of Shadow Accounting

A shocking percentage of businesses still manage compensation manually — or at least, virtually manually, through spreadsheets. Excel was used in the commissions management process by 89 percent of businesses responding to a 2012 Deloitte study. While that number has ticked down somewhat in the intervening years, it still hovers around 70 percent.

Manual management through spreadsheets is a process fraught with errors. Ninety percent of spreadsheets have errors, research shows — and commission errors do not go unnoticed by salespeople (when the error goes against them, that is).

The hit against sales productivity begins the moment a salesperson believes the comp plan manager is making mistakes; instead of allowing the manager to compute commissions, salespeople often engage in shadow accounting, or keeping a set of financial records for themselves that they can compare against the official version.

When a commission payout conflicts with a payment expectation, the salesperson often confronts the comp plan manager, and the conflict cuts into selling time. The comp plan manager’s investigation is a manual process, so resolving the conflict takes time. When this happens several times, the salesperson’s trust in the organization as a whole suffers and can contribute to sales staff churn — itself an expensive and productivity-sapping problem.

Automation’s Many Benefits

Automation helps eliminate many of these conflicts, cutting them by 40 percent or more. The 60 percent that remain are resolved much more easily by comp plan managers, who can use the commissions management applications to quickly access a step-by-step history of each deal or commission payment. Analysis time drops dramatically, helping to bolster salespeople’s confidence in their commission checks.

Automation’s usefulness isn’t limited to resolving accounting issues and putting sales people back to work selling. When commissions solutions are integrated with other parts of the sales software infrastructure, it can help reinforce commissions’ value as a driver of sales behaviors.

For example, when a quoting solution is connected to the compensation management solution, it’s possible to display the commission a salesperson stands to make by closing a deal — and not for that deal by itself, but in relations to the SPIFs, bonuses and accelerators in the salesperson’s comp plan.

It can also show the additional amount to be made through upselling products and services suggested through the guided selling features of the quoting system.

Automation also enables managers to understand how effective their coaching and sales enablement efforts are in a timely manner. Commission data can be analyzed against usage data for sales content or against the number of training courses salespeople complete, allowing managers to validate their strategies or change them quickly.

A manual management system would lock away that data in a format that would take significant human analysis to use for those purposes, ensuring that in most cases it would not be employed.

Achieving Sales Potential

Managing compensation manually seems like a satisfactory solution — the price is right! — but it limits the business’ ability to harness data generated by compensation, and thus prevents sales managers from being able to motivate, compensate and coach salespeople to achieve their potential.

Businesses, whether they realize it or not, are hampering their sales forces by operating with a figurative blindfold over their eyes. Automation can remove that blindfold — and, in the process, give sales productivity a shot in the arm.