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You Are Contemplating SPM Automation Tools. Is Your Organization Ready For The Road Ahead?

road2Sales Performance Management (SPM) involves multiple business processes, and hence, the procurement and implementation of an SPM Tool (such as Callidus, IBM, Xactly) requires a significant amount of planning and effort.

The planning must start long before you schedule vendors demos. There is no point in conducting vendor demos if your organization is not yet prepared to travel the road towards SPM automation. So how do you go about evaluating your preparedness?

To determine your organization’s readiness for an SPM tool, here are the top 10 questions you should answer:

1. What is the Business Justification?

The answer could be Cost Savings, Enhanced Reporting, Operational Efficiencies, Auditability, Calculating Payments or something related. Whatever it may be, if you can’t come up with a couple of strong business justifications, you will find it difficult to make a business case for the tool. Though it doesn’t all have to be about the financials, you have to be ready with a worksheet that shows the numbers. To learn how to build a business case, here is a link to a webinar that could be very helpful to you: http://bit.ly/2pvd1Ts.

2. Are the Executives on board?

Have you discussed your plans with your executives? Do they understand the high level budgetary needs for such a project? Do you have their verbal nod for a ballpark budget?

If your executives aren’t okay with the estimated budgets, maybe you have gotten ahead of yourself. Save yourself some time and initiate the vendor demos only after you see your executives warming up to the idea.

3. Are Compensation Plans Stable?

The most common reason for SPM implementation failure is that the compensation plans are in a state of flux, sometimes even changing while the implementation is in progress. If your organization’s comp plans are still going through significant changes because of evolving market landscapes, you will have a tough time keeping your SPM implementation on track.

If this is the case, you are not ready for an SPM tool. And yes, when you are told that the tool can handle all future changes without any time or effort, take it with a grain of salt.

4. Do we have enough Time?

From vendor demos to go-live, SPM projects will take no less than 4-5 months. If you are too close to the beginning of the new Plan Year and the deadline for Pay file is already in sight, you have probably missed your window of opportunity. If you decide to move forward at this point, you will be scrambling to move fast, thereby compromising the quality of your decisions, and creating a huge risk to the project overall. You are better off planning a mid-year rollout, which will have its own challenges, but at least you have time to plan for it.

 5. Are Business Processes Mature?

When the organization is growing rapidly, HR and Finance are constantly tweaking the organizational framework. For this reason, or maybe due to a recent M&A, if the processes and policies in the organization have not yet been solidified, it is difficult for the implementation team to configure the new tool.  A lot of time and effort would go to waste in changing the tool configuration again and again.

For example, if the new hire draw policy is changing every few months, the SPM tool can’t really be successful.

6. Do we have IT Systems providing Reliable Data?

SPM tools can’t operate in a vacuum. If you don’t have HR systems providing reliable Payee data or ERP systems providing sales data, you will have huge challenges with the SPM tool. Garbage in, garbage out. For instance, if new hire notices are coming to the commission administrator on Post Its, you are not ready for an SPM tool. You must first invest in HR tools and processes.

7. Is IT Leadership ready for one more Tool?

SPM implementation projects require IT budget and resources. If the IT team has resource constraints, or there is another large IT initiative, such as ERP upgrade planned for the year, then IT will not be very happy about supporting an SPM implementation. A quick synch up with your IT leadership would help ensure that no such major roadblocks exist.

8. Is Cloud OK?

Almost all major SPM tools are now available only as SaaS solutions, where the software is hosted in the vendor’s Cloud. What that means is, if your organization has a strong preference for On-Premise solutions, your choices of vendors becomes very limited.

It’s better to clarify with your business leaders if Cloud solutions are an acceptable option. If not, knowing the roadmap for all software vendors, you may want to abort the idea of packaged solutions or wait for your organization’s mindset to change.

9. Do we have Resources to support the Project?

After the tool is implemented, you may be able to cut the headcount in commission operations. But initially, you will have to dedicate a great deal of time and energy in evaluating and implementing the tool. If you are unable to free up any of your current resources and can’t find the budget to hire external consultants, it will be extremely challenging for you to get this to the finish line.

10. Is there an M&A on the Horizon?

Last but not least, if there is an M&A on the horizon, it’s better to wait on an implementation project. The new company may already have an SPM tool, and it is almost guaranteed that your business team will want a single SPM tool catering to the joint salesforce.

If you need further assistance in getting you prepared for an SPM project, please contact us at mktg@spectrumtek.com.



