better tools, better process, better performance best-in-class spm deployments mirrored by xactly customer

This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. May 2013 Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers One of the most crucial challenges facing today’s business-to-business (B2B) companies is the care and feeding of their professional sales staff, considering that competitive threats, savvy buyers, and ongoing budgetary constraints put pressure on sales leadership and operational managers to do more with less. Fortunately, a select group of top-performing enterprises reveals, in recent Aberdeen research, an actionable combination of best practices and technology adoption that successfully meets this challenge. This Research Brief will outline a series of these protocols that can be adopted by under-performing sales organizations seeking to improve their business results, as well as how a subset group of Xactly customer survey respondents relate to these practices and performance levels. Between September and November 2012, Aberdeen surveyed 312 end-user organizations about their sales effectiveness practices and accomplishments, specifically to understand how sales performance management (SPM) is most effectively deployed by Best-in-Class firms (sidebar) and detailed in Motivate, Incent, Compensate, Enable: Sales Performance Management Best Practices (January 2013). Ten percent (10%) of these survey respondents indicated Xactly as their technology provider around SPM, and we see in Figure 1 that sales reps for Figure 1: Xactly Customers Field More Successful Sellers Source: Aberdeen Group, November 2012 59% 54% 56% 43% 40% 45% 50% 55% 60% Reps achieving quota First-year reps on quota Percdentage of attainment n = 312 Xactly customers All Others Research Brief Aberdeen’s Research Briefs provide a detailed exploration of key findings from a primary research study, including key performance indicators, Best-in- Class insight, and vendor insight. The Sales Performance Management Best-in-Class In November and December, 2012, Aberdeen surveyed 312 end-user sales organizations to understand their sales effectiveness best practices. The performance metrics used to define the Best-in-Class (top 20%), Industry Average (middle 50%), and Laggard (bottom 30%) among these sales teams are:  88% customer retention rate, vs. 78% among Industry Average and 14% for Laggard firms  12.3% average year-over-year increase in overall team attainment of sales quota, vs. a 1.0% increase for the Industry Average and a 5.8% decline among Laggard respondents  10.1% average year-over-year increase in the percentage of sales reps achieving quota, vs. a 1.2% decline for Industry Average and a 7.7% decline (increase in) the cycle time among Laggard respondents  8.0% average year-over-year increase in average deal size or contract value, vs. a 0.8% increase for the Industry Average and a 1.5% decline among Laggard respondents Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 2 © 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 these particular organizations, particularly first-year sellers, are more likely to achieve their individual quota levels. If we may safely assume that more sales reps hitting their number is a desirable trait — and Aberdeen’s Sales Effectiveness research consistently yields support for this metric as a crucial key performance indicator (KPI) in overall ROI on Sales Operations spending — then it is well worth exploring how these firms, as well as top-performing enterprises, support their front line with core competencies and technologies. Best Practices, Best Performance In Figure 2, we learn about a series of process capabilities (see Aberdeen’s PACE research model, sidebar, page 3) that are consistently deployed more frequently by Best-in-Class sales organizations than under-performing companies, all of which can be effectively utilized in support of an SPM technology deployment. Let’s take a detailed look at some of these practices: Figure 2: Best-in-Class Capabilities Yield Superior Sales Results and Enablement Efficiencies Source: Aberdeen Group, November 2012 Among all companies, and especially well-adopted by the Best-in-Class, is the organizational capability defining SPM support from the C-Suite. It is somewhat surprising that so many Laggard companies — nearly half — actually report that senior executives are not invested in enabling their sales organization; their business results paint an unfortunate picture of the associated poor performance results. On the other hand, it should be noted, the involvement of top corporate management in the specific compensation design for the sales team is not as advisable, with only 35% of the Best-in-Class (45% of All Others) reporting such a connection. While senior-level involvement in fixing sales quota is the leading compensation determining factor among all companies, Best-in-Class firms do not allow this top-down involvement to override other forms of input nearly as dramatically as Industry Average and Laggard companies, such as previous rep compensation, needs of 81% 78% 65% 45% 78% 58% 55% 40% 56% 55% 51% 37% 30% 45% 60% 75% 90% SPM process has buy-in from corporate senior leadership Defined metrics for analyzing impact of sales performance on company health We provide sales managers with training/tools to help them provide better feedback to, and guidance for, their reps Sales reps use automated solutions to forecast their performance against goal / their likely compensation Percentage of Respondents n = 312 Best-in-Class Industry Average Laggard Sector Definition For the purposes of this survey, the term “sales performance management” referred to any process, strategy, or initiative focused on managing, compensating, rewarding, motivating, or promoting sales staff, in order to achieve optimal performance in revenue attainment and overall sales productivity. Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 3 © 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 the business or territory, or overall expectations for a team’s performance. This is due to the distance, especially in large corporations, between top executives and staff in the trenches, to whom they might not easily relate. Rather, they balance the input more evenly with past and future corporate needs as well as the realities of sales incomes and goals. Next, Best-in-Class firms are 37% more likely than All Others (78% vs. 57%) to link the sales team’s overall performance to the company’s overall health, using defined metrics such as profit margin, forecasting accuracy, customer retention, net client value, etc. Rather than isolating the perception of the sales team’s performance around the simple number of dollars in closed deals, these companies value a more holistic contribution by the business development team, and track measurable statistics to back up their commitment. A final Best-in-Class core competency shows fewer than half of all companies provide their sales reps with automated solutions to forecast their current sales performance against their goals and/or their expected compensation based on pending achievements. It is worth noting, however, that top-performing firms are more likely than others to take advantage of the best practices and tools described in Better Sales Forecasting Through Process and Technology: No Crystal Ball Required (July 2012), which provide sellers with real- time data on their performance results vis-à-vis quota. The most advanced SPM deployments allow sales reps to perform quick what-if scenarios that delineate their exact income potential should any particular sales opportunity or set of deals close during the current selling cycle, as well as how incentive programs such as President’s Club or gamified internal competitions will play out. This kind of visibility can serve as a strong motivator, considering the fact that 98% of Best-in-Class companies confirm the value of financial compensation as a prime motivator for the sales persona. This knowledge management capability is also the one in which Xactly customers most often report their adoption, with a 63% rate, compared with 38% among all other organizations. Supporting Best Practices with Enabling Technologies Now let’s turn to how Best-in-Class companies invest in specific SPM platforms and applications to turn these best practices into measurable business value. In Figure 3 we look at four specific technology enablers that are deployed more often by Best-in-Class organizations than by Industry Average or Laggard firms:  CRM compensation integration: Since the customer relationship management (CRM) platform is the legitimate standard sales home port for most enterprises, and money is the clear leading motivator of sales behavior, it makes sense to marry these two functions. Aberdeen’s research shows that Best-in-Class companies are 32% more likely than All Others (66% vs. 50%) to integrate real-time compensation and quota data or a commission estimator into the CRM system of record. By doing so, the strongest-performing enterprises enable their reps to play out how their compensation will be affected by closing (or failing to close) various deals in their pipeline. Aberdeen’s PACE Methodology Aberdeen applies a methodology to benchmark research that evaluates the business Pressures, Actions, Capabilities, and Enablers (PACE) that indicate corporate behavior in specific business processes:  Pressures — external forces that impact an organization’s market position, competitiveness, or business operations.  Actions — the strategic approaches that an organization takes in response to industry pressures.  Capabilities — the business process competencies (process, organization, performance, and knowledge management) required to execute corporate strategy.  Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices. Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 4 © 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 Figure 3: Enabling SPM Technologies Support Peak Sales Effectiveness Results Source: Aberdeen Group, November 2012  Performance dashboards or scorecards, also preferably integrated into the CRM, provide a quick visual status update to savvy end-users who want to rapidly digest the information they need to run their personal or group book of business. It works out best for all stakeholders if such dashboards are configurable all the way down to the individual user level, so that individual reps can select which data points — commission estimates, quota attainment, gamification status updates — are in front of them, and preferably with no distinction between the device or location of the end-user. This technology enabler also represents the highest adoption rate among Xactly customers of the four presented here, with 55% of them doing so, compared with 53% among the other 90% of survey respondents.  