Incentive Compensation and Sales Performance Management Survey

SaaS – Future or Buzz?

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Julien Dionne
on May 2, 2010
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I had a good conversation with Chris Cabrera, the CEO of Xactly Corporation, last week. We spent an hour talking about Software as a Service (SaaS) and why people should care. He is definitely one of the people most passionate about this topic that I know!

For those who don’t remember, I wrote an article called “Buy the Car, Rent the Car or Take the Bus” which explains the difference between on-premise, single-tenancy and multi-tenancy.

“Many people are confused about what SaaS is, and about the benefits of a pure SaaS solution” said Cabrera. “Many companies use the term incorrectly to be buzzword compliant. That’s too bad because some people start to believe it is only a marketing gimmick.” I asked him why people should actually care about if a solution is SaaS or not. Playing the devil’s advocate, it would seem like most potential customers would not care if a solution is really a SaaS solution versus hosted, or multi-tenancy versus single-tenancy.

Chris mentioned 6 reasons why potential customers should care:

  1. It is in the client’s interest for the vendor – their technology partner – to be around long term. On-premise solutions are not cost effective because they have so many technology stacks and versions of the software that need to be maintained and supported. With SaaS solutions, some of the savings are passed back to the client, and a significant portion of the revenues are reinvested into the infrastructure as well as in the development of new features.
  2. SaaS vendors can focus on improving a single software version, used by every customer. Every engineer is dedicated to improving a single source of code. This allows the vendor to release new features and improvements much more quickly than is typically feasible with an on-premise solution.
  3. Upgrading a SaaS solution usually happens ‘behind the scenes’. New SaaS software releases are tested extremely rigorously before being released. A quality problem would impact thousands of customers and hundreds of thousands of payees. On-premise solutions often transfer the quality ownership to the clients who must perform their own regression testing after an often labor intensive upgrade process.
  4. Non-SaaS solutions are not always scalable. For example, with 10, 100 or even 1000 customers, an on-premise solution might work. But the real test will be when a solution is used by thousands of customers – will a non-SaaS solution really be able to scale up? “Probably not” said Cabrera.
  5. SaaS vendors constantly measure and monitor their environment. They make a significant investment into that infrastructure to ensure an optimal performance for all of their customers.
  6. SaaS solutions are usually sold on a basis of $ per payee per month. Solutions such as Xactly Incent all of a sudden become cost effective for even small companies which can avoid a high upfront infrastructure and license cost.

Chris Cabrera is convinced of one thing: SaaS is the future. “On-premise solutions might still be appropriate for a very small share of the market, but SaaS is appropriate at least 98% of the time.” Looking at the market trends, I would say he’s right. Most vendors realized the benefits of SaaS and are rushing in that direction.

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ActekSoft ACom3 Review Part 2

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Julien Dionne
on March 25, 2010
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In this second part of the ActekSoft ACom3 Sales Performance Management solution review, I will focus on some of the concepts that make this solution a particularly good fit for insurance clients. The first part of this article is here.

Management of producer (payee) data
The insurance industry has very challenging requirements regarding producer (payee) data. ACom3 supports an unlimited number of direct and indirect hierarchies with no limits on the number of levels it contains (some of ActekSoft’s clients pay more than 20 levels). ACom3 also has an integrated license and compliance module which can easily manage logic for compliance violations.

Communication / Workflow
ACom3’s correspondence module can be setup to automatically send letters or emails on demand or based on conditions configured the system (for example in can send an e-mail when a license will expire in a certain number of days, or when a debit balance exceeds a certain dollar amount). The workflow module can be leveraged to facilitate and streamline internal and external communications.

Unearned Commissions
ACom3 provides built-in features to facilitate logic to handle unearned/future commissions such as annualized payout and advanced payment with automated charge backs for policy terminations that take place while there is still an unearned commission balance on the advance. ACom3 also has a reserve feature which holds back a portion of the advance payment to offset future chargebacks.

Scalability
Unlike many other industries, the insurance industry always requires computation at the transactional level and not at a summary level. Because of the volume of transactions and often complex hierarchies which can transform an originating transaction into an additional 10 or 20 transactions, efficient scalability is critical. ACom3 uses the concept of work units which can distribute processing across multiple servers and processors.

Insurance specific concepts in Formulas
Compensation formulas contain many insurance specific concepts such policy age and policy age/holder age calculations, a wide range of performance based tiering options, and the ability to tie advances and automated charge backs to calculations.

Strong Retroactive Capabilities
Retroactive processing is particularly important to the insurance industry and ACom3 supports in excess of 20 retroactive objects that allow the system to reverse and reprocess transactions for as many periods back required. Retroactivity is often required to resolve incorrect assignment of producers to a customer or policy, incorrect hierarchies, the use of an incorrect schedule, etc. ACom3 marks all transactions that need to be reprocessed in prior and current periods to ensure that tiered based payments are correct.

Security and Audits
Data confidentiality and security is highly regulated in the insurance industry. ACom3 was built with these requirements in mind and offers strong security and audit functionality, audit reporting, secure data transfers, and encryption out of the box.

