AI Driven Compensation: How Predictive Analytics Is Changing The Game For Incentive Design

Why Dashboard and Scorecards Aren’t Enough 

Companies have made incredible strides these past few years modernizing their sales compensation operations with real-time dashboards and scorecards. Attainment, payouts, behavioral metrics you name it. These days Revenue Operations teams can gain incredible visibility into how plans are performing throughout the year. While these dashboards are leaps and bounds ahead of old-school Excel reports, they all fall victim to one major flaw. They are reactive. They tell you what happened, but not what is about to happen. Dashboards can show you regionwide discount % are creeping up, but by the time you see it on the dashboard deals have been negotiated, contracted, and margins have been eaten. Attainment reports can tell you 75% of sellers are behind quota at the midpoint of a quarter, but they can’t predict which sellers are going to catch up and which won’t. Reactive insights just aren’t enough in today’s hyper competitive revenue world. It’s time to take the next step from visibility to predictive foresight.  

Artificial Intelligence: Changing the Game for Incentive Design 

Predictive analytics, fueled by artificial intelligence (AI) is helping companies do just that. Companies are no longer being passive with their scorecards. They are plugging in historical data, behavioral insights, and machine learning models to predict what will happen next. One source of untapped predictive insight? Compensation data.  Pulling from historical attainment trends and feeding deal level attributes (GLVs), discount behavior, and payout information into AI models can help predict the likelihood of each seller meeting quota. A predictive AI model can pull from past pipeline quality, deal sizes, and closed deal conversion rates to show that only 40% of your sales team is likely to hit quota this quarter. Instead of waiting for the quarter to play out and watching opportunity after opportunity slip through your fingers, leadership can jump into action. Empowered with foresight teams can revisit incentive plans, reallocate resources, or course-correct sales strategy. Commission forecasting is another killer use case. Many sales enablement leaders are using predictive models to anticipate commission liability weeks before quarter ends. Finance teams can finally gain control of an unpredictable COGS. Just about every Sales and Compensation Platform is jumping on the analytics bandwagon these days, but who is actually using the data for more than hindsight?

 Predictive Use Cases Will Drive the Future of Incentive Design

Let’s take a look at a few killer use cases and how they’ll change the game for incentive design moving forward.

1.Attainment Prediction- predicting which territories are at risk or which sellers are likely to under or exceed quota part way through a quarter. Empower sales leadership to take action immediately rather than at quota review meetings.

2.Commission Forecasting- predicting total commission liability given current pipeline under multiple revenue scenarios. Give finance teams visibility and control into an otherwise unpredictable COGS.

3.Behavioral Prediction-detect risky behaviors (discounting, cross-sell/product affinities, etc.) before they become larger business problems. 

4.Incentive Simulation- most futuristic, yet powerful. Run what-if’s on your historical plan book to gauge potential plan outcomes *before* they are activated. Stepping into the ASO seat of most Sales Leaders and Finance VPs right now, would you increase that accelerators on your strategic product? Maybe so until you run that plan through a simulator and realize your payout exposure is unsustainable or that sellers will likely Game the new plan. Predictive simulations identify these issues before they’re brought into the wild. Allow companies to build better balanced plans. 

Challenge your Revenue Operations team or business partner to think about how predictive insights can change the game for your organization.