.jpeg)
Learn how effective sales performance management processes can help sales teams bridge the gap between ambitious strategy and successful execution
The difference between enterprises that are thriving and those that are merely surviving often comes down to one critical factor: how they manage their sales performance.
According to Deloitte, companies spend an average of 8% of their total revenue on their sales organization, but most sales teams consistently fail to return on this investment. As a result, only around 52% of CEOs feel confident about their company’s revenue growth plans.
It’s no wonder, then, that sales performance management (SPM) has emerged as a strategic discipline to help sales and revenue leaders build highly motivated and productive sales teams.
What began more than two decades ago as a series of disconnected improvements in the sales process has now converged into a sophisticated, data-driven approach that’s transforming the way companies meet and exceed their revenue goals.
But what exactly makes SPM so powerful – and how can forward-thinking businesses deploy it effectively?
This comprehensive guide covers everything you need to know about sales performance management, from its core components to practical implementation strategies and best practices. Whether you’re looking to revamp your current SPM program or to build one from the ground up, you’ll discover the key insights and actionable steps you need to develop a robust sales management process that aligns with your greater business goals and challenges.
Let’s take a close look at SPM and explore how it can transform any sales team into a revenue powerhouse.
What is sales performance management?
At the most basic level, SPM is a set of analytical functions and practical workflows meant to streamline operational efficiency and optimize the sales cycle.
In other words, SPM helps ensure every member of your sales team is equipped and energized to achieve both short- and long-term goals.
While the most successful sales and revenue leaders approach SPM holistically, it can be broken down into a group of core components to better understand its most strategic moving parts.
Essential components of sales performance management
There are several key elements of SPM, each of which aims to fuse the gaps between a sales team’s planning, execution, and measurable outcomes. Let’s break them down one by one.
Territory planning
Territory planning – also known as territory management – is the process of dividing a company’s market into distinct geographic or account-based segments (or sales territories) in order to streamline sales coverage and resource allocation.
This creates more equitable opportunities for sales representatives while minimizing any coverage gaps or overlaps, aligning a business’s selling resources with its actual market potential. When carried out effectively, territory planning can also reduce travel costs, strengthen customer relationships, and provide the foundation for more accurate sales quotas and capacity planning.
Learn more about territory planning.
Account segmentation
Closely related to territory planning, account segmentation is the process of grouping current and prospective customers into discrete categories based on shared characteristics like their company size, industry, revenue potential, and/or purchasing patterns. Sales teams can then tailor their selling strategy and methodology to each customer segment.
Proper account segmentation helps businesses easily identify their highest-value accounts, personalize sales messaging to resonate with specific buyer personas, and assign appropriate resources to different customer tiers. That means they can move more quickly on white-space opportunities, develop more targeted value propositions, and create more efficient sales territory designs.
By moving sales teams beyond a one-size-fits-all approach, segmentation drives higher conversion rates, improves customer engagement and retention, and maximizes lifetime value across a business’s portfolio.
Learn more about account segmentation.
Quota planning
Quota planning, also called quota management or quota setting, is the process of establishing specific performance targets for individual sales reps, teams, and territories. These targets are based on a number of criteria, including historical data, overall market potential, and strategic business goals.
The idea is to create clear sales performance expectations that boost motivation and retention, drive growth and profitability, and serve as a basis for more accurate compensation plans and incentive structures.
The most successful quota management strategies set challenging but realistic goals. A good rule of thumb is to plan for 70-80% blended quota attainment, with 70% of sales reps hitting 70% of quota. For guidance, check out this helpful quota-setting toolkit that walks you through the process.
This is especially important at a time when over two-thirds of sales reps don’t expect to meet their set quotas. That often involves balancing top-down, company-wide revenue targets with bottom-up analyses of territory potential, individual seller capabilities, and current market conditions.
Learn more about quota planning.
Capacity planning
Businesses use sales capacity planning to determine the size, structure, and composition of the sales team they need to reach identified revenue targets.
This typically involves calculating how many sales representatives and which specific skills are required across different functions, territories, and customer segments to meet key objectives.
