A company’s business performance is based on several criteria such as management style, customer relationship management and quality of service provided.
But incentive compensation is also based on the effectiveness of the plans and employee motivation.
What is the best way to define business performance? What can be improved?
From performance indicators to technological innovations applied to sales and recognition at work, discover what business performance is and how it relates to corporate strategy in this article.
What is business performance?
Performance as a reflection of professional effectiveness
Business effectiveness is the ability of a company, department or individual to achieve its goals and desired results.
Thus the concept of business effectiveness includes the issues of cost, time, quality and profitability.
This is measured using qualitative and/or quantitative KPIs (Key Performance Indicators).
KPIs directly linked to business effectiveness in terms of turnover, sales volume, market share and margin etc. explain the nature of the business sector in which the company operates, economic context, seasonality or strength of market competition. .
Business performance, closely linked to business effectiveness, is determined by a company’s ability to implement an optimal organization aimed at offering a product or service that meets customers’ and clients’ expectations.
Qualitative indicators enrich the bonus plans of sales staff
Sales personnel are evaluated primarily on their ability to sell, and many companies still choose to follow the rules in their incentive compensation policies.
Yet, in pursuit of professional performance, more and more companies are interested in introducing more qualitative factors into the salesperson evaluation grid.
Thus, although some companies are still in favor of quantitative evaluation criteria, some of them want to guide sales teams towards improved quality.
Moreover, it would be counterproductive to pit the role of qualitative and quantitative criteria against each other.
In both cases, the role of incentive compensation, based on purely qualitative or purely quantitative criteria, is to achieve greater professional effectiveness and individual and/or collective performance.
From customer satisfaction level to number of complaints, nature of customer relationship, share of repeat business and customer loyalty etc.
Qualitative business performance indicators are numerous and can be an excellent tool for understanding a vendor’s performance globally.
Rewarding virtuous behavior, but also identifying potential areas for improvement.
These qualitative criteria are actually intended to create the conditions for tomorrow’s economic success, which are more quantitative.
Pillars of Business Performance
Remuneration: Fixed and incentive compensation
Salary is fixed and based on incentive compensation package. The fixed component of remuneration rewards experience and ability, while the incentive component, which typically includes
Includes goal-based bonuses, rewarding performance. Also don’t forget benefits, which can be significant (company car, phone, computer and lunch vouchers, etc.).
Self-esteem and identity at work
According to a recent study by Bloomatwork.com, seven out of 10 employees believe they are underappreciated at work and 54% say they are unhappy with the recognition policies offered in-house to meet the need for recognition and visibility in the workplace.
The need for self-actualization is at the top of Maslow’s hierarchy of needs, followed by the need for respect and approval from others, which is found in the business world.
Valuing everyone’s efforts and distinguishing between individual and/or collective performance helps keep teams motivated and committed.
Beyond financial aspects, which play an important part in the perception of recognition in the workplace, the trust and consideration shown and imparted to employees also play an important role.
Indeed, including employees who make strategic decisions, for example, values them and encourages them to invest more in the company’s vision.
Training and development opportunities
Continuous training is an argument in favor of recruitment, but also builds team loyalty.
As in support functions, salespeople aspire to develop professionally in terms of both horizontal professional mobility (expanding the scope of their assignments) and vertical mobility (taking on new responsibilities).
Therefore, effective training and support plans must be implemented to be successful in retaining talent.
Professional development of employees is also a strategic lever for company development: creativity, initiative and skill development should be seriously considered by HR teams.
Incentive compensation, a key to renewed professional effectiveness
Effective balance between fixed and incentive compensation
The total compensation package must be balanced between fixed and incentive compensation.
According to a recent Maesina International Search study, bonuses represent 20% to 25% of total compensation in BtoC and can reach 50% in BtoB.
They are primarily designed to encourage the investment and engagement of sales personnel in the short term and to retain these personnel in the long term.
An attractive compensation package therefore depends on having the right balance between fixed and incentive elements.
A number of incentive factors lead to immediate results, but also present a significant risk in terms of the quality of customer relationships on the one hand, and the stability of teams on the other, which can quickly become disillusioned if their goals are too ambitious.
Moreover, choosing a compensation system that consists only of fixed salaries will have no incentive effect on the teams’ performance and their willingness to meet and exceed their targets.
As a result, effective compensation ratios are typically 70% to 80% fixed and 20% to 30% incentive in BtoB and 25% to 35% incentive in BtoC.
Professional Effectiveness Indicators
Performance indicators can be qualitative or quantitative.
Also known as KPIs (Key Performance Indicators), they enable a company to manage its sales strategy through the development of different dashboards.
From conversion rate to customer loyalty rate, customer acquisition cost and sales analysis, but also the turnover achieved by the seller, there are many KPIs.
It is important to remember that business efficiency can also be defined as a company’s ability to generate maximum business profit from its material and human resources.
While quantitative KPIs are relatively easy to measure, qualitative performance indicators are a challenge for companies to fully understand.
However, companies no longer hesitate to apply incentive compensation criteria to all functions, including support functions, for which it is becoming common to define performance measurement criteria both quantitatively and qualitatively.
Enabling marketers to work through qualitative indicators
The introduction of qualitative criteria in the calculation of incentive compensation for sales personnel is a trend that has been observed in recent years.
However, most companies hire their sales staff based on quantitative criteria only.
Thus, salespeople are generally expected to be paid on the basis of turnover, margin achieved or sales volume.
Encouraging sales staff to deliver high-quality service leads to greater customer loyalty and naturally develops repeat business to the detriment of one-shots.
Thus, introducing quantitative criteria into the incentive compensation of sales personnel by considering factors that objectively evaluate the quality of customer relationships.
Team motivation, after all, appears to be an effective way to develop the professional performance of teams.