The Evolution of Sales Performance Management

TTBlog_pic 2aSales Performance Management, A Look Back

Back when I started my professional selling career over 35 years ago, the term sales performance management meant sitting though weekly sales meetings and performance reviews every 3 months. Sales performance management in those days had little to do with analyzing productivity, team performance, sales enablement or incentive compensation, except, if you weren’t performing, i.e. hitting your numbers, sales management took the keys to the company car in return for your last check.

24 Carat Gold Calculators

From the early to mid-90’s, sales compensation management software started to hit the market. There wasn’t much science or empirical data to drive business outcomes based on historical or regression analysis, just a more streamlined and efficient calculator of sales commissions. This software was sometimes referred to as a ‘24 carat calculator’ because of its overall cost relative to its utility. A lot of IT organizations began building rudimentary commission calculators and reporting tools more cheaply. In fact, my team worked with our IT folks at Textron Systems to build such a proprietary system in 1990 using Lotus Symphony (before IBM) on Unix / Sun Solaris.

From SCM to EIM to ICM and Now SPM…

Over the next decade or so, sales compensation management (SCM) as it became known, morphed into EIM or enterprise incentive management as finance looked to increase its focus, and control, over incentive spend relative to performance. Then, by the early to mid-2000’s, incentive compensation management (ICM) became a more common definition as incentive compensation management moved across lines of business to now include other forms of incentives, both cash and non-cash for sales and non-sales staff with varying degrees of reporting and workflow.

As the new millennium was nearing the end of its first decade, sales performance management (SPM) became the defining terminology. With advanced reporting and analytics, territory and quota planning, improved workflow and flexible user interfaces, SPM software was now the quintessential tool designed to align sales performance with company goals. Sales operations suddenly had a new face, with new responsibilities and for some, a seat at the table.

From a technology perspective, the adoption of the Cloud (SaaS) and advanced integration technologies made the economics more attractive. The newer generations of SPM software became technically superior over just a couple of years prior. For better or worse, functionality also became quite similar across vendor offerings making vendor selection even more challenging, at least visually.

SPM Software, The Devil’s in The Details and The Requirements

Today, there are nearly 30 software vendors, including the leading ERP vendors, that perform many of the common SPM functional attributes. Out of these 30 software vendors, fewer than 10 are considered to be best of breed SPM software vendors. Of these best of breed vendors, most can satisfy at least 70% to 80% of the typical functional requirements found in technically challenging RFP’s. However, any one vendor can fall short on reporting, analytics, workflow, territory & quota planning, data volumes, managing overly complex compensation plans – the list goes on.

This is why it is imperative for stakeholders to take ownership of defining, gathering and documenting requirements for their particular line of business. The most successful implementations of a SPM solution occur when line of business owners are directly involved from the onset, executive sponsorship is established and realistic project goals are set. SPM projects are like ERP projects in some ways; there are a lot of fingerprints touching various segments effecting a lot of people, the way they work and the financial impact to the company. SPM is not a compartmentalized nor a departmentalized tool.

Human Capital Management Software

Human Capital Management (HCM), Human Resource Information Systems (HRIS) and Human Resource Management Systems (HRMS) also have variable compensation management capabilities. A few have rudimentary sales incentive compensation management functionality but none can manage the volumes of transactional sales data, perform complex sales crediting, perform simulated scenario modeling of plans, territories and quotas then analyze this data for outcomes against a prescribed forecast. That is a fundamental difference between HR tools and SPM, currently.

Many SPM tools can also calculate bonuses, assign and measure MBO’s while enabling scorecard functionality, a core function for HR tools. But, they cannot perform many of the core workforce management functions such as salary administration, equity or stock distribution, deferred compensation and merit pay, together known as total compensation or total rewards. In addition, HCM tools provide a unified view across all employees that can analyze role-based performance, measure skill levels and prescribe best-fit candidates for a particular job and provide a holistic view of the total workforce.

If a top tier HCM or HRMS vendor were to acquire a top tier SPM vendor, or, the other way, around, then integrating the two successfully, while offering either as a stand-alone solution or together as one, that would be a market moving game changer. I’m surprised that hasn’t happened up to this point given the speculation and rumors that have circulated throughout the industry for years. I think further consolidation of the SPM market is inevitable, which can be a good thing.

About the Author: For more than 15 years, Tom Troiano has been a successful senior sales executive with the leading Sales Performance Management vendors including IBM / Varicent, Synygy (Now Optymyze), Callidus Cloud and Oracle. Throughout these years he has helped 100’s of companies across many industries evolve from spreadsheets and homegrown tools to today’s data driven SPM solutions supported by a strong business case. Tom has been in sales and sales management his entire career. Starting in 1980, where he led a sales team at a small startup that grew into a big sales team while designing his first sales compensation tools.



