Sales Performance Management gains market favour

Sales is one of the last bastions of the corporate mavericks—few corporate executives want to upset the company’s breadwinners and risk losing their best sales talent. Mercurial sales high-performers have a smile and convincing rhetoric which can open any door and close any deal. Such Wayne Rooney-like skills should not be constrained, so the argument goes.

In recent years CRM and sales contact systems have provided more structure and framework to sales processes, but more importantly have captured customer data, thus stopping the loss of customer knowledge when a salesperson leaves. However, much planning of sales activities and remuneration plans are still done on Excel spreadsheets.

There is still much subjectivity in salesforce planning. For example, some sales reps are allocated the best geographic territories and customer accounts while others have “graveyard” accounts in the back of beyond. Ironically, CRM and sales contact systems can exacerbate the problem. They can be used as punishment systems to “manage” reps on a minute-by-minute basis. Not exactly what the makers had in mind, I would suggest.

Senior management now want more from their sales channels and less of this type of dysfunctional behaviour. They are also aware of the long-term damage to reputation and shareholder value of scandals involving salespeople (a recent survey showed that this is the No1 corporate risk according to CFOs). The public outcry about Siemens’ sales reps bribing customers in Europe being a recent case in point.

More governance and corporate social responsibility is required in the sales function; i.e. objectivity, transparency, accountability, meritocracy and responsibility. Senior management now wants intelligent and responsible sales that are profitable and strategic and offer sustainable long-term cashflow. Not “sales for the sake of sales” in other words. They want sales to be aligned with strategic objectives and pay-for-performance. They want less staff paid on time and materials.

This is where Varicent comes in. Varicent is a young, privately held, company that provides Sales Performance Management (SPM) solutions for mid-market and large enterprise customers on a licence or hosted service basis. Varicent helps organisations to devise innovative and yet complex compensation plans and then to dynamically change the variables in real-time. For example when the stock level of product X is too high, it can increase commissions to divert sales attention towards this product and model, and then monitor, demand and margins.

Varicent’s SPM solution comprises of 4 distinct elements: Incentive Compensation Management, Quota Planning, Territory Management and Performance Analytics. The first of these, Incentive Compensation Management, is the most compelling customer need. Bonuses and commissions are notoriously difficult to devise and administer. Get them wrong and you are in trouble. For example in Q1 2006, Computer Associates’ new bonuses and commissions system cost $75m more in commission pay-outs than forecast. Their CTO and the Head of Sales departed, and a late filing of their 10-K report led to falls in their share price and market confidence.

Varicent’s SPM suite supplements its own reporting and analysis capabilities with analytic platforms such as Applix (TM1), Hyperion (Essbase), and Microsoft (Analysis Services). Alerts and reporting can be output to the web and PDAs, as befits mobile sales people. Management dashboards and built-in workflow can be drilled into for greater detail and exceptions management.

There are a plethora of competitors emerging in the SPM space including Callidus, Xactly, Centive, Practique Associates, Glow Technologies, Centrive, Synygy, and Cellarstone. Varicent’s difference is that its executive team grew out of the Finance Performance Management area—Varicent claims to really understand financial consolidation and the budgeting and planning applications that underpin SPM.

Performance Management, to date, has been associated with finance-specific applications. SPM is a good example of bringing Performance Management into other departmental operations although its roots remain in the Finance Department. Expect other similar departmental applications to emerge—marketing budgeting performance management being an obvious area of focus for the future.