SalesCompInsights

Here’s the situation: years of sustained growth, multiple acquisitions, complex sales compensation plans, manual and unreliable systems, ongoing disputes from the sales force on payment accuracy.  We met with a sales operations team of a large financial institution back in 2007.  They were done with the band aid approach to fixing the system.  Time to transform the entire operation, get ahead of the curve, become a strategic resource to the organization.

The situation is not unique.  We’ve listed what are common issues that can drive a complete transformation of the incentive management function:

• Incentive management (IM) technology platforms are disparate and lack functionality;
• Processes for plan adjustments and redesign lack analytical decision-making rigor;
• IM staff is reactive, not proactive, in keeping the incentive plans aligned with the needs of the business;
• Leadership is unclear as to the effectiveness of its incentive compensation investment.

In solving these issues, the company needed to ensure its incentive compensation plans were effectively managed, and aligned with the needs of the business, and enabled through a robust technology platform.

The solution approach focused on three discrete areas:

• Incentive operations: people, processes and tools that report performance and payment data, address disputes and adjustments, and provide analysis for ongoing incentive plan alignment;
• Incentive compensation plans: structure and policy for motivating the required behaviors and delivering compensation to specific sales and service job roles;
• Technology: applications for measuring and reporting sales and service performance, and facilitating incentive compensation management, including goals, payments, analysis and ongoing administration.

Subsequently, the project approach included three work streams designed to identify current state practices, desired-state practices, gaps and action plans for closing those gaps.

The company formed a task force to execute the three-phase initiative, along with an executive steering committee to guide progress and decide on structural elements.  The 30-week effort provided these outcomes:

• Formation of a formal IM governance structure, including:
  • Decision rights and accountabilities for the analysis, redesign, approval, implementation and ongoing management of the incentive plans;
  • A cross-functional incentive advisory panel chartered with the delivery of outcomes tied to an annual incentive management calendar;
  • An executive incentive leadership team chartered with addressing recommendations from the incentive advisory panel;
  • The role and staffing requirements for staff positions responsible for execution of incentive management functions;

• A comprehensive redesign of its incentive compensation plans for key jobs to realign goals and payment opportunity with the company’s strategic objectives; the redesign included development of plan design principles and operational standards to guide future plan realignment efforts;
• Funding and implementation of a “best-of-breed” incentive compensation management application.

By using a comprehensive approach, the company transformed its incentive management function to one capable of meeting the needs of the business for years to come.    The business impact includes:

• An increase to the company’s return on its sales compensation investment – more revenue and net operating income relative to the sales and service compensation spent;
• Increased sales and sales support productivity through a reduction in the number of sales and staff time previously engaged in IM activities;
• A reduction in the time required to cost-model and introduce incentive components and campaigns for new products;
• A reduction in the number of performance and payment reporting errors tied to sales credits.

Granted, this is a tough pill to swallow, but it’s a very comprehensive approach.  Just fixing the plans, the technology or organizational structure is piecemeal.   It’s a band aid.  Sound familiar?  Time to transform.