Data Quality for SPM Operations

SPM operation, especially the Incentive Compensation part of it, is all about handling data. Poor data quality can significantly
drive up the operational costs and cause the sales team to lose faith in the calculations. Good data is essential to producing correct pay calculations and reports, allowing sales team to focus on delivering sales, rather than dealing with discrepancies.

But, having good clean data is not enough. SPM operations are time sensitive, and the data across various underlying systems is every changing. Hence proper data synchronization (across business and IT systems) is important as well.  Different Reporting Cycles, Payroll Cutoffs, and Period specific Adjustments can’t be handled accurately, until data is clean, and well synchronized.

The following check list will help guide the decisions to deliver consistent and accurate data to the SPM system:

1. Choose the data source carefully

Companies that have a single source for revenue and customer sales data are more likely to have good data quality, thus generating the most accurate reports. Data quality suffers when companies have multiple production systems and data repositories that are managed by multiple teams.  If these systems and repositories are not in sync because of different adjustment and reconciliation processes, the data quality will be poor.  To insure integrity of the SMP reports, these companies must design requirements that sync up the various data sources and utilize the same data that is used for all other company reports.

2. Consider full data loads vs. incremental transactions

Based on the cost and time it takes to process sales transactions, the most common transaction loads are incremental. Because companies make periodic payments to Sales, the SPM data must be date-stamped and stored. This insures that future transactions do not alter or compromise the historical values previously used for pay calculations. Many core business systems provide the infrastructure to load incremental data without compromising the historical data.  Companies with known data issues however, may resort to full YTD data loads prior to the close of each pay period.  Still others still, design compensation calculations that factor the YTD data changes into the current pay period.

Companies should decide on the type of data load best suited for them, based on factors impacting their sales crediting policies such as, type of business, number of transactions, and volume of revenue adjustments.

3.Determine the impact of adjustment transaction

Adjusting sales results involves different types of transactions, including contract revisions, cancellations, discounts, claims, and pricing revisions.  Three important principles should be followed to ensure good SPM data quality:

  • SPM data should be loaded in sync with adjustments posted in the core systems and those posted to management reporting systems
  • Do not attempt duplicate postings of core data adjustments directly into the SPM data loads. This could be a costly move.
  • Create a separate category for “SPM Only” Pay For Performance adjustments (small volume critical pay adjustments) that can be posted within a specific pay period for correcting payouts. By year end all final adjustments will be posted to the core systems and these SPM adjustments will show a net of zero.

 

4. Reconcile with core systems before running compensation calculations

Even the best designed data acquisition and validation processes need to be reconciled with the core system before pay calculations are executed. This is easily done by reconciling the SPM data loads with core system results during the period-ending data load process.  Make sure that the revenue and other key metric values are reconciled to the same reporting periods, so that SPM calculations are in sync with other business systems.

5. Provide an easy way to create reports and data files for sales and support teams

Add customized reports and data extracting options, specifically designed as inquiry tools, to the SPM system.  This will enable Sales Support and others to easily create reports whenever needed.

6. Retain “locked” multiyear data available for SPM analytics

The ‘locking’ functionality in many SPM systems allows access to detailed, multiyear performance data and provides a major advantage when producing sales team compensation analytics, internal pay plan performance trends, and business performance metrics.

In summary, the first priority in the development of a SPM Pay and Performance reporting process is to design requirements that will produce superior data quality. This includes dictating that the SPM data is in sync with your company’s sales results reporting and business metrics.  Poor data quality will lead to a lack of confidence in the SPM system and Operations team, creating unease and discontent among your Sales team.

Managing sales compensation programs takes planning; focus and a daily drive towards the organizations sales performance management objectives.  To discuss this further feel free to email us at info@spectrumbiztech.com.

About the Author:  George O’Connell has on premise and SaaS expertise in the area of Sales Performance Management (SPM) and Incentive Compensation Management (ICM). His experience includes design, development, operations, governance, and analytics for a company with $2.5 billion in sales to over 500,000 customers.   He’s managed SPM operations for a wide range of sales channels including telephone sales, sales executive channels, union contracts, new business start-ups, call centers, third party vendors, sales management plans, and director / sales VP compensation.



Right Organizational Structure For Sales Performance Management (SPM) Operations

Author:  George O’Connell

I have observed a wide range of organizational structures for Sales Performance Management (SPM) operations. Compared to any other organizational operation, SPM operations are somewhat an oddball because there is no single department in the organization that is a natural fit to take full ownership. Roles and responsibilities are often undefined and spread across multiple functional groups.  There isn’t a standard best demonstrated structure that fits all businesses. The SPM operational responsibilities are by and large split evenly between the HR, Finance, and Sales Operations teams.

