During challenging economic times, certain predictable trends that are ever present in business really bubble to the surface. One that is constant, but tends to be even more popular during times like these is ROI. Those five little words that are enough to send you into a downward spiral of defensiveness, “What’s the ROI on this?”
Now, don’t get me wrong, ROI is a valid question and one that needs to be evaluated thoroughly and completely understood. However, ROI is very often used as kind of a, shall we say, cop out of sorts when a key stakeholder maybe doesn’t really believe in it or is just trying to hit you with a “gotcha.” What they’re really asking is what are we spending and what do we get back, the basic dollars in dollars out of business.
The problem here is, regardless of the investment, ROI is rarely that simple and being prepared to give context to said ROI is the best way to never fall victim to this question. Turns out the boy scouts had it right, “Always be prepared.” Oftentimes ROI isn’t just dollars in dollars out, it’s got a vast number of measurements that eventually lead to revenue, efficiency, productivity increases, reduction in mistakes, transparency, etc. All roads eventually do lead to dollars in and dollars out, but there’s a nuance to that journey. Let’s take a trip down ROI lane and highlight some key areas of value when evaluating sales comp.
So you’re looking into upgrading your sales compensation process. Great! Perhaps you’ve been using spreadsheets or an in-house solution, and you’re thinking it might be time to switch to an Incentive Compensation Management (ICM) platform.
But before you do, you understandably want to know: is it worth it? ICMs promise to save you money and improve your processes, but what ROI can you realistically expect?
In this article, we’ll walk you through six of the most significant ways companies find value through their ICM software, we’ll cover the specific savings Performio’s ICM has yielded for a few of our clients, and we’ll explain the true value ICM software offers.
The ROI of ICM software: 6 value streams
The ROI of ICM software comes in several forms. Some are obvious and well known. Others are less expected but equally valuable. Let’s take a look at six of the most important ways that ICMs return value.
1. Saving time
“Time is money” isn’t just a kitschy saying. In the business world, it’s a concrete reality. The more time it takes employees to complete a task, the more money that task ultimately costs the organization. And calculating sales commissions in spreadsheets takes a lot of time.
You have to manually input data for every sales rep, build and execute dozens of formulas to calculate all the different commissions for different kinds of sales activities, modify the spreadsheets per person in order to send the information they need without compromising other people’s information, and then share those sheets individually to every sales rep, your finance team, and everyone else who needs them. Sales admin professionals can and often do spend days on this alone.
But an ICM solution like Performio tracks all your sales data automatically. No need for excessive manual input. And all those formulas you had to execute, no matter how many or how complex, are now simply a button to press. From there, each rep receives payment information automatically, and you can automate any other reports you may need for other departments.
ICM software slashes time—and thus money—to a fraction of what you’re spending on sales compensation management right now.
2. Reducing errors
Besides being a waste of time, spreadsheets are also extremely error prone. Mistakes are inevitable when you manually input thousands of rows of data, followed by dozens of complicated formulas that must also be created by hand. And errors in spreadsheets cost you in two different ways.
First, when you find them, you’ll have to spend more time correcting them. Forget all that time you spent calculating commissions in the first place—that’s nothing compared to digging through (and verifying) thousands of entries to find the one tiny typo that’s throwing everything else off. A single error can easily add hours or even days to the process because giant spreadsheets are just so hard to debug.
Second, when errors go unnoticed, they can cost you even more in the long run. You could be yielding entirely incorrect calculations, and it could go on for months or years before the error is finally detected—if it’s ever detected at all. Then you have to go back through all of your historic data to not only make corrections to the spreadsheets themselves, but also to correct all your past payments.
3. Avoiding overpayments and underpayments
According to Gartner, the average company loses 3% to 5% of their total incentive compensation due to overpayments and underpayments. The savings on this aspect are pretty easy to calculate. Just take whatever you spend on sales comp, multiply it by 4%, and you’ve got a rough idea of what you can expect to save from using an ICM solution that eliminates these errors.
Or take it from Steven Stumpo, Vice President of Sales and Marketing at Jillamy, one of our clients who switched from spreadsheets to Performio:
“What we found is that our old methods introduced a lot of stealth errors that led to overpayments. Eliminating those errors more than pays back our software investment. Now, we no longer have manual calculations or fragile spreadsheets—and we save lots of administrative time. We were spending three or four hours a week just creating reports. Now, we spend only one or two hours a month—and our sales reps can track their performance online at any time. Performio paid for itself within the first year and helped us eliminate tens of thousands of dollars in overpayments. The success continued, and in year two, we’re generating a 2x ROI. This isn’t a luxury for us. It’s a necessity.”
4. Preventing “shadow accounting”
Sales reps need to be able to see their performance in real time, track what sales activities they’ve completed, view their progress toward goals and quotas, and know what they can expect to earn. Lacking access to these insights, they often resort to “shadow accounting”—crude attempts to track and calculate their progress and commissions using homebrewed calculations.
