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The challenge of increasing sales productivity: How ‘what if’ analysis can help

By November 11, 2014January 16th, 2023No Comments

When sales executives see their quarterly figures, they often pay attention to revenue and other lines on the company balance sheet, but what about productivity? Employee productivity is key to helping firms accomplish their projected revenue growth, but there are some challenges that could hold them back. Workers’ lack of engagement with their jobs is a major factor while inadequate incentives are also a big contributor.

The U.S. Bureau of Labor Statistics reported labor productivity in the business sector grew 2 percent in the third quarter from the previous quarter. Output also increased 4.4 percent and hours worked rose 2.3 percent. While productivity and output saw improvements in the latest quarter, sales managers may still be concerned about whether they can hit all of their targets.

A survey of sales and marketing executives by Docurated found the vast majority of teams anticipate meeting their goals of 20 percent or more year-over-year sales growth. However, sales productivity will play a large role in whether or not companies are able to achieve these targets.

As companies face the challenge of motivating workers to maintain or increase their level of growth to meet targets, they should look into their sales team’s performance through sales analytics and craft meaningful incentives.

Importance of ‘what if’ analysis on productivity
The Wall Street Journal recently highlighted research from professors at the University of California, Los Angeles and Stanford University who sought to determine whether data analytics could help a company manage their sales incentive compensation programs. The researchers found that since the company in the study had trouble establishing the correct quota and ceiling for salary and commission for sales staff, it needed to play around with past performance data to properly set these incentives. They knew that if the quota was too low, sales staff wouldn’t be highly motivated to increase sales, which is a common problem for many companies. Too high, and the quotas can intimidate reps.

The professors used models to adjust the quotas and determine how the changes would impact productivity and sales. In sales compensation software, companies can do the same thing with “what if” analysis to try out different quotas and other productivity indicators to see whether incentives will be sufficient in engaging and motivating salespeople. Manipulating data allowed the company to increase its average revenue by figuring out that low enough quotas and no ceilings is the right combination. The researchers proved that “what if” analysis is a valuable tool for companies that are unsure how adjustments in their incentive compensation program will affect their workers.

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