Kudos to Xactly, the SaaS based incentive compensation solutions provider. Last week they ran a very successful user meeting in San Francisco that I attended but more importantly they made some real news in the compensation space.
Conferences like this are often news generators or more precisely, they’re PR engines. Everybody with a show announces something, even if it’s just the next release of their products. News outfits dutifully carry the announcements along with a few quotes from the boss and an analyst or two and that’s that. This is not to say that the announcements are unimportant, just that they strike a certain level.
But that wasn’t the case with Xactly. Last week they announced some thought leadership that could only come from a relatively mature SaaS company. They took a big chunk of the data they managed and made it anonymous so that no one knows whose data says what. Then they looked for patterns in the way that companies pay their people; a methodology that they will replicate across multiple industries. They call it a benchmark.
First up was the SaaS industry, i.e. companies selling software as a service. Xactly has deep roots here and it was relatively easy to run some analytics against the data but what they discovered was amazing. According to the company, 79 percent of SaaS sales reps miss quota and only 14 percent make or exceed it. Now let’s peel this onion.
First, wow Batman, that’s gotta be a lot of unhappy reps trying to live on base salary and I’d bet there’s significant churn in the ranks. Why stay if you can’t figure out a way to make a living? But second, as CEO Chris Cabrera said, these companies are looking for growth rather than profit. He’s right, of course, if you’re burning venture capital, revenue is less important than market share and the name of the game is to put as many reps into the territory as possible to up the chances of gaining penetration.
This might be something we’ve intuitively known for a very long time but to see it in concrete numbers raises the perception significantly. More significant, to me, is the fact that Xactly has similar benchmarks waiting to be released on seven other industries. Very soon, for the first time in history, we’ll be able to see patterns in sales compensation in eight markets. This will inevitably help managers and HR types to truly understand compensation and it will help reps to better know whether their jobs are keepers or if a little churn is in order.
But it can also serve to inform the sales reps that they’re being, shall we say, used? Used. If there is a 79 percent chance you won’t make quota, would you accept a standard pay package that essentially treats you like a human advertising medium while paying you like something else.
Could this possibly be good news for marketing automation vendors? It could if sales people started avoiding SaaS jobs like a bad habit. In lieu of the hardcore sales approach, lack of quota attainment might make sales people scarce to the point that companies will need to get more savvy about how they market and that could be good for marketing automation. See? With so many reps not making quota I could see the VC’s calling time out on their portfolio companies’ business plans too.
All this is well and good but the significance of this announcement doesn’t stop here. There are lots of companies with similar data that can be scrubbed to reveal distinct patterns in a variety of industries. For instance what would Zoura’s subscription billing data reveal if subjected to the same treatment? Or Salesforce? What might these companies learn from reviewing their industries’ data? What might VC’s discover about their investments or entrepreneurs learn about white space in markets? The possibilities might not be limitless but they are significant. It seems that best practices ought to be forthcoming soon.
This is a new world in which almost anything can become known quickly. It seems to me that Xactly has made a big down payment on the second machine age after a book by that title. They’ve found a way to leverage already collected data using simple computers and some smart people. They will be able to share what they learn with their customers to enable them to be better at a critical piece of their business — compensating performance.
This isn’t going to cure cancer or global warming but I believe we’ll look back on this in ten years as the beginning of a new era in data driven management. Cabrera has been talking about this approach for a long time and I know several other CEOs who have similar ideas and I think this could be a game changer. As I intimated at the beginning, this was not your average conference announcement.
(Cross-posted @ Beagle Research, LLC)