To ensure the most effective practices, the organizational responsibilities should be assigned to the most qualified, and experienced resources available in the organization.  Anticipated business changes, in addition to the existing workload, should be a factor in deciding how to build SPM organization.

If, at any given time, a particular department needs to focus their attention on other critical business issues, they should be excused from SPM’s operational responsibilities. For example, HR may be dealing with high turnover, core HR system installations, or a lack of experienced resources needed to manage programming staff.  Likewise, Finance and Sales Management, and Sales Operations will have their own specific challenges.  In fact, Sales Operations may be viewed as too closely controlled by Sales Management to be appropriate gate keepers for commissions and bonus payments.  Nevertheless, each one of the organizational options can be designed with all the appropriate management controls.

The right resources in any one of the three departments can produce excellent SPM operations results. For most companies, an evaluation of current talent and performance is needed to select the team with the highest probability for success.  Once the dedicated SPM operations group has been selected, it can function successfully under the guidance of any one of the three departments.

The following three steps will help guide a company through the organizational set up:

SPM Advisory Board

The company should setup an SPM advisory board to oversee and approve changes to compensation plans and processes. The approval process will involve many aspects, such as legal issues, HR compensation policy, cost analytics, strategic financial decisions, sales management objectives, systems capacity, security, performance issues, etc.  The senior advisory board should be the governing body that makes the final decisions for all SPM related projects and investments.  A well functioning board will give the SPM operations team clear and timely direction so they can deliver effectively on companywide pay for performance objectives.

The senior leadership group should be comprised of representatives from HR, Finance, Legal, Sales Management, and Technology.  Once the most qualified department is selected for direct SPM responsibilities, the board should monitor the performance of the dedicated team responsible for all SPM operations.  The most senior SPM manager should have a seat at the advisory board meetings.

RACI Chart

Once the SPM organization is formed, the detailed responsibilities and scheduled interaction with the advisory board should be documented.  Every company should put together a RACI chart to outline various functions involved in SPM and clearly define responsibilities and ownerships around these. Sample RACI Chart can be downloaded here. The best SPM organizations have “end to end” process responsibilities–from data capture, vendor management, SPM system design, plan development, pay calculations, testing, and reporting, to on-going support.   Effective management of these end to end processes insures that the SPM team delivers accurate and timely results critical to maintaining excellence in sales performance.

Another important role of the SPM team is to keep the advisory board apprised of systems development, data or calculation issues, company sales payout trends, resource requirements, and all other operational factors impacting pay plans, projects, and cost.

Flexible Staffing Model

SPM operations usually require close interaction with the company’s IT organization, HR payroll staff, Financial Planning, Sales Management, New Product Marketing, and Legal departments.   Due to the quick turnaround requirements, and the impact of revised or new annual compensation plans, SPM is best managed with a flexible resource pool.

Incremental resources from other departments, vendors, or outside consulting firms are frequently required to meet project deadlines.   It is unlikely that a cost effective Sales Operations team can deliver a new compensation plan within 60 to 90 days using only in-house staff and management.  SPM organizational resource needs are fluid, project based, and sometimes seasonal.  The quality and timeliness of the incremental resources are often critical to the success of delivering pay for performance responsibilities.

In summary, org structure for SPM operations is unique for every company. An SPM advisory board can provide guidance and decisiveness. A RACI chart helps clarifying who does what, and creating a flexible staffing model will ensure an effective SPM operation.

About the Author:  George O’Connell has on premise and SaaS expertise in the area of Sales Performance Management (SPM) and Incentive Compensation Management (ICM). His experience includes design, development, operations, governance, and analytics for a company with $2.5 billion in sales to over 500,000 customers.   He has managed SPM operations for a wide range of sales channels including telephone sales, sales executive channels, union contracts, new business start-ups, call centers, third party vendors, sales management plans, and director / sales VP compensation.



5 Reasons Why SPM Projects Fail

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Sales Performance Management (SPM) projects are complex and most don’t complete on time or within budget.  As a specialized SPM services firm, Spectrum has worked on numerous SPM implementations with a variety of technologies.  The following our five of the top reasons why SPM implementations run into issues and our take on what can be done to mitigate those risks.

# 1 – Lack of Executive Sponsorship

SPM projects involve participation from multiple business functions like Sales, Finance, HR, Legal et al.  There is always a possibility of participants losing momentum on project tasks, as they also need to focus on other regular job.  The presence of a senior leader as an Executive Sponsor of the SPM project, who everyone looks up to for directions and guidance, helps in keeping the focus of the team on the project priorities.