The most effective sales capacity plans also account for variables like productivity metrics, ramp time for new hires, anticipated attrition rates, and fluctuating market conditions. This provides sales leaders with critical insights that enable more accurate budgeting, recruitment, territory design, and quota setting, so their sales reps can realistically and reliably meet their target revenue commitments.
Learn more about capacity planning.
Incentive compensation planning
Incentive compensation planning, or incentive compensation management (ICM), is the process of designing variable pay structures that motivate sales teams to achieve key performance targets and work toward critical business objectives.
Many organizations use dynamic sales compensation models and gamification strategies – such as commission structures, bonus systems, targeted sales incentive programs, and other rewards – to drive desired sales behaviors across different roles and segments.
The best sales compensation plans invite input from multiple stakeholders and provide a clear connection between sales reps’ day-to-day efforts and tangible financial and/or experiential rewards. They thus act as powerful recruitment and staffing tools for attracting and retaining top sales talent while also promoting long-term customer satisfaction and business growth.
Sales forecasting
Sales forecasting is the process of predicting where sales revenue will land based on the existing or anticipated pipeline for a given period. It relies on a thorough analysis of historical performance data, available opportunities, and emerging trends to project future sales outcomes.
Modern sales forecasting methods often leverage real-time data pulled directly from CRM systems. This allows sales leaders to rely on more accurate, up-to-the-minute data and to make more informed decisions when it comes to resource allocation, risk management, and performance interventions.
When applied systematically, sales forecasting can transform guesswork and intuition-based predictions into more disciplined, advanced projections that business leaders can trust. This provides them with the visibility and confidence they need to make sound financial planning, inventory management, and hiring decisions while also helping sales teams move quickly on high-value opportunities.
Learn more about sales forecasting.
Advanced analytics
Advanced analytics help forward-looking sales teams prepare for all possible outcomes while setting them up to achieve the best possible results.
Typically, this involves examining sales data in depth while leveraging statistical analysis, predictive modeling, and machine learning to drive more strategic decision-making. Vast amounts of unstructured data must be transformed into structured intelligence if sales leaders want to use historical patterns to accurately predict future outcomes. Research from McKinsey suggests that, in B2B alone, businesses that can effectively harness their sales data can increase performance growth by up to 25%.
For best results, analytical frameworks should take into account evolving performance trends, customer behaviors, and market signals. Building a more thorough data framework can help sales teams push their performance plans beyond reactive reporting to more proactive optimization by identifying common drivers of success, customer churn risks, and coaching opportunities, so they can measurably improve their win rates, increase their deal sizes, and boost their overall sales productivity.
Sales pipeline management
Businesses use sales pipeline management to monitor sales opportunities and ensure prospects are being guided efficiently and effectively through each stage of the sales cycle.
This not only helps sales leaders improve conversion rates, it also provides them with direct visibility into the way successful and unsuccessful deals typically unfold, so they can identify common bottlenecks, accurately forecast if and when prospects will close, and coach their sales reps using specific examples.
Successful pipeline management practices clearly define sales cycle stages, customer qualification criteria, and target milestones so sales teams can quickly spot accounts that are at risk, of high potential worth, or in need of additional coverage.
{{BLOG-POST-BANNER}}
Benefits of effective sales performance management
The success of a sales-led company is proportional to the efficiency and empowerment of its sales team. When sales reps are well-resourced and motivated to achieve key business goals, they’re able to quickly meet customers’ needs and maximize potential revenue.
To achieve this, it’s essential to support them with a well-rounded strategy where proven, tried-and-tested methods are combined with smart innovations. That’s where SPM comes in.
By optimizing core sales processes and incorporating data-driven analytics into traditional operations and planning methodologies, SPM helps sales leaders and their teams execute strategies that push their business closer to its revenue goals.
SPM plays a critical role in driving team productivity, outcomes, and morale by delivering the following advantages:
Strategic alignment
Perhaps the most valuable benefit of effective SPM is its ability to align sales planning and execution with broader organizational strategy. According to one study, companies with strong sales alignment see up to 38% more sales wins and 36% higher customer retention.
