What Is Sales Performance Management? Benefits, How-tos, & Tips

What separates a mediocre salesperson from a superstar? Truth be told, there’s no magic formula for creating outstanding sales reps. However, thanks to evolving technologies and smarter use of data, sales organizations are becoming more strategic in their approach to performance, gaining greater insight into their sales processes and the ways to drive success, balance territories, and improve operational efficiencies. This article will delve into some of the key questions that sales leaders have about sales performance management.

What Is Sales Performance?

Sales performance is a measure of how effectively a sales team delivers against their assigned revenue targets. It doesn’t just pertain to the individual results of each sales rep, but to how well sales leadership plans, forecasts, sets targets, and tracks results for the entire sales organization across territories. Sales performance also measures how well the sales team delivers on targets set by leadership, such as quote-to-close ratio, average sales cycle length, customer retention and churn rate, and customer lifetime value.

What Is Sales Performance Management (SPM)?

Sales performance management (SPM) is the process of gaining visibility and control over the core actions that a sales organization performs. This includes forecasting, planning, implementing, monitoring, and rewarding sales performance. Historically, many of these processes have been done manually. Now, successful sales organizations are adopting advanced digital tools to manage core functions more effectively, such as quota management, territory management, and incentive compensation planning. These digital tools have come to be known as sales performance management or SPM software. These systems are now able to use business data and machine learning in increasingly sophisticated ways, allowing sales leadership to better align broader sales and business strategy with individual sales goals and actions, thereby helping organizations increase revenue.

Key Takeaways

• Organizations use sales performance management strategies to help them increase revenue and help the sales organizations better plan, manage, reward, analyze, and forecast.
• SPM helps companies align sales goals and incentives with broader company goals beyond just closing deals, such as customer satisfaction and retention, lifetime customer value, and sales rep turnover.
• SPM technology evolved to help companies handle sales support processes that were too disconnected from broader operations and primarily managed on spreadsheets or legacy tech that wasn’t designed for sales management.
• The best SPM applications can integrate into core business systems and leverage AI and machine learning.

Sales Performance Management Explained

How do you break out your sales territories? Do you align reps by geography? By product? By industry? How much should your reps be selling? How should they be rewarded? How do you respond to a sudden change in your business environment? These are the types of questions that sales performance management is designed to answer. SPM involves the strategy, tactics, and analytics needed to monitor and improve all the elements that drive a company’s sales efforts. At the highest level, SPM strategy starts with companywide goals around growth, customer satisfaction, and other factors. SPM tactics concern how to ensure that each salesperson can achieve their target results and reach their full selling potential through functions such as compensation, quota setting, training, and pipeline optimization. SPM software supplies the analytics to track and apply these metrics.

Sales performance management solutions evolved from a long history of attempts to optimize people’s work output. The concept of performance management has been around for more than a century, dating back to Frederick Winslow Taylor’s scientific management principles. Applying scientific analysis to workflows over “rule of thumb” judgments, for instance, or reducing discord by establishing a common goal for workers and managers, are principles that can still be seen in modern performance management systems.

The need to identify and measure the most important drivers to achieve organizational goals is a constant in performance management. The technology to do so, however, has changed significantly over time. With the rise of enterprise software in the 1990s, this functionality became automated via incentive compensation management modules within ERP systems. This baseline technology evolved into more sophisticated systems as more data became available to sales organizations and as sales leaders looked to achieve greater operational efficiency.

Why Is Sales Performance Management Important?

A company might be able to run its sales organizations with simple territory maps and spreadsheet-based incentive plans for a while, but this approach won’t scale well in the long run. Recent data from Sales Insight Lab shows that 61% of salespeople consider selling harder or much harder than just five years ago. As sales operations become more sophisticated and customer expectations become more complex, robust sales performance management practices are essential.

Here are some of the most beneficial outcomes from SPM.

• Align sales strategy with sales action: Over the years, salespeople have gotten a bad rap for only being concerned with chasing commissions and bonuses. While compensation is important to sales reps, the simplistic calculation of “close deals, make money” doesn’t quite fit with a modern sales organization. Sales strategy increasingly weighs factors such as customer satisfaction, renewal rates, rep turnover, and sales enablement plans. Having an effective sales performance management process in place captures this more nuanced and granular picture. This, in turn, increases quota and compensation transparency and allows sales organizations to better align (and reward) the actions of their salesforce with their organization’s broader strategies.
• Grant visibility into key performance indicators (KPIs): In addition to aligning sales strategy with sales action, effective sales performance management also tracks KPIs for sales organizations. These KPIs often cover the complex relationships between rep performance, territory management, customer satisfaction, cost of sale, and other factors. Monitoring these KPIs gives sales leaders a more holistic view of their teams’ performance, providing crucial insights into areas such as monthly sales growth, average purchase value, pipeline velocity, and lead-to-sales percentage.
• Provide better forecasts for the business: Having greater insight into sales performance doesn’t just benefit the sales organization. Since sales is the lifeblood of every company, a more in-depth understanding of sales performance makes it easier for the rest of the business to forecast and budget.

What Are the Components of Sales Performance Management?

The components of sales performance management include two distinct elements: the parts and the process. Let’s take a look at both.