Decision making in a multi-dimensional team comprised of mid-level managers is a challenge.  The project runs into time pressure frequently.  The executive sponsor understands the success factors and constraints too well.  With the authority to take quick decisions, he helps aligning the team to his directives and ensures that timelines are met.

# 2 – Poor Project Governance Model

Since multiple functional departments have participants in the project, involving all the stakeholders throughout the life cycle of the project is an absolute necessity.  A consistent, proactive and methodical communication platform ensures that the all the stakeholders are well informed of all the elements of the system that are being impacted during the project.  It is important to form the steering committee very early in the project that lays down a simple and transparent project governance model, identified the dependencies and risks in the project, establish a versatile project plan involving all stakeholder participation and a sound  communication platform that keeps the directives clear.

# 3 – External Dependencies

SPM projects impact multiple functions such as Sales, Finance, Legal, HR, IT etc, and at the same time get impacted by multiple functions.  This puts SPM projects at high risk, especially the projects with long project timelines.

Several external factors like – a new executive, launch of a new product line, an M&A announcement, economic downturn or legal lawsuits, can very quickly bring in significant changes to business processes, incentive plans and resource availability.  The new VP of Sales walks in with new visionary ideas that put the in-flight project back to design phase!  An enhancement applied to ERP system breaks the data interface and so on.

It is important to realize that SPM projects are not happening in silo.  There are lots of dependencies!  While it is impossible to predict the unforeseen, one has to put in a conscious effort to look beyond the horizon and anticipate the factors that may impact the project.  If there are too many changes expected in the near term, you should consider pushing out the project kick off.

# 4 – Poor Resource Planning

Operational and project responsibilities are different, and it makes sense to keep them separate.

Can the driver of the car also be made responsible for engine tune up?  Yeah, maybe, but generally you wouldn’t expect one person to take on the dual role.  However, in SPM projects, we often see the commission operations team carrying on the added responsibilities for supporting the new project, especially testing.  This leads to severe operational conflict with project tasks.

Like any other complex projects, different specialists are needed to be assigned to specific roles.  Bigger the project, greater will be the resource needs.  If it is so deemed that operational team has to be the one doing testing as well, then one has to plan for the month/quarter ends, when operational team would have no bandwidth for the project.  Don’t assume 100% availability.

Planning of vendor resources is also important.  I have seen projects where multiple vendor resources are on-boarded on the project kick off, even though the ground work of the project is not yet completed!  It’s like getting construction workers on the ground when the floor plan is not even approved.  This burns a lot of money over idle vendor resources causing budget crunch for later phases of the project.

# 5 – Testing Approach

Most popular testing approaches are – Parallel Run and Test Case based testing.  Most often there is not much thought given to which approach is best suited for the project.

Parallel Run approach requires running the legacy (or current) system in parallel with the new (or enhanced) system, and comparing the results for a quarter or two.  This approach does not work, if there are significant changes in the plan design and expected results.  I have seen testing resources working arduously to identify and explain the gaps between the two systems.  If the new plan design is very different, or the old system has lots of known issues, then why waste time in doing reconciliation!  In such a situation, test case based approach is more suitable. However, building numerous test cases, test data, and expected results, is a time and effort intensive approach.

One needs to evaluate the two options, and take a conscious decision on which testing approach is most suited. Very often a hybrid approach works much better.  Compare the results with the old system where there are no changes, and build exhaustive test cases for some selected modules.

About this Blog’s Author
Maneesh Gupta is the founder and Managing Partner at Spectrum Technologies.  Spectrum is a Silicon Valley firm providing specialized services in the area of Sales Performance Management Systems since 2006.  Maneesh can be reached at mgupta@spectrumbiztech.com
 



5 Tips to Manage Annual Changes to Your Sale Incentive Plan

By: Dan Ganse, Spectrum Technologies

It’s that time of the year again, the leaves are changing, pumpkin lattes are back, and you’re starting to hear about changes to next year’s sales incentive plan.

You could sit back and wait and for these changes to find you, hope that they’re small and will be easy to make…but if you’re wrong, you’re setting yourself up for long days and a late program rollout.  It would be wiser to seek out these changes now and carefully analyze their impact on the current IC system.