SPM helps sales leaders achieve alignment by drilling down into the details of every sales target and setting and tracking relevant performance benchmarks that ladder up to a company’s greater goals.
Specifically, SPM enables:
- Shared vision and cross-functional collaboration
SPM allows sales and revenue teams to work closely with finance, HR, and other departments to successfully drive pipeline and ultimately increase year-over-year revenue growth.
Even for geographically dispersed organizations, SPM provides the infrastructure to maintain consistent performance standards and expectations. This helps prevent the strategic drift that can occur when siloed teams develop their own independent workflows.
- Clearly communicated goals
SPM systems translate high-level leadership objectives into specific metrics and achievable steps for each sales role. This ensures that day-to-day sales activities directly contribute to strategic priorities, rather than straying into more comfortable but less impactful tasks.
- Accessible data models
SPM processes help organize complex sales data into an intuitive and comprehensive database, which can act as a single source of truth and deliver higher-level, organization-wide insights.
- Heightened flexibility
When shifting market conditions demand a change in strategy, SPM processes provide a systematic way to quickly realign sales incentives, metrics, and coaching around a new direction. Staying agile and adapting to the needs of the moment can ultimately be a significant competitive advantage in a volatile market.
Smarter forecasting and planning
Strategic sales decision-making requires accurate predictions about future sales performance. SPM provides a solid foundation for more reliable models, including:
- Data-backed projections
While traditional forecasts rely heavily on sales leaders’ subjective opinions and guesswork, SPM bases forecasts on documented data. This includes precise, real-time pipeline metrics and win-rate analyses that drive improved accuracy.
- Systematic territory planning
SPM processes analyze a range of different factors to create more balanced territories, including market potential, customer concentration, geographical distributions, and past performance data. These factors in turn maximize opportunities and rewards for sales reps and business leaders.
- Optimized resource allocation
SPM helps sales leaders strategically direct investments to areas with the greatest possible returns. This prevents the common problem of allocating resources based on internal politics rather than true market potential.
- Forward-thinking scenario planning
Advanced SPM processes allow sales leaders to model out different business scenarios and their likely outcomes, enhancing the way organizations can flex and adapt to shifting market conditions.
Better sales performance and productivity
Sales performance was once thought to be more art than science. But SPM has introduced data-driven methodologies that have fundamentally improved the way sales teams operate and communicate, while also boosting team engagement and satisfaction. For example, strong SPM enables:
- Effective performance reviews and coaching
SPM replaces subjective (potentially biased) performance reviews with objective, data-based evaluations, creating a fairer work culture where rewards are based on merit and there are clear pathways to advancement. SPM also supports a more tailored approach to coaching by providing personalized performance metrics. This allows sales managers to identify skills gaps within their team and put together more specific, actionable improvement plans for individual sales reps.
- Real-time transparency
Transparency is especially important for a sales team to thrive. While traditional sales environments can leave reps in the dark about their day-to-day performance, SPM offers real-time visibility into key performance metrics and milestones. This allows sales reps to self-correct before small issues become big problems and gives them a more thorough understanding of how their sales activities and outcomes are contributing to their compensation.
- Dynamic incentive compensation plans
Variable compensation plans are often the major driving force behind sales performance, and they can serve as effective motivational tools. SPM helps salespeople prioritize activities with the highest value and the highest potential return, aligning their interests with company objectives and incentivizing them to work at their absolute best.
- Custom quotas and territories
Sales leaders need to remember that no two salespeople or segments are the same. SPM helps them design team- and rep-specific sales quotas that are challenging but attainable, plus equitable sales territories that provide a balanced distribution of opportunities across all reps. This unlocks sales plans that are fair and realistic, ensuring sales teams stay motivated to achieve their targets.
Enhanced operational efficiency
Research from Salesforce shows that sales reps currently spend 70% of their work time tending to non-selling tasks and busywork and only 30% of their time actively making sales. Luckily, SPM can dramatically enhance efficiency in ways that extend well beyond the sales organization.