At its core, a sales performance management system is made up of three parts:

1. Territory management lets sales organizations create balanced and optimized territories based on geography, business units, product lines, industries, named accounts, and other factors.
2. Quota management lets organizations align sales quotas with company objectives, individual seller goals, and performance criteria. It also enables them to set equitable and achievable targets based on the full revenue potential of their territories.
3. Incentive compensation helps organizations create accurate and sophisticated sales compensation processes—including monetary and nonmonetary incentives—by leveraging unified customer data and core back-office systems.

The sales performance management process is comprised of five cyclical stages:

1. Planning out the responsibilities, expectations, and goals that align with sales and company objectives
2. Continuously managing and monitoring sales organization performance against set standards and expectations
3. Rewarding team members based on performance, individually and as groups
4. Analyzing performance against goals and objectives using data from customers, core business systems, and industry/competitive benchmarking
5. Forecasting outcomes and performance to help set expectations for the next sales performance cycle

A complete SPM strategy and system takes both the parts and the process of sales performance management into account, leveraging data via advanced analytics and machine learning to manage each element.

Benefits of Sales Performance Management

There are numerous benefits to sales performance management at all levels of an organization. These include the following:

• Benefits for companies: At a company level, SPM provides much greater visibility into revenue forecasts, making planning and budgeting easier and more accurate.
• Benefits for sales organizations: Here, SPM provides a much more comprehensive and granular view of territory, quota, and incentives. The better a company can map out its territories and quotas, the better the odds of reps making their numbers, staying motivated, and hitting revenue targets. SPM can also help sales organizations develop a sophisticated sales strategy so available resources can operate more efficiently.
• Benefits for sales leaders: SPM gives sales leaders a real-time view of how their reps are performing, allowing leaders to coach and support their teams to success. It also helps leaders set realistic and measurable objectives for their teams.
• Benefits for sales reps: SPM allows sales reps to play to their strengths, assigning them more targeted territories or quotas that are realistic for their skill level and assigned accounts. It also provides reps with a clearer sense of how they'll be rewarded and how to best spend their time to be most effective.

Challenges of Sales Performance Management

Although the potential benefits of SPM are clear, there are several challenges that can hinder the effectiveness of a sales performance management strategy. These include the following:

• Lack of clear vision: With any good system, what’s measured is what matters. To be effective, SPM relies on having a clear understanding of what the sales organization wants to accomplish. If there’s no clear vision or strategy, sales leaders won’t know what to measure or what to reward.
• Lack of good data: As always, garbage in, garbage out. If an organization is unable to share accurate and comprehensive data from its core business systems, or if accessing that data requires too much manual intervention, its sales performance management system will be underused and often out of date. As a result, the SPM strategy will suffer.
• Lack of motivational link: If an SPM strategy doesn’t motivate the sales team, it’s a failure. A sales performance management plan must align quotas, territories, and targets in a way that keeps reps high performing and energized.
• Lack of sales enablement: While sales performance management systems have become much more intuitive and user friendly, sales leaders and sellers still need some training to reach peak effectiveness. Targeted training around an SPM initiative can give sales leaders the knowledge and tools they need to measure, coach, and reward effectively. It can also give sales reps a better sense of how the system works, enabling them to spend less time navigating it and more time getting value from it.

How to Implement a Sales Performance Management Process

By now, you should have a clear sense of what sales performance management is, why it matters, and the benefits and challenges it presents. Now, we’ll take a look at the steps involved in implementing the process.

How to Measure Sales Performance

As mentioned above, sales performance management offers benefits for all levels of a sales organization. Which is why it is important to measure sales performance at every level. How are your individual sales reps performing? How well have your sales leaders been able to monitor, manage, and coach their teams? How have you been able to execute on your sales strategy, and how did that strategy align to broader company goals? To accurately answer these questions, you have to create the right KPIs and measure them using the right systems and data.

Choosing Sales Performance Management Software

Any sales performance management software should be able to track and monitor sales performance for individual sales reps and teams. It should also feature territory management, quota management, and incentive compensation components. A more robust system will go beyond these basic elements, integrating seamlessly with your core business systems and leveraging AI and machine learning for deeper insights. To derive the greatest benefits, you should seek out software that is comprehensive, intuitive, and clearly built with end users in mind. After all, if your SPM system isn’t easy to use, your salespeople may burn up precious cycles training on and navigating it instead of closing deals and serving customers.

Increase Revenue with Sales Performance Management from Oracle

If you’re looking for an SPM solution that can help you increase revenue and reach your company’s broader customer goals, Oracle Sales Performance Management offers advanced tools for incentive compensation, quota management, territory management, and other key functions. Backed by a strong data foundation and machine learning capabilities, the solution helps you increase revenue by aligning individual sales goals with your company’s sales strategy.

Sales Performance Management FAQs

What are the five stages of performance management?
The five stages of performance management are planning, managing, rewarding, analyzing, and forecasting.

What are the three types of performance management?
The three most common types of performance management are the balanced scorecard, management by objectives, and budget-driven business plans. The three most common components of sales performance management software are territory management, quota management, and incentive compensation.

How do you measure performance in sales?
To measure performance, you must create and monitor key performance indicators (KPIs) that align with your company’s sales and business strategy. These KPIs often cover the complex relationships between rep performance, territory management, customer satisfaction, cost of sale, and other variables. Sales performance management helps balance these diverse factors.