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ICM Trends to Watch: Finance-GTM Alignment Makes the CFO an Incentive Compensation Hero

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In our “ICM Trends to Watch” blog series, we explore the five key trends we’re keeping an eye on in 2024, and dissect the ways in which innovative technologies, evolving GTM (go-to-market) cultures, and more are impacting incentive compensation strategies and revenue performance management.

According to CaptivateIQ survey data, the finance org more so leans in while setting overall sales targets and administering plans, but there are many other avenues for CFOs to more closely align with Sales and Revenue Operations leadership to ensure optimization and performance of compensation strategy.

Averaging roughly 40% of total sales costs, variable compensation is the largest sales expense for many businesses. But if the right incentives have been put in place to drive behaviors that benefit the bottom line, it also has the potential to be the expense with the highest ROI.

According to the Alexander Group: “The CCOS (Compensation Cost of Sales) is essentially an efficiency measure. It helps you determine if you are getting the best ‘bang for your buck’ of investment in sales. Thus, generally speaking you want to see this number be as low as possible while still achieving your sales target and keeping the sales force intact.

The Alexander Group’s 2022-2023 U.S. Sales Pulse survey revealed that 66% of organizations plan to increase sales spend (6% plan to decrease), and 59% plan to increase revenue/sales ops spend (2% plan to decrease). Additionally, revenue & sales operations was listed the #1 investment priority for sales.

All of this highlights the heightened role of GTM strategies, operations, and technologies in helping drive business and revenue success more efficiently. It also highlights the delicate balancing act for finance teams as they determine budget allocation and ROI, and the importance of optimizing costs across the organization by cutting unnecessary spend while also betting on the right categories.

And the stakes for strategically optimizing costs across the organization only seem to be getting higher — only one-half of business leaders surveyed for The CFO’s Alliance mid-year checkpoint report remain confident they can meet their top and bottom-line goals for 2023, despite 33% working harder than expected this year, and 41% expecting their workloads to further increase.

Recent Gartner data reflects this as well, with 40% of CFOs reporting they’re focused on cost optimization this year, versus 23% in 2022. In addition, 62% of CFOs say they’re continuing to prioritize growth, and betting on better technologies to help them hit their goals. According to CFO.com, “Technology, an area in which CEOs, CFOs, and Gartner alike have had their eyes set upon, is an area in which leadership agree upon. Data shows over a third (36%) of CFOs believe this effort is a top focal point.

Another opportunity lies in reporting and forecasting improvements, where only 13% of CFO Alliance mid-year report survey respondents say their capabilities are excellent, and 87% say there’s room for improvement, with a whopping 40% say either their capabilities are too slow or there’s insufficient attention paid. 

Consolidating disparate data from all the relevant sources can help finance leaders get more visibility into past, current, and projected sales revenue and compensation spend, allowing for better insights and reporting, more accurate forecasting, and well-informed planning.

Beyond optimizing CCOS and investing in more accurate forecasting and planning solutions, it’s crucial that finance leaders understand how the organization’s incentive compensation strategy is impacting the bottom line, top-line growth, and productivity costs.

For example,  77% of companies surveyed for our State of Sales Compensation Report said they hold between 26-75% of rep commissions pending invoicing or payment, and 71% said their rep compensation plans include clawbacks for failed or reduced value of transactions. As mentioned above, these compensation strategies help put financial protections in place to ensure the business is appropriately balancing spend with revenue results.

Additionally, over half (53%) of the sales managers surveyed said they spend 2-3 days resolving questions or disputes each pay period. Only 26% of reps surveyed say they find their compensation is always calculated accurately, and a whopping 93% spend time recalculating their compensation statements to validate them at least some of the time – and it takes almost half (46%) 2-3 hours to manually recalculate their compensation statements. 55% of sales managers also recalculate their team's commissions every pay period.

When you consider the implications of these statistics in terms of team productivity costs, it’s clear that due to a lack of transparency and visibility into commissions processing and payouts, many businesses are sacrificing opportunities for:

  • Focused sales performance
  • Better alignment around variable compensation
  • Accelerated pipeline
  • More closed-won deals

Relatedly, 63% of reps claim accurate and trustworthy reports of compensation as essential to success in their role, while 61% claim that access to real-time data on current and future commissions earnings is essential to success in their role. To boost GTM performance and revenue results in leaner times, it’s crucial that today’s CFOs prioritize transparency, trust, and visibility into past, current, and potential future earnings as a means to efficiently drive the right rep behaviors and business outcomes.

You can learn more about the top five trends redefining incentive compensation management in 2024 by downloading the full report.

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