Here are 5 tips that will help plan for next year:

1.  Start Early

An IC steering committee – typically formed with HR, sales, sales operations, finance, and other stakeholders – often decides on the annual plan changes.  And it’s not uncommon for major changes (e.g., new data sources driving new metrics) to take 2-3 months to implement.  It’s also not uncommon for this group to finalize these changes in mid/late December.  Failing to anticipate these changes will only put pressure on your timelines and the quality of your initial payroll and other deliverables.  And making mistakes – for any reason – will take you 3-6 months to regain credibility.

2.  Run It Like A Project

The key to managing annual plan changes is to make the stakeholders recognize what the key deliverables are to a new plan year rollout.  Push the steering committee to provide final compensation plans as early as possible.

Communicate timelines to all stakeholders early and publish and track dates to reinforce dependencies and accountability.  Establish a weekly meeting with all key stakeholders to share timelines, assess project risks, and resource plan for all roles (HR, support, IT, etc.).  If you’re planning to engage a vendor to help with your changes, secure the resources early on.  Don’t wait for the final plans to be ready as you’ll need to account for enough time for the vendor to plan their own staff and ramp up on your requirements.

3.  Model the New Plan

Modelling the new plan is crucial to ensure that the plan behaves as expected.  Monte Carlo simulation (running repeated simulations with random sets of data) can be particularly helpful to gauge the financial sensitivity of the plan.  You’ll want to understand how the plan behaves under a variety of conditions in order to (1) adjust the plan if the behavior isn’t desired before you launch and (2) serve as a baseline and reminder later in the year when discussions arise to change the plan.

4.  Archive Old Components

Too often, little or no time is spent archiving or removing unused components (rules, data, reports, etc.)  The reasons for not doing this are many – you assume this is a feature of your IC system, you don’t have enough time to do this and make the required changes, or it simply didn’t occur to you to do – but the consequences of not “pruning” these unused components is a more complicated system that is harder to understand and make changes to.

Be sure to allow for time to archive and remove unused components from your system to keep as clean as possible.  Doing so extends the overall life of your IC system, keeps the processing speeds faster, and allows for faster configuration changes.

5.  Communicate to the Salesforce

Your company is spending a lot of money on sales incentives.  Don’t assume that  just because you implement the changes requested that the salesforce knows what those changes are.  And just because you updated the Terms and Conditions of the plan for the new year, that also doesn’t meant the salesforce understands the plan or changes made to it.

Each and every year, it is essential to remind and educate the salesforce on their sales incentive plan.  This can be accomplished through a variety of ways such as testing and certification, road shows promoting the plan, sessions at a national sales meeting, webinars, on-demand videos, and more.  The key is that a concerted effort is made to remind, educate, and drive home the sales plan’s key metrics and overall corporate strategy of your organization.  Doing so, drives the performance of your sales organization and strong ROI in your sales incentive plan.

This is always a busy time of year, where you can be pulled in multiple directions.  Don’t let next year’s sales compensation needs sit idly by – take the time to prepare for what is to come.  Make it a good 2015!



A Must Read Book on ICM

If you are reading this blog, you must be someone entangled in this complex world of Incentive Compensation and Sales Performance. Like everyone else in this industry (including myself), you may still be searching for ways to enhance your understanding on this subject but business schools don’t offer courses on Incentive Compensation, nor do we have any industry journals on this topic. Therefore, I am thrilled to see someone publishing a book on ICM. I am particularly excited because the author – David Kelly – is a good friend and an industry stalwart with reputation for being brutally candid about his opinions.

The Book on Incentive Compensation Management

David’s newly published 200 page book is simply titled – The Book on Incentive Compensation Management.I received a pre-release version of the book, but I confess its text book style cover was a bit intimidating. I finally finished the book this weekend, and I am glad I did!

This book is not yet another prescription on Compensation Plan Design, nor a bunch of Project Management tips from a Big 5 consultant, nor a collection of author’s favorite project stories. It offers a world much like the diary of a wise consultant providing candid commentary on the quandaries of ICM world.

The book has taken a holistic approach towards ICM. Rather than focusing on any one stakeholder, or specific business process, or a particular industry, the book delivers on its title by addressing all stakeholders across all project phases. It starts by defining the term ‘ICM’, and then dives straight into the complexities of the ICM landscape. The second half of the book provides a candid narrative on project phases, common challenges, pitfalls and sage advice. The book not only talks to the implementation consultants, but also makes business leaders aware of what an ICM project entails.

My favorite part of the book is where David answers the question often asked by industry outsiders and newbies – Why is ICM so hard? Chapter 2 provides a roof top view of the answer, while Chapter 7 gets into the trenches. I wish I had this book during my early days at Apple, when neither business nor IT leadership had a clue and there was no one available to guide us. If you are dealing with a manager or a client who undermines your ICM challenges, do yourself a favor and gift a copy of this book to them. You may also want to take a bright red pen and underline the parts that are relevant to your situation (just saying…!).

