Sales compensation is one of the largest line items on most companies’ P&Ls and is a critical investment in achieving revenue goals. Optimizing this investment increases in complexity as companies grow and expand their products and sales structure, making it difficult to administer seller plans without the use of a sales performance management/incentive compensation management (SPM/ICM) solution. While sales performance management (SPM) platforms represent a broader set of capabilities such as planning, territory design, and quota management, most clients engaging with Forrester to evaluate SPM platforms focus on compensation optimization and administration, which includes plan design, deployment, management, and governance (see figure).
The Forrester Sales Compensation Design And Management Model
Client requests for a better understanding of these capabilities led us to do a deeper evaluation of the incentive compensation elements of SPM platforms, which are focused on delivering:
Decreased compensation administration costs by reducing manual work. The core reasons why companies buy SPM/ICM solutions are to prevent hiring additional resources or to implement technology to reduce the resources required to administer current compensation programs. These solutions allow companies to redeploy those resources to higher-priority initiatives.
Reduced time to payment by better connecting performance to rewards. The combined challenge of complex compensation measures and the manual effort required to accurately pay sellers often creates lead times for payouts that result in a performance being rewarded months or quarters after they achieved their objectives. Companies want to close this gap and reward sellers at the point of success. This better connects payouts to results and keeps sellers focused on achieving current objectives.
Increased motivation by enabling custom plans for complex organizations. While most organizations want simplification of their compensation plans, they also want to maximize motivation for each sales role. An SPM/ICM solution can enable organizations to maintain efficiency while also efficiently deploying compensation plans that are aligned to a wide variety of different roles in an organization.
While the broader capabilities of SPM platforms are valuable, the primary goal of most clients evaluating this technology is to improve the efficiency and effectiveness of their compensation programs. Forrester’s SPM/ICM landscape and forthcoming Forrester Wave™ evaluation will focus on identifying the capabilities that are most critical and the companies that do this best. The planning elements of SPM platforms merit their own evaluation, which will follow the evaluation of this SPM/ICM market.
Forrester clients can click here to read our landscape on this market. Connect with me on LinkedIn to talk more about this category and how it can improve the effectiveness of your compensation program.