Cross-selling and upselling: two key sales concepts
Cross-selling and upselling are sales techniques aimed at increasing sales figures and business performance.
What is the basic idea behind it? Cross-selling involves encouraging customers to buy more related products, while upselling is when customers are encouraged to buy more expensive products.
Popular with major online retailers like Amazon, these techniques are now part of every seller’s arsenal to increase their average turnover.
Upselling involves offering a customer a product that they want to buy, but is more expensive than their initial choice.
In the technology world, it is common to see marketers and CSMs (Customer Success Managers) regularly trying to sell new features that will improve the user experience of a software package or computer application.
CSMs are only objective based on upselling, which happens after a salesperson makes a sale.
Cross-selling, however, is a more transversal selling technique that involves combining several complementary products or services.
In the retail sector, it involves selling products that customers need based on their recent purchases.
This system of cross-selling is widespread in online stores, especially Amazon.
If we take the example of tech, cross-selling, for example, involves selling software with another tool that offers complementary services to the first, in a bundled manner.
This approach encourages different market players offering complementary services to work together and propose similar service offerings.
Innovation for business performance
The value of CRM
To ensure that collected leads are optimized, salespeople need to enrich their CRM, or customer relationship management, in real time and with great accuracy.
To avoid losing business information, and to get the most out of the information managed by the system, sales representatives must make good use of CRM and understand the full implications of a well-stocked customer database.
Indeed, a lead is only usable for a short period of time, so if a salesperson does not immediately contact a customer who has asked about a specific issue, the conclusion of the sale may be compromised.
Today, salespeople are better informed and have a new position with customers, able to predict which companies will potentially be interested in their services.
Including visits, phone interviews, notes, follow-up measures and sales proposals etc.
To manage, real-time control and centralization of business information are prerequisites for the success of a sales strategy.
LinkedIn Sales Navigator
LinkedIn offers a clear competitive advantage with LinkedIn Sales Navigator, which allows salespeople to create contacts and find leads.
In addition, Datananas, a French start-up, has begun collecting leads by crawling LinkedIn pages to export lists, emails and phone numbers of potential customers directly from professional networks.
It’s also important to note that according to a recent Forbes study, 90% of decision makers say they never respond to impersonal emails, and conversely, marketers who use social selling are 20% more effective than others.
why this Because social selling takes into account a very important factor: most purchase decisions are made before a potential customer contacts the seller.
So LinkedIn to collect information before any promotion, to send emails through internal messaging system, to find suitable contacts through advanced search feature.
Joining discussion groups is useful to keep an eye on your companies, but most importantly, to be visible above. market.
Other innovations (big data, marketing automation, tracking tools and business social networks)
According to the website sendinblue.com, marketing automation broadly refers to the automation of marketing campaigns based on a set of predefined conditions and user behavior.
It is possible to automate sending emails, text messages, contact segmentation, lead scoring or lead nurturing.
For example, after subscribing to a service or requesting documents, after making a purchase refund and after making a purchase.
Or after interacting online in any way, potential or current customers may be integrated into automated email channels and receive a series of multiple messages.
Adapted to their needs and programmed according to their interactions.
Other tools can be used to gain information about potential customers and expand your base of potential customers.
This is especially true of webinars or web conferences.
More and more companies are deciding to organize these individually or in groups to gather as much information as possible about the participants and possibly prospect them later.
Finally, professional social networks and information tracking and sharing tools allow marketers to develop collaborative projects.
According to Moderator’s blog, 58% of large companies in France now have their own business social network, 67% of managers surveyed also said that they understand what these tools can contribute.
Some of these contributions include open discussion (for 75% of respondents), mutual support (72%), emergence of new ideas (72%), coordination of activities (62%), decision making (62%) and development of individual skills (59%).
Management of bonus schemes, a major advantage required for better business performance
Communicate at the beginning of the cycle with SMART goals
Communicating early in the performance cycle is essential to providing teams with the necessary visibility.
A kick-off meeting proposed by sales departments at the beginning of the performance period reminds the company of strategic priorities and national sales goals, explains the rules for calculating incentive compensation according to individual profiles.
Monthly follow-up meetings
Monthly follow-up meetings allow managers to check the morale of the teams, to review the achievement of targets mid-term, but if necessary, especially the market and the environment in particular.
They also adjust if unfavorable.
These follow-up meetings are essential to better understand how motivated the team is, the issues they face, and any difficulties they encounter.
These discussion times are also important for enabling mutual support, establishing connections and sharing good business practices.
Intermediate bonus calculation
Automation of bonus calculations gives companies immediate access to intermediate bonus levels, meaning they can make them available to employees during the performance cycle.
This way, sellers can see their earned bonuses in real time and understand both under- and over-performance to steer well throughout the cycle.
Moreover, the provision of interim bonus also improves the use of the company’s bonus scheme and the company’s target and performance strategy.
It should be noted that interim calculations are only effective if they are correct and shared between performance periods.
Giving everyone a chance to project their bonus
Salespeople will be more motivated if they can project their future earnings.
In companies that don’t have simulators, it’s common to find “homemade” incentive compensation calculation matrices that employees make themselves to simulate their incentive compensation.
These matrices try to reproduce the bonus scheme, but often contain errors, which can lead to frustration.
Salespeople who can check with a simulator how much they can earn are naturally more inclined to high performance and achieving their goals.
Equipping yourself with the tools to activate communication about bonuses
There are tools that enable comprehensive management of incentive compensation, from the initial disclosure of the plan and targets to the final communication at the end of the cycle.
These digital tools include a simulator with bonus gauges that show where employees stand and how much they can earn by estimating performance.
This tool provides proper calculations at the end of the performance period and highlights the actual performance of the employees.
The latter can model their future bonuses based on their projected performance for the next period.