Best-in-Class firms are 23% more likely than Average companies (53% vs. 43%) to use quota planning or management technologies to develop aggressive-but-attainable quotas and territories for their reps, as well as to address the need to give all reps a reasonable chance at a fairly-sized book of business. Considering that the average reported cost to replace a B2B sales rep is $35,360, ensuring that as many of the front line team members have an achievable result and stay engaged and profitably employed by the enterprise, is well worth careful planning. Xactly customers are less likely than both the Best- in-Class and other companies (41% vs. 42%) to deploy quota planning; they are encouraged to enjoy the benefits of adoption, particularly if their existing SPM platform can be integrated with this type of tool for seamless management- and rep-level access. 66% 65% 53% 43% 56% 65% 43% 38% 39% 44% 43% 29% 20% 30% 40% 50% 60% 70% CRM or SFA includes compensation module or commission estimator Performance dashboards / scorecards for both managers and reps Quota planning/ management solution Compensation management solution Percentage of Respondents n = 312 Best-in-Class Industry Average Laggard Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 5 © 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 Sales Mobility: No Longer a Nice-to-Have As reported in Aberdeen’s Sales Mobility: How Best-in-Class Remote Sellers Are Replacing “See” with “Do” (April 2012), today’s most successful enterprise field sales staff and account managers are fully enabled with processes, platforms, devices, and technical support to ensure that peak sales performance, especially among that data set’s Best-in-Class cohort (sidebar), is ensured regardless of the physical location or time of day when sales reps perform their jobs. In the context of the current SPM research, a majority of companies either currently or plan within the year to support their team with mobile access to sales compensation data, with Best-in-Class firms leading All Others by 17% (48% vs. 41%). Why is mobile access to earnings data so important? Because we want our sales reps to see the “if–then” potential of closing that last-minute deal regardless of where they are working. For example, a successful but tired rep who is traveling at month-end may log into the CRM from the road, discover that one more small customer up-sell will vault them into a higher commission payment plan for the remainder of the quarter, and use their final hours of sales cycle time to squeeze enough revenue out of their territory to hit that elevated number — rather than close up shop, ignorant of the missed opportunity. And this incremental revenue certainly helps their company, as well as internal and external stakeholders, count on additional revenue overall. In this area, Xactly customers out-pace the Best-in-Class, with 63% currently deploying the approach, compared with just 15% among other firms. In Table 1, we look at the performance advantages associated with this protocol, comparing a number of sales effectiveness KPI results among users and non-adopters. Table 1: “Show Me the Money” — an Anywhere, Any Time, Any Device Must-Have Sales Effectiveness Metric Mobile Access to Sales Compensation Data All Others Customer retention rate 77% 67% Annual sales employee turnover 15.1% 20.6% Average deal size or contract value $650k $279k Annual improvement in sales employee time-to-productivity 4.1% 0.0% Source: Aberdeen Group, November 2012 Sales Motivation: Is it Just the Money? Salespeople are only in it for the money, right? While fully 98% of Best-in- Class firms predictably indicate individual financial compensation as a top- three sales motivator, we see in Figure 4 that when we move beyond the cash, even this classically hard-edged job role is highly susceptible to the value of being told, “Job well done,” as well as to the challenge of internal competition. Best-in-Class companies indicate that internal recognition for Sales Mobility: Best-in-Class Defined Aberdeen research published in Sales Mobility: How Best-in- Class Remote Sellers Are Replacing “See” with “Do” (April 2012) features a Best- in-Class group of survey respondents, defined as the top 20% of performers:  109% of overall sales quota achieved by the sales organization during the last completed calendar or fiscal year, compared with 73% among Industry Average firms and 41% within Laggards  8.1% year-over-year increase in lead conversion rate (sales-accepted lead to close); vs. a 2.1% increase for Industry Average firms and 6.1% decrease among Laggards  4.6% average year-over- year improvement in customer renewal rate, vs. a 0.3.% improvement for the Industry Average and a 2.5% decline among Laggard respondents Best-in-Class: Top 20% of aggregate performance scorers Industry Average: Middle 50% of aggregate performance scorers Laggard: Lower 30% of aggregate performance Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 6 © 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 strong performance matters greatly to the sales function, followed by tangible cash and non-cash rewards, as key motivators of the most highly desired sales behaviors. Figure 4: Top Non-Financial Sales Motivators — Cash Is King, But Tell Me You Love Me Source: Aberdeen Group, November 2012 Does this mean that salespeople actually have … feelings?! Indeed, yes. Consider this common scenario in a typical sales organization: a number of high- performing reps are consistently beating quota, making President’s Club, earning good money … so what is the next step in their professional development? The current research teaches us that “great players don’t often make great managers” — only 18% of all respondents prioritize a promotional track to sales