Final Thoughts
Overall, I was impressed by the richness of ACom3. The size of the company could have been a concern for potential clients, but with Callidus now standing behind ActekSoft, this should no longer be a concern. The new challenge which ActekSoft will have to manage is to retain the same level of client-focus they have demonstrated in the past for their current and new customers.

While I found that ACom3 is not the ‘sexiest’ application, several improvements were recently made to its user interface with its release version 6.0. ACom3 provides several insurance specific features, and its focus on transactional processing makes it a solution worth considering for many projects.

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ActekSoft ACom3 Review

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Julien Dionne
on March 16, 2010
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ActekSoft was founded in 1999 and currently supports over 30 clients (mostly in the insurance industry).  I talked about them earlier this year when they got acquired by Callidus Software. Acteksoft’s flagship product is called ACom3 and can be deployed On-Premise or On-Demand.  Approximately one third of ActekSoft’s clients are currently hosted.

As I’ve discussed in a previous post, Gartner recently released their 2009 ICM MarketScope for the insurance industry. Gartner cites the following as some of the main reasons why ActekSoft deserved a positive rating:

ActekSoft was rated Positive this year, due primarily to its deep understanding and ability to deliver health insurance requirements, the number of new deals in the past 12 months and the positive nature of its customer references. Four of its customers were interviewed for this report… Several themes resonated throughout these interviews. First, ActekSoft is very committed to the pricing that is quoted to the customer… Second, customers cite a culture of customer satisfaction and commitment to project delivery.

ACom3 is accessible via a web browser. After logging into the application, administrators find themselves into a relatively intuitive interface; the various application areas are accessed via the top menu, and configuration for each of those areas are accessible in the left menu. Different sections can also be expanded and collapsed by clicking on the + or - icons. The content of each of these sections is completely configurable by simply dragging and dropping fields into the appropriate section. Sections can also easily be added as required.

A plan consists of ‘schedules’ which are applicable to a certain region and hierarchy. These schedules are rule driven and reference formulas, filters, tables, etc. Reference data is typically imported into the application, but editing information such as transaction details or producer information can be performed manually by inserting text into text boxes, or by selecting values from drop down menus.

The look and feel of the interface for payees is very similar to the administrator’s interface. Upon logging in the application, the payees can access performance details for themselves and for their subordinates via reports and dashboards. They can also access important information such as their appointments, their book of business, etc.

All of these features are very similar to what is expected from any sales performance management solution, so you may wonder what makes ACom3 different than other non-insurance specific solutions. I will discuss some of these differentiators in my next post.

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Motivating your Sales Team to go for the Gold: What can you do to turn your reps into an Olympic sales team?

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Julien Dionne
on March 2, 2010
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At the 2008 Olympics, Michael Phelps took home 8 gold medals. Like all Olympic athletes, Phelps trained year-round for four years to compete in this one extraordinary sporting event. As a result, Phelps was rewarded with $200,000 in prize money ($25,000 per gold medal), millions of dollars in paid endorsements and sponsorships from big names such as Kellogg’s, Speedo and Subway and recognition as the best swimmer in the world. Quite the incentive for any professional athlete.

Incentives have the power to motivate almost any kind of behavior if the reward is attractive enough. Let’s look at sales teams for example, the Olympic stars of a corporation. A number of incentives and SPIFFs are implemented into their quarterly sales plans to drive a particular behavior. It could be to focus on a particular product, cross-sell, up-sell – anything the company needs or wants based on its sales strategy. Slap the right incentive on anything and you’ll see results.

Incentives play a huge role in both sports and sales; they are the driving force behind motivation. Although motivation is the heart of success, it isn’t the only factor. For sports and sales, success relies on a number of elements. Motivation, talent, coaching, strategy and communication all play a part in the success of a team.

Motivation
It is important to know what drives your players. What are their incentives? Is it winning, lots of praise, mental coaching or a combination of factors? Finding the right balance is difficult. Managers have the same problem with their sales teams. What will motivate their employees? A big cash bonus? A trip to Hawaii? Fortunately for sales managers, technology has turned this guessing game into a science. With the help of incentive compensation solutions, managers have visibility into sales to see what incentives are working and can adjust sales plans quickly to align employee behavior with corporate goals.

Talent and Coaching
Coaching your players is vital to the success of any team; that’s a given. Coaches provide the right tools and expertise to help the players uplift their performance (individually and as a team). A coach must know how to take an individual from a B player to an A player. It’s the same with sales managers. If a sales rep isn’t meeting his quota, it is up to the manager to coach him to improve his performance.

Coaches must also deal with situations like bringing on new players, incorporating them into the team, as well as letting players go and deciding who has potential and who does not. Time is of the essence; when a coach brings on a new player he must quickly bring him up-to-speed on game strategies and team culture.

Like coaches, sales managers must quickly get new sales reps set up with their plans, quotas and verify they have the right qualifications and certifications required. Time is money, so a fast rollout in essential. Luckily for sales managers there are solutions that can help with this process. Sales performance management software streamlines these processes saving time and resource by eliminating the manual burden.