For example, SPM unlocks:
- Streamlined workflows
Manual reporting and other administrative tasks can eat up a lot of a sales leader’s time. With the right SPM tools, day-to-day processes like generating reports, tracking performance, and calculating incentives can be fully automated. This allows sales managers to focus on more strategic and impactful activities like coaching reps and engaging with customers.
- Centralized intelligence
Effective SPM creates a unified repository for all sales performance data, eliminating the sorts of contradictory reports and proliferating spreadsheets that cause administrative headaches and selling bottlenecks. This streamlined consistency helps ensure that all stakeholders within a sales organization – and across the entire business – are making decisions based on the same, easily accessible insights.
- Integrated data flows
Advanced SPM solutions can integrate with CRM systems, ERP platforms, HR tools, financial software, and more to create fast, frictionless data flows across an organization. This eliminates the need for manual data transfers that can introduce avoidable human errors and cause delays in critical business processes.
- Leaner teams
Ultimately, the efficiencies gained from SPM allow businesses to operate with smaller, more agile teams, lowering operational costs while also providing better sales service.
Want to see the benefits of effective SPM in action? Learn how AI search-as-a-service platform Algolia ditched spreadsheets with Pigment and reduced their sales planning time by 90%. Read Algolia's full story.
How to optimize SPM implementation
Companies of all sizes have learned the value of agile decision-making in the face of unpredictable economic, political, and environmental events. As business landscapes become even more complex, it will become even more important to remain nimble enough to confront tricky situations and uncertain times with confident, data-driven decisions to win in the marketplace.
SPM can help sales leaders offset market volatility by building a strong backbone of real-time data, actionable insights, and dynamic collaboration opportunities.
While the specifics of SPM will look different for every enterprise, you can ensure your unique SPM process is implemented effectively – and primed to deliver real results – by following a few standard practices:
Identify the sales performance metrics that matter most
Meeting and exceeding revenue targets is the north star for sales teams everywhere. To better achieve this ultimate goal, you can set critical KPIs and benchmarks to act as levers in your SPM strategy, so you can quickly align your sales plan to company goals and achieve faster results.
These metrics can include:
- Conversion rate: The percentage of leads who are actually converted to customers
- Sales productivity: How efficiently your sales team achieves established targets
- Quota fulfillment: The percentage of sales quotas met over a given period
- Pipeline coverage: The ratio of pipeline to net-new revenue targets
Get your entire sales team on board
It goes without saying that sustainable, repeatable results are impossible to achieve without complete sales team buy-in. Communicating sales goals, plans, and targets in advance allows all of your team members to better prepare to translate strategy into action.
If your team expresses concerns – like pushing back against aggressive sales targets – sales leadership must either alter ambitious metrics or help sales reps understand the reasoning behind them by providing the concrete data and insights that shaped your decisions.
Regularly up-skill your team
After you’ve secured sales team buy-in, it’s vital to ensure your team has the resources and skills they need to achieve their targets. This is where sales leaders must take initiative and encourage each team member by setting out a clear career progression roadmap.
Equipping your team with the right skills, technology, tools, and other resources will help achieve this in a more timely manner. Sales team loyalty is fortified when every representative feels empowered with best-in-class means to excel at their jobs.
Provide consistent and useful feedback
Both during and after the implementation of an SPM strategy, regular feedback loops keep targets, plans, and execution in line with internal and external changes to the sales team.
If feedback is to truly improve team performance, it should be:
- Prompt: Communicated in a timely and direct manner
- Actionable: Followed up with or shaped around concrete steps
- Constructive: Delivered with empathy and with employee development in mind
- Relevant: Related to both the individual sales rep’s and the business’s goals
Discover more sales planning strategies that drive revenue in our on-demand webinar, featuring RevOps expert Brian Selby.
Best practices for improving sales performance management
Sales leaders leverage SPM to optimize the efficiency and effectiveness of their sales teams. But developing a robust strategy can be a challenge, as there are many moving parts that have a direct impact on one another’s performance.
Truly agile sales leaders take a more holistic approach, treating SPM as a set of interconnected concerns and solutions rather than an assembly line of siloed, independently executable components.