management, perhaps knowing that many sales leaders earn less than their top reps — so how can we keep our strongest sellers engaged? By instituting formal recognition programs and competitive campaigns that reward leadership and winning within a team environment. This brings up the subject of the relatively new Sales Performance Management focus on gamification , which is defined as the use of game mechanics to motivate or reward distinct behaviors. While only 12% of survey respondents currently report an active gamification initiative, 23% of them (31% among the Best-in- Class) indicate a plan to implement one within the next 12 months. Gamification is a natural fit for the sales function — it represents another dimension in which these naturally competitive team members can one-up each other — and is adopted by the same 12% of Xactly customers as among all companies. Fifty-six percent (56%) of these companies, however, consider public recognition a top motivator around reps’ ability to achieve quarterly sales goals, compared with 36% among non-Xactly users. Hence, gamification adoption is likely to rise. The other motivator under discussion here is competition. While the Human Resources team inside a typical company may not always get excited about creating employee competitions in which there are identified winners and losers, the sales function is a natural fit for tapping into the competitive spirit that has long been associated with the job role. In Figure 5, we note that companies indicating the use of competition as an actively deployed motivator 57% 35% 21% 18% 15% 15% 10% 20% 30% 40% 50% 60% Internal recognition for positive performance Competition with other team members Learning and developing new skills Promotional opportunities within the company Team-based financial compensation Employee engagement program aligned to company values Percentage of Respondents n = 312 Best-in-Class Fast Facts  Best-in-Class companies average 105% total team attainment of quota, compared with 86% for Industry Average and 54% among Laggards  Best-in-Class firms close an average of 29% of sales- accepted leads; the number drops to 24% and 19% among Industry Average and Laggards respectively  The percentage of sales reps achieving quota grew by 8.8% among the Best-in- Class and 1.0% for Industry Average companies; Laggards report an average 2.1% decrease Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 7 © 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 for sales results see more first-year reps and all reps overall achieving their individual sales quota numbers. In the case of Xactly’s customers, they are 16% more likely (58% vs. 50%) to identify themselves as active adopters of this practice. Figure 5: Competition — an Effective Motivator of Sales Over- Achievement Source: Aberdeen Group, November 2012 Does Teamwork Matter? Finally, let’s consider the references above to cash-oriented and non-cash rewards in the context of teamwork. Figure 6 teaches us that the classic assumption that salespeople are only motivated by their own personal compensation, and achievement, is not supported by the data. The majority of all survey respondents, and particularly the Best-in-Class, provide organization-wide financial rewards for overall accomplishment of corporate goals; these targets can vary from hitting revenue numbers to achieving defined levels of customer satisfaction. Forty-eight percent (48%) of respondents also provide non-cash incentives on a company-wide basis, with a slightly higher percentage of Best-in-Class firms doing so. These incentives can be tied into the gamification process described above, and serve to further the point that while money remains the prime motivator and delivery model of an individual’s sales remuneration, it is wise to consider rewarding teamwork both via payroll and non-cash models. Looking at the Xactly users within the research, they report an average score of 2.81 on a 1 to 5 scale of focusing on teamwork as an essential sales effectiveness ingredient — “1” equaling an “every man for himself” environment and “5” representing a total “one for all, all for one” scenario “ which ranks lower than the 2.95 average among all survey respondents. As more aggressive users of SPM tools, however, this sub-set of companies sees more reps achieving quota (Figure 1 above) and 60% 49% 56% 43% 40% 45% 50% 55% 60% Reps achieving quota First-year reps on quota Percentage of Attainment n = 312 Competitive Motivators All Others Fast Facts  The Best-in-Class report a 16% higher average sales quota than all other firms: $1.208M vs. $1.043M  Best-in-Class companies raised average sales quota 13.7% since last year, vs. 8.1% among all others  Best-in-Class firms are 15% more likely than Laggards (69% vs. 60%) to onboard / train sales staff specific to individual job roles Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 8 © 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 their average overall team attainment of quota — 78% vs. 77% among non- Xactly users — doesn’t suffer as a result. Figure 6: Business ROI of Rewarding Teamwork on the Sales Team Source: Aberdeen Group, November 2012 Conclusion: Sales Effectiveness is Worth the Care and Feeding Readers have no doubt experienced the classic view of B2B sales people: they are cutthroat, selfish, and motivated only by their own W-2, with no loyalty to their co-workers or their employer beyond WIIFM — what’s in it for me. Figure 7: Sales Employee Satisfaction Source: Aberdeen Group, November 2012 A different story, however, is