CRM applications have been a godsend to businesses of all sizes, putting all the information needed to help clinch a sale right at the fingertips of the sales force, thereby enabling it to compete more efficiently. Recently, the CRM equation has become especially attractive with the advent of on-demand solutions . These solutions can leverage the same enterprise-class CRM functionality enjoyed by large organizations but without the major hardware and software investment that on-site enterprise software entails.

As the on-demand delivery model continues to widen the circle of CRM users, the opportunity exists to greatly extend the value of CRM by linking with other on-demand applications in the greater sales performance-management space — starting with sales-compensation management.

If CRM is about leveraging presales data to make the sale, sales compensation-management solutions are all about leveraging postsales data to ensure reps are paid accurately and have incentive to make the most profitable deals. There's a neat symmetry here with powerful synergies for CRM customers to realize. Today's sales compensation-management applications can bring automation and end-to-end visibility to the incentive-compensation process — which in most companies is still managed via burdensome spreadsheet-driven manual processes that breed errors and disputes, don't scale cost-effectively, don't easily accommodate plan changes or additions and waste enormous amounts of administrative and sales-rep time. Even worse, the inflexibility of these processes leads to dumbed-down compensation plans, because it's next to impossible to implement a truly strategic and dynamic plan that aligns sales behaviors with corporate goals when you're tied to sheaves of spreadsheets. Sales compensation-management applications solve these issues in much the same way that CRM applications have brought automation, visibility and efficiency to presales processes.

To be effective, sales compensation-management applications must consolidate postsales data from all relevant enterprise systems where it may reside — including ERP (enterprise resource planning), payroll, order management, pricing, inventory, product, accounts receivable and HR systems. This data becomes fodder for the business rules and algorithms that accurately calculate each sales rep's commissions on each sales transaction. Once captured, the data is centralized in a sales compensation-management repository, so it is available to drive modeling activities for determining the impact of new compensation plans, organizational changes, commissions expenses and plan changes prior to their deployment. Beyond that, it can drive analyses that help companies refine their sales processes and compensation plans, understand their commissions exposures, optimize the structure of their sales organizations and much more. In short, through this strategic data, customers gain a scrubbed, comprehensive, detailed and extremely leverageable view of field activities at any point in time and over extended periods of time.

Two enormous benefits result if forward-looking CRM customers take advantage of this postsales gold mine:

  1. The postsales data in sales compensation-management repositories can be linked with presales data in CRM applications to drive new value for the sales and finance organizations and the business as a whole.
  2. The same postsales data can be leveraged by the other sales performance-management applications currently coming together around sales-compensation management — and the functionality resident in these applications can, in turn, be leveraged by CRM customers to drive even more new value.

Synergy Between CRM and Sales-Compensation Management

If you are a sales rep evaluating live sales opportunities in Salesforce CRM, Oracle Siebel CRM On Demand or other CRM applications, you likely have great and immediate visibility of contacts, contact history, influencers and the like. What you likely don't have is immediate visibility into precisely how much money you stand to make in commissions, bonuses and other incentives for each opportunity. Hence, you may not really know which opportunities will be the most profitable for you.

You can try to figure it out using a spreadsheet, calculator or the back of a napkin, but that takes a lot of time and there's no guarantee you're going to get it right. To even start, you must have a thorough knowledge of the ins and outs of your individual compensation plan as it stands at the moment. If it's complex or subject to change — SPIFs (special performance incentive funds), for example — that can take some time and effort. In addition, each potential deal can likely be structured in certain ways to maximize your personal return, and that takes time to figure out as well. But what if you could do it all almost instantly with ensured accuracy within your CRM application, so you could get on with selling instead of running numbers?

By the same token, if you head up sales and have devised a sophisticated and detailed set of compensation plans to align your reps with corporate objectives — such as selling high-margin intellectual products before trying to move low-margin OEM (original equipment manufacturer) products — wouldn't it be valuable if reps could see at a glance the return they'll get on their efforts, opportunity by opportunity? That kind of visibility, or lack of it, can help make or break a plan, a fiscal quarter or a career.

This is where the synergies between presales and postsales data start to come in. One of the most useful features a sales compensation-management application can offer is the ability to run "what if" scenarios to project earnings using compensation-plan data. Among the most useful features of a CRM application are comprehensive views of live sales opportunities. By integrating these two applications, you provide reps with the ability to run "what if" scenarios on live sales opportunities in order to see accurately — and in real time — how much they can potentially make on each deal per their compensation plans, as well as how to structure a deal for maximum compensation payout. Consequently, reps can easily see where to most profitably put their sales efforts, and they can do so within their CRM application by transparently leveraging this "new" value-added functionality.

While the previous example illustrates a tangible operational synergy, many other synergies exist behind the scenes. Like CRM, sales-compensation management is transaction-centric — transactions are captured and archived, metrics are leveraged to measure progress, analytics are applied to spot trends, audit trails are created for accountability and compliance and so on. With CRM and sales compensation-management solutions in place, companies have the start of a presales and postsales data environment that addresses the operational and analytic needs of sales and finance management tasked with driving sales performance and maximizing profits.

Total Sales Performance Management

We've discussed how sales compensation-management applications cleanse and consolidate strategic postsales data from a wide range of disparate systems — the kind of data necessary for sales-compensation analysis, product-profitability analysis, channel sell-through analysis, customer-profitability analysis and so on. This critical data can be leveraged to automate and bring visibility to business processes that are highly complementary to both sales-compensation management and CRM, and it can drive improvements in sales performance management.

These processes include quota and territory management, modeling, analytics and price management, as well as sales forecasting and planning. Following the lead of CRM and sales compensation-management applications that are increasingly going on-demand, on-demand solutions to address the aforementioned business processes are emerging. Further, they are coming together under the sales performance-management umbrella, where they can leverage the same postsales data that enables incentive-compensation effectiveness. For example, analytics applications provide insight into who are the most profitable reps by revenue, margin, discount percent and region; what are the most profitable products; who are the most productive reps per month, quarter and year; the cost of sales in a given region in a time period; how this group compares with those in other regions; and more.

Quota-management applications automate quota allocation and provide analytic capabilities to optimize quota distribution. Territory-management applications help define accounts, territories and hierarchies that best drive revenues and profits. Price-management applications analyze which products should be sold to which customers at what price points, and they help manage pricing strategy and execution. And forecasting/planning applications help drive optimal product planning, sales forecasting and inventory levels.

Critically, all of this postsales functionality loops back to enhance the presales processes that are the domain of CRM solutions, impacting these processes positively and substantially through:

  • Improved planning for addressing sales targets.
  • Optimal tuning of sales organizations.
  • More competitive price structures.
  • More meaningful sales expectations.
  • Incentives closely tied to strategic objectives.

Maximizing Your Return on CRM

CRM need not, indeed it should not, exist in a silo, even though this has traditionally been the case. Starting with sales-compensation management — and piggybacking on it — a set of new on-demand sales performance-management applications now exists to feed value back into presales CRM processes and thereby help to maximize the return on customers' CRM investments.

CRM users now must think seriously about how they can leverage the power of postsales data the same way they are leveraging presales data, and bring presales and postsales processes together in a total sales performance-management environment. The new sales imperative is fast becoming as essential as CRM itself.

Christopher Cabrera is the President and CEO of Xactly Software.