Strategy & Operations » 8 ways to drive growth with commission

In a recent webinar with CFO Alliance, “How to Drive Growth with Commission,” we discussed how the role of the modern CFOs is changing the view of incentives and growth strategies.

A majority of companies are still using Excel to track commissions

In a poll of webinar attendees, 70 percent were using excel to track and manage commissions. The remaining were using a dedicated commission solution, managed commissions as part of their ERP/accounting package, or were part of a company that did not have a need to calculate commissions.

According to Elizabeth Salomon, Xactly CFO, with the high likelihood of errors in spreadsheets, it’s hard to ignore the value in the opportunity to automate the compensation process and the insight gained from automation tools.

CFOs are playing a key role in driving company strategy

Today’s CFOs are still focused on getting the financial statements right, understanding what happens in the company each quarter, funding the business, and dealing with public markets. However, they are beginning to play a larger key role in driving company strategies, specifically turning business strategies into finance strategies.

What excites our CFO in today’s world is that CFOs now more than ever must help the business build value, but they also need to help their company have a disciplined approach to innovation, making the right investments for growth, and understanding the operational drivers that help the business perform, including leading and lagging performance indicators.

You need the right data in a data-driven world

Salomon believes that as the world becomes more digital, “it’s imperative to create a culture of analytics,” more specifically, you need to gather data, but it should be the right data. In order to make the right decisions for the business, it’s important to have the most important data.

It’s important to understand early indicators of performance to address issues early on. For example, in marketing, it is helpful to know lead flow from top of funnel to sales accepted leads, the effectiveness of each marketing channel, etc.

CFOs are Facing Three Main Challenges

According to Xactly CFO, Elizabeth Salomon, today’s CFOs are facing three main challenges:

Data and Metrics:To be effective in driving results, you have to have the right metrics and data to understand what’s happening in your company. You need to know your company’s key drivers for growth and find a handful of metrics that really help you dive into the performance and overall health of the company.

Talent:In today’s competitive market, there is a war for top talent. It’s critical to have a compelling value proposition to attract and retain employees because the impact of top talent really makes a difference in company growth and success.

Alignment:It’s important to maintain alignment between the executive board, investors, and the management team. Although it’s not always an obvious problem, it can create huge problems down the line when everyone has a different agenda. Be sure your strategy and execution plan are clear and everyone supports the plan.

 It’s all in the sales compensation plan details

There’s no denying that sales incentives drive behaviour, and sales commission is a critical component of driving company strategy.

In fact, the behaviour drivers lie in the details of the plan design, and you should focus on the most important behaviours to avoid over-complicating the plan. One small provision in the sales commission plan can have great results or unexpected consequences, which is why it’s valuable to have the ability to test and model plans before implementing them.

Finance professionals are becoming more involved in sales planning

In the past, finance professionals were less involved in the overall sales planning process, spending most of their time in the accounting planning. In a poll, nearly 90 percent of webinar attendees (89 percent) were involved in accounting and analysis processes in sales planning.

The growing involvement shows the impact and importance of finance roles in driving business results. In fact, more than half of webinar attendees (67 percent) were involved in accounting, analysis, and planning processes.

Commission expense forecasting is more important than ever

It’s vital for CFOs to have a solid competency in forecasting because you can’t manage the business without it. In her experience, Salomon says accurate commission expense accounting is one of the most important jobs of a CFO. Inaccurate forecasting can lead to several problems down the road.

One of the biggest lessons Salomon has learned is that commissions don’t always move the same as company sales do. In her experience, she has found herself in the situation where total sales is below target, but commissions are higher than target, depending on how compensation plans are built. It’s important to get granular detail to understand the possible outcomes and avoid paying higher commissions that total sales revenue.

There are 3 critical success factors for mergers & acquisitions

Mergers and acquisitions can wreak havoc on sales commission. There are three critical factors for a successful merger and acquisition:

Picking the Right Strategy Upfront:It’s important to select the right strategy for your business–buy, build, or borrow and make sure that the financial model makes sense and will help grow the business.

Clear Strategy Around Integration:After the initial excitement dies down post-merger or acquisition, it’s important to focus on integration to realize the strategic benefits you laid out upfront.

Communication is Key:Merger and acquisitions can cause confusion and concern. Communicating the compensation plan with sales reps clearly will help avoid uncertainty and encourage reps to continue closing deals.