revealed by the research, and exemplified by the Best-in-Class companies within the data. Consider the value, proven here, of 92% 51% 69% 52% 70% 46% 40% 55% 70% 85% 100% Organization-wide financial rewards Organization-wide non-financial rewards Percentage of Respondents n = 312 Best-in-Class Industry Average Laggard 3.16 2.88 3.03 2.64 2.59 2.35 2.00 2.50 3.00 3.50 Overall sales employee satisfaction Overall sales team satisfaction with compensation Average on 1-5 scale n = 312 Best-in-Class Industry Average Laggard Fast Facts  What is the “ideal” amount of sales turnover? Best-in- Class firms report 9.7%; Industry Average 10.1%; Laggards 12.3%  What is the average fully- loaded cost of sales rep? $152k among Best-in-Class organizations; $148k for Industry Average; $138k among Laggards  Are Best-in-Class companies larger than others, and therefore more able to invest in SPM technologies? Actually, they are 18% smaller than Industry Average and Laggard firms, measured by revenue Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 9 © 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 emphasizing teamwork, career growth, non-financial rewards, and many other softer sides of managing salespeople most effectively. In reality, the most successful sales and sales operations leaders put energy and resources into developing long-term, happy front-line employees. We see in Figure 7 the clear link between sales staff satisfaction and peak performance. Sales leaders with the strongest results around quota attainment, revenue growth, and shortening the sales cycle are selecting, on-boarding, training, motivating, incentivizing, and of course compensating their sales team members — and managers — with a holistic view toward creating employees who are both productive and satisfied. When it comes to compensation, Best-in-Class and even Industry Average companies report better-than-neutral average satisfaction with how much their teams are paid: in these uncertain economic times, this is an enviable and ultimately profitable position to attain. In the context of Xactly customers’ performance, the percentage of these firms indicating strong overall and compensation satisfaction rates among their sales teams is strong, with 73% and 61%, respectively, ranking at four or five on the Figure 7 scales, equal to the 74% and 61% levels among all other firms. If “a happy sales force is a successful one,” the performance of this customer base remains strong, as evidenced by the opening data in Figure 1 above, as well as by the additional metric provided in the sidebar. Xactly Customers’ Performance vs. All Others In addition to the performance metrics showcased in Figure 1, Xactly’s customers achieved stronger performance around these sales effectiveness KPIs, in comparison with the other 90% of responding companies:  30% lower sales employee turnover (15.0% vs. 21.4%)  26% shorter sales time-to-hire (2.1 vs. 2.8 months)  22% shorter sales time-to- productivity (3.6 vs. 4.6 months)  19% shorter average sales cycle (4.02 vs. 4.98 months)  2.8% annualized growth in average deal size, vs. 0.8% Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 10 © 2013 Aberdeen Group. Telephone: 617 854 5200 www.aberdeen.com Fax: 617 723 7897 For more information on this or other research topics, please visit www.aberdeen.com . Related Research Breaking the Laws of Physics: Shortening the Last Sales Mile Through Workflow Automation; April 2013 CRM 2013: Generating Business Value throughout the Enterprise; April 2013 Motivate, Incent, Compensate, Enable: Sales Performance Management Best Practices; January 2013 CRM 2013: Manufacturing Success through Mobilized, Integrated, and Flexible Deployments; January 2013 Collaborate, Listen, Contribute: How Best- in-Class Sales Teams Leverage Social Selling; November 2012 Train, Coach, Reinforce: Best Practices in Maximizing Sales Productivity; October 2012 Better Sales Forecasting Through Process and Technology: No Crystal Ball Required; July 2012 Sales Intelligence: What B2B Sellers Need To Know Before the Call; June 2012 Partner Relationship Management: Channeling Better Sales Results; March 2012 Sales Mobility: How Best-in-Class Remote Sellers Are Replacing “See” with “Do”; March 2012 Author: Peter Ostrow, Vice President and Research Group Director; Customer Management, Sales Effectiveness (peter.ostrow@aberdeen.com) LinkedIn Twitter For more than two decades, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter — the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.5 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500. As a Harte-Hanks Company, Aberdeen’s research provides insight and analysis to the Harte-Hanks community of local, regional, national and international marketing executives. Combined, we help our customers leverage the power of insight to deliver innovative multichannel marketing programs that drive business-changing results. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 854-5200, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com. This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. (2013a) . aggregate performance scorers Laggard: Lower 30% of aggregate performance Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers. achieve optimal performance in revenue attainment and overall sales productivity. Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers. Average and Laggard firms, measured by revenue Better Tools, Better Process, Better Performance: Best-in-Class SPM Deployments Mirrored by Xactly Customers Page 9 © 2013 Aberdeen