Chapter 5 of the book is specifically targeted towards the companies that are somewhat new to rolling out enterprise level ICM projects. Whether you are on the business side of the project or IT, if you have been thrown into a new ICM initiative, you would benefit from the words of wisdom spread throughout this chapter.

In spite of his long association with providers of the ICM tools, David has been honest to his audience, and doesn’t waste any ink writing about specific tools. The book follows the theme that irrespective of the choice of ICM tool, one has to make sense of business requirements, operations, and processes ahead of kicking off an ICM project. The book focuses on educating and preparing both sides – the company’s compensation administrators and the implementation team’s consultants.

The author’s witty and often sarcastic tone directed to his peers and business teams keeps the reader engaged.   The writing style, as explained early in the book, is characteristically informal and chatty. But don’t be fooled by it, as you would find the book loaded with wealth of information and industry insights, reflective of David’s years of experiences in the trenches of ICM.

While not a bible on Compensation Plan Design (there are plenty of those already available), this book does provide some high level guidance. If you are from a small size company undertaking a simple ICM project, you may find this book over the top. But if you are in the middle of a large ICM project, you would be nodding all along as David talks about challenges, hurdles and craziness of ICM projects. Your challenges, after all, are not so unique.

Whether you are an expert practitioner of incentive compensation, or you are facing your first ICM implementation project, this book can save you months of misunderstandings and wrong paths in a system implementation project.

I’ve been consummately engrossed in this book for the last two weeks. It is loaded with heavy textual content with sparsely sprinkled graphics. This made it a bit of a daunting read for me, but David’s friendly tone and jest helped me pull through to the finish line. ICM is a complex topic, and the book provides a holistic and impartial commentary, while offering helpful guiderails for all of us in ICM industry.

A must read book for anyone who is passionate about the world of ICM.

To learn more, or to purchase the book please visit:

http://amzn.com/0996081003

About this Blog’s Author
Maneesh Gupta is the Managing Partner at Spectrum Technologies. Spectrum is a Silicon Valley firm providing niche services in the area of Sales Performance Management Systems since 2007.

Maneesh can be reached at mgupta@spectrumbiztech.com
To learn more about Spectrum please visit – www.spectrumbiztech.com

 



7 Tips to a Successful 2014 Sales Compensation Year

2013 has come and gone, which means new 2014 sales compensation plans will soon be rolling out. Whether you are modifying your current plan or creating an entirely new one, be sure to keep these tips in mind to save you from a potential headache.

1.   Align the sales compensation plan with corporate goals and strategy.

The key objective in plan design is to ensure your sales compensation plans align with corporate goals and strategy. A well designed compensation plan embodies the strategy of the organization and drives the right sales behaviors towards the corporation’s business goals.

2. Evaluate the current compensation plan’s effectiveness.

When designing your new plan, it is helpful to determine what worked and what didn’t in last year’s plan. Some questions you should consider while evaluating your plan: Are your territories balanced? Does your quota attainment plot a standard bell curve? Is sales turnover higher or lower than expected? Do you have the ‘right’ kind of turnover (poor performers leaving) or the ‘wrong’ kind (high performers leaving)?

3. Use simple and objective measurements.

The best plans are those that are simple and easy to understand. The more complex a plan is, the less effective it can be. For instance, a plan that includes four or more measures is usually too complicated and may require the need to define another sales role. Avoid complexity by setting individual and/or team-based measures as appropriate for each role. These should align with corporate sales goals that focus on aspects such as margin, profitability, new customer acquisition, new product introduction, etc.

4. Define policies.

Your plan should be clearly outlined and defined. Develop clear and absolute policies for crediting, adjustments, liabilities, windfalls, etc. There should be no surprises.

5. Model the plan.

Model your compensation plan to evaluate the impact at both the macro (plan cost) level and the micro (individual earnings) level. Make sure your plan fits within budget parameters and adequately rewards your top performers.

6. Follow a formal process to communicate the new plan.

By now, you should have the structure of your 2014 sales compensation plan. Avoid any confusion or worry that may arise by allocating adequate time to roll out and explain the plan to your sales team. Highlight major changes from the prior plan year with a “What’s New” summary. Be sure to train (and possibly certify) first-line sales managers on the plan(s) because they will be the first to field questions from your sales reps and will need to be able to reinforce the plan details (and the corporate strategy) with their sales team.