Best case scenario, this is a waste of their (and the company’s) time, which could be put to better use making more sales, generating more revenue, and earning them more commissions. But worse (and more common), their calculations won’t even be accurate, setting the stage for disputes and frustrations, and wasting even more time as finance has to re-check their calculations to ensure everything is accurate.
Performio’s ICM software provides sales reps with all the real-time insights they need, eliminating any reason for shadow accounting, saving everyone time, and allowing sales reps to stay focused on their goals.
5. Data analysis and reporting
Your sales data is an invaluable source of insights. It can hold the keys to identifying trends, more effectively structuring compensation plans, generating additional sales from existing customers, developing new sales strategies, identifying and fixing problems, streamlining sales processes, better motivating your sales reps, and more.
But you won’t get those insights by simply looking at spreadsheets. You’ll have to export all your data and then run it through a data analytics platform or business intelligence solution just so you can start working with it. It’s time consuming, costly, and may even require a different set of skills than you have on your team.
The best ICM solutions, like Performio, come with built-in reporting functionality. Our Analytics Studio gives you unparalleled access to insights from your data. You won’t have to export anything, pay additional fees, or even create complicated formulas. Nor do you need a specialized skill set: it uses advanced natural language processing, which means you just ask the software in normal language for whatever you need to know, and it automatically generates the results for you.
From there, you can display the results in charts, graphs, and automated reports, for complete flexibility in however you want to use that information.
6. Incentivising revenue-driving activity
Effective sales comp plans incentivize your reps to engage in the most profitable, important activities. This is another area where ICM software allows organizations to capture more value. Spreadsheets—and spreadsheet-based ICM software—simply can’t handle as much complexity as their purpose-built counterparts like Performio.
This means these solutions give you far less control over the intricacies of your comp plan. If your sales comp plan is a wardrobe, spreadsheets limit you to shopping at big box stores. Performio is more like a tailor, allowing you to ensure that each component of your sales comp plan is truly optimized for your sales org.
Increasing control over your sales comp plan isn’t the only way ICMs incentivize performance. While spreadsheets offer sales reps no real-time visibility into their performance, and thus no real-time motivation to keep pushing to reach their goals, Performio gives reps real-time performance dashboards. You can even promote a sense of healthy competition to encourage everyone to do their best with built-in leaderboards.
“With Performio managing our tiered commission structure, we saw a 16% increase in premium product sales.” —Nick Deters, Director of Sales at Big Ass Fans
The true value of ICM software
All of this adds up to a lot of savings and additional revenue. So what’s the total amount you can expect from adopting ICM software?
Well, it depends. A number of factors contribute to the exact ROI that ICM software can yield for your organization. The bigger the size of your teams, the more sales divisions in your organization, the more complex your sales comp plans, the more product portfolios you offer—the more value you’ll get out of an ICM solution.
For example, two of our clients, Yorktel and Coeo Solutions, have been able to reduce their time spent on processing and calculating commissions by 50% using Performio. Pretty impressive. But that pales in comparison to another one of our clients, Simpli.fi, which was able to slash their time spent from four to five days per month down to four to five hours per month—a time savings of around 84–90%!
Either ROI is well worth it, but clients with larger and more complex needs may see a greater return. Or at least, they will up front.
While smaller organizations with simpler sales compensation plans may not see such dramatic savings right away, adopting an ICM allows their sales compensation strategy to evolve and increase in complexity alongside their business.
Spreadsheets can work okay while organizations are very small and comp plans are very simple. But of their many faults, perhaps their biggest downside is their lack of flexibility. All the little problems created by spreadsheets for small sales teams grow exponentially as you add more sales reps. More errors are introduced, finding and fixing those errors becomes nearly impossible, more disputes from disgruntled sales reps arise, more duplicate and outdated copies of spreadsheets get passed around, security concerns intensify, and on and on.
By the time an organization reaches around 50 sales employees, spreadsheets simply aren’t viable. That organization must adopt a better solution if they are to grow any further. And there’s no better solution for managing incentive compensation than ICM software.
Think of it as a matter of maturity. As you grow your organization, the tooling you use needs to evolve along with your business. And in today’s world, ICM solutions have increasingly become required equipment as part of the elite tech stack for sales.
The true value of ICM software isn’t merely the ROI you’ll see upfront (though that may be substantial). But it’s also the value of being able to continue experiencing growth far further than you’d be able to do without it.
How Performio delivers value for organizations
By now you’ve seen that ICM software more than pays itself back. But you don’t just need any ICM platform—you need the best.
With Performio, you get unlimited flexibility. There’s no upper limit to the complexity our software can handle, which can’t be said of all our competitors. But that complexity exists on the backend where you never have to worry about it. You get to manage everything through a streamlined interface that puts all the info you need at your fingertips. And our advanced analytics capabilities let you pull more value out of your data than ever before.
Ready to see what the best ICM software can do for your business? Request a demo of Performio today.