Strategy
A good strategy is the key to success. No matter how fast, skillful and intelligent your players are, without a strategy, the team is lost. Coaches are responsible for creating the game plan. They must have visibility into the game to be able to see what strategies are working and what they can do to quickly change the plan to overcome obstacles. In sales, a strategy is critical. The strategy ensures employees will meet their quota and execute against businesses goals. Like coaches watching a game, managers must closely watch the performance of their sales team in order to identify weaknesses, motivate the team when the numbers are down and change the strategy to reach the goal. It is important for companies to invest in solutions that provide visibility into performance and flexibility to be able to quickly change strategies in order to meet sales goals.

Communication
For professional athletes, incentives can be much more obvious than for sales reps. Fame, fortune and achievement: the three inherent rewards of any successful athlete. However, for sales professionals, the rewards aren’t always clear. Sales plans are changing constantly; every new quarter, every time a product is introduced, every adjustment affects the plan. If incentives are not clearly communicated, then the sales team won’t realize their rewards or understand how to get the reward. Managers must lay the plan out simply: you get this reward for doing this action. It is imperative to invest in tools that can ensure clear communication between employees and management in order to align sales behavior with the overall corporate strategy.

Go for it!
To turn your sales team into super star Olympians like Michael Phelps, it takes dedication, focus and motivation. Motivation is the powerhouse behind success. In an interview in 2008, six months before the Beijing Olympics, Phelps revealed he kept an article about Ian Crocker’s record setting win in the 2003 World Championships and a list of goals posted next to his bed. “…That’s something that’s definitely there for me to see and get me motivated and more excited.” Realizing his goals on a daily basis perpetuated his motivation.

To foster his motivation, Phelps invested in his talent: a great coach, lots of training time, strict workouts and good nutrition. With this strategy, he honed in on his talent, he was able to change swimming from a sport to a science. This gave him a competitive advantage over the rest of the swimmers. With the correct tools and incentives, he was able to become one of the most well-known, successful athletes in history.

Sharon Seitz is a public relations specialist currently contracted with Callidus Software. She can be contacted at sharonseitz09@yahoo.com.

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Percentage of reps making quota in 2009 dropped to 51.8% from 58.8% in 2008

Valentine’s Day in Prison

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Julien Dionne
on February 16, 2010
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I spent last weekend – the Valentine’s Day weekend – in Philadelphia with my girlfriend. I’ve been working on a project in Philly for almost two months, but I hadn’t had the chance to explore much of the city and visit the tourist attractions. One of the weekend’s highlight was our visit to the Eastern State Penitentiary, a prison which was operated from 1829 to 1913.

There are many things that make this facility particularly interesting. At the time it was built, the prison was the most expensive building built in the U.S. Its innovative design and high technology (flushing toilets!), made it a model for over 300 prisons in the world. Criminals were sent there to reflect upon their actions, “find God”, and become law abiding citizen. This goal was supposed to be achieved by placing the inmates in permanent solitary confinement.

I’m sure the intentions behind the solitary confinement were good, but in practice there were several issues. First, as sales reps do with many incentive programs, inmates found ways to ‘game’ the system by finding ways to communicate between each other despite the rules and potential repercussions of being caught. More importantly, while the goal of solitary confinement and harsh punishments was reform, the unexpected result was to drive many inmates crazy, and turn petty thieves into dangerous criminals. Solitary confinement was abandoned by 1880 and was considered a large failure due to its lack of results.

The incentive compensation take away: A certain incentive program is not necessarily a good idea until it is proven to be, and one cannot discount the impact of unintended consequences. A small oversight could end up being a very expensive mistake!

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Quota Performance Distribution

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Julien Dionne
on February 11, 2010
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Last week I wrote that the percentage of reps making quota in 2009 dropped to 51.8% from 58.8% in 2008, according to a large survey. One of my readers made the comment that it would be interesting to find out how many companies expect/want their sales people to make quota.

I reached out to two experts in the incentive compensation field to get their opinion.

Donya Rose from the Cygnal Group replied on her blog that ‘most people should achieve or exceed quota’. More specifically, she says, more than half of the people should hit or exceed their goal.   She notes that the ideal performance distribution should be as follows:

  • Not more than 5% of the sales people “out of the money” (earning no variable pay), and the these people should generally not be “keepers”
  • About 40% of the sales people earning some variable pay, but less than the target amount
  • About 45% of the sales people earning more than the target amount, but less than the fully leveraged upside (fully leveraged upside is generally 2 to 3 times the target incentive)
  • About 10% of the sales people earning the fully leveraged upside or more.

So the 51.8% of people making quota in 2008 is low, but still acceptable according to Donya’s point of view.

I also asked the question to David Cichelli from the Alexander Group. His answer was that companies should shoot for 65 to 70 percent of all sales people to achieve quota. He notes that this performance distribution should create an on-goal performance of at least 100% of company sales goal. Through their own survey, the Alexander Group also noticed a significant reduction in quota attainment in 2009, with a median quota performance of 85%… a historically low number.

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