7. Monitor the compensation plan.

Once a sales compensation plan goes live, be sure to establish ongoing processes to continuously monitor your sales compensation plan’s performance.  Be prepared to make mid-cycle changes as strategies change and/or unexpected events occur that require plan adjustments.

Sales Performance Management (SPM) software can be extremely helpful with ongoing monitoring as well as enable faster implementation times when changes are needed.

Conclusion

When you look at the right things when designing and administering your sales compensation plans, you’re more likely to reward the right sales behavior and achieve the corporate sales performance you want.

Make it a good year!



How To Measure The Success of Your SPM Implementation

During an RFP process, I was in a customer reference call and a question came up – Did you have a successful implementation? They gave their answer but it got me thinking – what exactly defines the success of an SPM implementation? Of course the straightforward answer is within-budget and on-time delivery. But what are some of the other metrics besides the obvious?

SPM projects are intended to deliver much more than just $ savings. Therefore the conventional ROI calculation doesn’t work here. Some of the non financial parameters to consider :

  • Time/Effort in Comp Administration- Has the system enabled you to normalize headcount or working hours?
  • Sales Incentive Plan Document distribution – Are those being routed on time?
  • Agility in making Comp Plan changes – Are you able to make quick changes to comp plans, or do you still have to push back?
  • Commission Forecasting Accuracy – Are the actual and forecasted numbers comparable?
  • Fiscal Year Beginning Draws – How long are the payees on draws before actual commission is paid?
  • Volume of Disputes – Is the team now able to catch issues before they become disputes. How quickly are discrepancies resolved?
  • Meeting Payroll deadlines – Is it a comfortable run to the finish line, or is it still a mad rush?
  • IT Support Head Count – Has it reduced? How much value is the support team adding?
  • Reporting – Do sales folks actually understand and use the reports? Do the reports provide necessary insight to higher Sales Management?

If your answers to all or any of the above is positive, then you have a winner!



Merced ICM Calculator

The biggest competition for all the ICM packages available in the market is none other than Microsoft Excel. Excel is so ingrained in the commission world that often times, potential buyers tend to minutely compare the two and are not willing to giving the ease and simplicity of excel.

So instead of competing with Excel why not use it to your advantage. In my opinion, this is exactly what Merced has done with their calculator. That said, my post today aims to throw more light on the Merced ICM Calculator and how it works.

WHAT IS A CALCULATOR?

In simple words, a calculator is a reusable object that a user has defined for managing a calculation which is equivalent to writing a formula in Excel. The layout of the calculator UI is very similar to an Excel spreadsheet.

HOW DOES IT WORK?

A Plan is a rule or a container that holds the criteria to filter transactions based on different matching criteria defined by the user. A Calculator contains the logic to process the transactions. A user can quickly write formulas/logic using the excel like spreadsheets and test it out to make sure it produces the correct result. Calculators can also feed into other calculators. This allows users to break down complex calculation logic into smaller chunks that are easy to understand and maintain and can be reused by other entities.

WHAT ARE THE DIFFERENT TYPES OF CALCULATORS?

The different calculator types are Summary, Event, Function and Table Calculator. Each of these calculators is suitable for different types of calculations.

Summary calculators operate over a group of transactions and produce an overall result. For e.g, it can be used to aggregate transactions before computing the overall commission and achievement.

Event calculators operate on a per transaction/event basis and it is recommended that they be kept to a minimum.

Function calculators as the name suggests can be used to create functions(similar to excel) that can be referenced by other calculators.

Table calculators are typically used to define Rate Tables and such.

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HOW IT ALL COMES TOGETHER?

Here is an example of how all the entities come together. The example shows how a single calculator can accept inputs from multiple plans to produce desired results.

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WHAT ARE SOME OF THE CALCULATOR DOs AND DONTs?

Calculators are very powerful and can be used innovatively to achieve the desired results. But they can easily become unmanageable and complicated if not thought out properly.

They should always be made generic by utilizing lookup tables. This makes them reusable and minimizes the number of calculators needed.

Use Summary level calculators very possible and limit the use of Event calculators as they can prove to be very expensive.

Cell references must always be in caps, for e.g A1 and not a1.

Cells with calculations/formulas should start with “=” otherwise the contents will be read as plain text.

Customers love Merced ICM calculators because they are so excel-like, easy-to-use, flexible and extensible. Most people configuring calculators have usually built out similar requirements using Excel at some point.

If I were asked to choose one single calculator feature that truly takes the cake, it would have to be the Calculator Test Mode. One can build a calculator, provide test input data and instantaneously see the calculated output including results in intermediate cells as well. And from my personal experience, all this can be done in a flash.

Merced mostly definitely has a WINNER on their hands!