To fully take advantage of this approach, business leaders need to enforce a system of sales performance management best practices to encourage sales and other teams to work together toward common goals.
To that end, here are five sales management best practices you can follow to roll out a robust SPM strategy for your sales organization:
1. Define what sales performance management means for you.
The meaning of SPM can vary across organizations based on their unique priorities. For example, at some companies, generating new leads is considered part of sales performance, while others may only consider deals closed.
To better channel your sales efforts, you need to clearly define what SPM means for your team, encouraging business leaders and other key stakeholders to weigh in on both short- and long-term goals. Only after that can you define your sales management performance parameters.
Once you’ve determined the right approach to SPM, it’s essential to communicate your expectations to every member of your sales team. You can begin by setting individual sales quotas and performance metrics for each salesperson – including the expected amount of leads generated, leads closed, proposals sent, and revenue dollars earned.
In addition to setting quotas for individual sales reps, you should also set team quotas that align with your broader organizational and revenue goals. You can then schedule regular conversations with your team to ensure they understand and are actively working toward each target.
2. Set specific end-goals and milestones to track your progress.
You can efficiently track the progress of your sales team by setting achievable goals and assigning incremental milestones along the way. These should include not only annual sales goals, but also individual sales goals, team sales goals, and sales activity goals.
Setting specific goals and communicating them openly to your team provides greater clarity around expectations and priorities, enhances the sales process, and motivates sales reps. You should ensure the goals you’re setting are realistic and data-driven but also challenging enough to keep motivation high. One of the best ways to do this is to use the S-M-A-R-T method. That means establishing sales goals that are:
- Specific: Clearly defined and limited in scope
- Measurable: Able to be quantified and tracked in concrete terms
- Attainable: Achievable with available team skills and resources
- Relevant: Directly related to sales team and broader company goals
- Time-bound: Reachable within a reasonable, specified amount of time
Once you have your specific sales goals in place, you can develop a system to monitor and track your sales reps’ and team’s progress.
At this stage, you can determine which KPIs and metrics will help you measure success – like average revenue per user (ARPU), annual recurring revenue (ARR), win rate, quota attainment, and the percentage of revenue derived from new and existing customers.
3. Establish a process to gather feedback from team members and customers.
Another critical aspect of managing sales performance is developing a system to collect feedback both internally (from your team members) and externally (from your customers).
[Design note: callout] As a sales leader, you can formulate and implement a sales strategy for your team, but it’s then your sales reps who must execute that strategy out in the field. You can collect their feedback, analyze it, and use the results to gauge how your strategy is working and take steps to optimize it.
There are various ways to gather feedback from your team, including surveys, emails, and written reports. But one of the most efficient and reliable methods is integrating a CRM or ERP system seamlessly into your tech stack.
This will allow your salespeople to submit feedback in real time, while it is still fresh on their minds. In turn, you’ll get a better idea of how they’re performing day to day, the challenges they’re facing, and any additional resources they may be looking for. By incorporating their feedback into your ongoing sales planning, you can enhance your team’s overall efficiency and satisfaction.
Customer feedback is equally important in identifying opportunities for improvement in your products and services.
For example, if you manufacture industrial power solutions, and your customers are experiencing issues around the availability of spares, you may need to focus on making spares more accessible – e.g., by optimizing your dealer network or offering free one-day shipping on suitable products.
You can solicit customer feedback manually through surveys, questionnaires, phone calls, or emails. But automating the process through integrations with CRM systems can similarly streamline key tasks while delivering more accessible and comprehensive data.
4. Celebrate your wins, and learn from your losses.
One of the hallmarks of a well-balanced SPM strategy is a healthy company culture and sales environment.
If you want your sales team to perform at an optimal level, you must eliminate workplace barriers like employee burnout and high turnover. Without this critical step, sales reps will either leave your company or fail to perform at their best.
[Design note: callout] Ensure you’re building a sales environment where you celebrate your collective successes, learn from your collective setbacks, and collaborate and communicate effectively as a team.
