Here at Sales Cookie, we help our customers automate their sales commission programs – from user enrollment to payout. Our day-to-day consists in a/ adding new capabilities or customizations and b/ designing fully automated incentive programs. In this article, we step back from our daily routine to reflect on 4 pains points associated with manual (non-automated) sales incentive programs.
#1 – Manually Generating Commission Spreadsheets
Believe it or not, many SMBs still use manually-generated spreadsheets for their sales commission statements. Amazingly, more often than not, those commission statements happen to be correct and paid on time. How come? Because, behind the scenes, a highly disciplined individual in Finance or Payroll is paying a hefty price. Every pay period, this person is conscientiously manually generating spreadsheets, triple-checking payouts, accurately distributing them, and making adjustments as needed. While one can keep pretending all is OK, this is a risky proposition which also isn’t sustainable. Our fundamental belief is that automation should be deployed whenever a task is repetitive and does not increase an individual’s knowledge. Manually generating sales commission spreadsheets is in our opinion a demoralizing task. It relies too much on specific individuals and on their accuracy, while putting excessive demand on them. It’s also a problem which automation can easily solve.
#2 – Constant Back-and-Forth Between Sales and Finance
No automation? Expect negotiations! Often, a lack of automation leads to confusion, constant back-and-forth discussions, or even negotiations. Let’s face it – it’s a lot harder to argue with an automated system than with humans. When humans are responsible for calculating sales commissions, sales reps may feel that results could be biased, that results need to be audited, or that results could be influenced via negotiations. As a result, sales reps spend considerable time and effort calculating their own commissions, and then comparing with manually generated results. Sales reps may also engage in active efforts to “negotiate” their commissions with finance. Note that both sales and finance are on the receiving end of this type of pain. In some organizations, it may even result in degraded relationships between sales and finance.
#3 – Losing Good Reps Over Sales Commissions
Commission-related issues are the #1 reason for sales churn. Good reps may leave because you failed to pay them on time. They may leave because you failed to pay them the right amount. They may leave because commission-related goals were unrealistic. Finally, they may leave because they felt commissions were opaque or unfair. All of those are rooted in a lack of automation. Only automation can deliver accurate and timely payouts – with the ability to monitor its effectiveness. When a good rep leaves, the pain is not only felt by the sales team, but also by HR. Additional sales resources must be expended to interview and train new reps. The sales team’s workload may increase to handle abandoned customer accounts. The sales force may also get demotivated. And HR needs to spend time and effort recruiting new reps.
#4 – Wasted Financial Resources
Which incentives have the most impact on sales motivation and results? Are you over-spending on sales commissions, with no additional gain in productivity? Or are you under-spending on sales commissions with a negative impact on sales performance? Without the ability to measure the correlation between incentives and sales performance, it’s just a shot in the dark. Your sales commission program may look “reasonable” or “fair” – but it doesn’t mean it’s optimized. In addition, because so many financial resources are spent on commissions (typically 8% of total revenue), any calculation error (ex: double-paying commissions) can drain precious resources. Equally important, the inability to use logic to set sales commissions makes incentive programs vulnerable to waste (and challenges from reps).
In this article, we stepped back to examine 4 pain points associated with a lack of commission automation. Our #1 pain point is manual generation of sales commission statements using spreadsheets. However, other aspects, such as a lack of accuracy or transparency in commissions, can impact productivity by draining resources. If you’d like to learn more about how you can automate your sales incentive program, visit our website and sign up for a free trial.