For example, if a high-performing salesperson is unable to achieve their sales quota for a given quarter, you should discuss the underlying issues that caused the disconnect. This would help the salesperson understand that your company values their effort and is willing to offer support when needed.
Taking a positive, encouraging approach will not only help you retain top performers but also attract talented new hires. Remember that organizational success depends on sales performance – which, in turn, depends on a fulfilled and engaged workforce.
5. Continuously improve your SPM strategies and processes.
In the era of rapid technological development, sales practices can quickly grow outdated and inefficient. Today, a single Google feature update can make your entire sales process redundant overnight.
Consider that, before the COVID-19 pandemic, face-to-face meetings were considered table stakes to closing deals. Now, even B2B customers prefer video conferencing to finalize a contract.
[Design note: callout] Clinging to familiar but antiquated sales workflows and not flexing to accommodate new tools and expectations not only hinders your internal operations, it also places your business at a distinct disadvantage compared to competitors who are keeping up with the market.
One of the most important parts of improving sales performance management processes is identifying which tasks can be fully automated.
Automating key tasks allows your salespeople the time and flexibility to acquire new skills, master digital sales channels, and focus on areas of core capability – that is, selling. You can offer regular training opportunities for your team to help sales reps adopt new systems and stay up-to-date on your tech stack.
You can also measure the efficiency of every sales process that your team follows to gradually replace inefficient practices. These can range from customer prospecting, sending emails, making calls, and entering data manually into your CRM. Through continuous improvement in your sales process, you can also keep the motivation level of your salespeople high and drive them closer to achieving their goals.
The work of SPM is never over, and it will ultimately involve a high-level mindset shift across your sales organization. But these five sales performance management best practices are a great place to start.
The role of sales performance management software
Agile companies are always looking to level up their operations and roll out new solutions quickly and capably.
Implementing specialized, third-party SPM software eliminates the need to start from scratch, while also freeing you from manual workflows and cumbersome spreadsheets as you work to optimize your sales performance. The ability of SPM software to instantly and accurately process vast amounts of data has become especially important in competitive markets, where the margin for error is virtually non-existent. With demand increasing for streamlined sales operations and data-driven decision-marking, the SPM software market has experienced rapid growth and is expected to top $8 billion by 2032.
Here are a few other advantages that come from working with a tech-forward software provider as you make your move on SPM:
Greater operational efficiency
With a dedicated SPM platform, sales leaders can monitor the capabilities and performance of their teams in real time. Unified dashboards pull from multiple systems at once and transform siloed, complex data points into visualized, actionable sales insights that drive more informed decisions and close deals faster.
Sales leaders can also cross-check this real-time data against strategic inputs and operational procedures to get a high-level view of performance across their organization.
More productive sales teams
With SPM software, sales leaders can ensure their teams are on track to achieve established business and revenue goals.
They can achieve greater success in sales forecasting based on reliable data collected in real time and integrated into a single source of truth. They can also automate incentive and compensation plans and eliminate payout errors to retain the best personnel, empowering them with precise capacity and quota planning to achieve their targets.
Enhanced accuracy in financial reporting
SPM software helps automate data changes originating from employee events and contracts.
Automated processes and higher-quality data in turn boost the accuracy of revenue forecasting and mitigate the risks involved. Some SPM software packages also help improve the accuracy of revenue forecasts by delivering key insights related to commission expenses.
Streamlined workforce planning
With SPM software, business leaders are better positioned to align their business needs with workforce strength and performance requirements.
SPM platforms can also meaningfully increase employee engagement in the sales process. Highly motivated and engaged teams offer a better return on investment and also reduced attrition rates.
Key takeaways
Modern sales leaders who prioritize agile sales strategies and seamless execution stand to benefit from the enhanced efficiency and reliability offered by a solid sales performance management strategy and guaranteed by top SPM software.
In short, advancing your SPM strategy today can help you embrace all of the innovations that are changing the face of the sales process for tomorrow and beyond.
Discover how to manage sales performance effectively with Pigment
Learn more about Pigment’s industry-leading SPM solution for sales and revenue teams – or register for a personalized demo to see what our platform can do for your business.
