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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.



IBM acquisition of Varicent – How does it impact the SPM landscape?

We were barely getting used to calling ‘Merced’ by its new name – ‘NICE’, when this news hit the wire – IBM buys Varicent!

This is the second major acquisition in the SPM arena in the last four months. M&A activities are a good indication of industry maturity. So is the SPM arena already maturing? And how does this acquisition impact Varicent’s customers and its competition? The news comes as a surprise, and the title of the press release is puzzling in itself. It reads “IBM buys Varicent to boost business analytics”. We think of Varicent as an SPM company, don’t we? And yet, IBM bought it for its Data Analytics, as though it discovered a hidden gem under the layers of SPM application that customers love! It is more likely that the author picked a name better understood by the masses(vs ‘SPM’), or maybe, it is indicative of the future roadmap – leveraging SPM data in an analytical fashion to improve overall sales performance.

The press release goes on to state ‘..the software will be folded into IBM’s Smarter Analytics line of software packages’. In the recent past, IBM has mostly acquired companies that offered IT Management or Infrastructure Technologies, whose products are were leveraged across a range of industries and functions. Click here, for a list of IBM acquisitions. I cannot think of any major application vendors acquired by IBM in the recent past. With the purchase of Varicent, Big Blue has stepped beyond its chosen path. If IBM plans to stick around and become a significant player in the SPM landscape, then it is a big reinforcement to the value proposition of SPM solutions. Quoting Chris Caberra, Xactly CEO, ‘We say welcome, IBM’.

All indicators point in the direction that Varicent would continue to operate as an independent entity, under the IBM brand, just like Netezza or Algorithmics. Both are thriving after getting acquired by IBM, and successfully serving small and large enterprise customers alike. I expect to see ‘Varicent, an IBM company’ in all their future messaging, and Varicent continuing to operate as an SPM player for years to come. With IBM getting into the SPM ring, we’ll have not one, but two niche SPM packages backed by the strength of publicly listed companies – Callidus and Varicent(not counting Oracle as a niche SPM player). Decision makers on the customers side, concerned about Varicent’s sustaining power, can now take comfort in dealing with IBM.

If IBM plays it cards as expected, folks at Callidus are likely to see serious challenges in more of their sales cycles. But in the short run, as it happens with every M&A, prospects and customers might get jittery, and competition(read Callidus and Xactly) will look to take advantage of the opportunity to lure away customers.

As for Varicent’s current users, it should be life as usual. I don’t envision IBM changing or discontinuing the SPM product line in the foreseeable future. The pricing may go up just to be in sync with IBM branding, but customers wouldn’t mind paying a premium for IBM’s brand value. In fact, IBM acquisition should help customers in three significant ways:

1. Global Reach – IBM with its global footprint is better equipped to serve Varicent’s global customer base.

2. Data Analytics – This is a no brainer. IBM will integrate its portfolio of big-data technologies to further enhance Varicent’s analytical capabilities.

3. Cloud Capabilities- IBM has acquired several cloud technology companies in the recent past – Cast Iron Systems, Green Hat and DemanTec etc. to name a few. With some innovative re-engineering, IBM has the opportunity to leverage these technologies, and significantly enhance the SaaS offering of Varicent. We can expect to see much more solid SaaS capabilities in future versions of Varicent.

Welcome, Varicent, an IBM company.

About the 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



ICM/SPM Industry News

Dear readers, my apologies for the long silence. I have been busy helping a hi-tech client with vendor evaluation and it does tax your brain!

Going back to the blog, amidst your busy schedules, dont you wish there was a quick way to stay abreast of the ICM/SPM industry news. Well, at least I do, especially for the last few weeks while being submerged under piles of data. They say, if you can’t find it, invent it!

Starting today, I’ll be doing a roundup of the important SPM/ICM industry news and events every week.

Here is the very first newscast for this week:

Varicent makes it for the first time to Deloitte Technology Fast 500™ list. For the period 2005-2009 it grew 40,269%. They are sure growing fast and everyone better be watching out – http://tinyurl.com/2ccnouz

Callidus announces the launch of its new solution for onboarding sales professionals and independent channel partners. Integrating channel partners has been a significant problem and surely Callidus seems to be on the right track – http://tinyurl.com/2a9blx4

Upcoming Event – Synygy SPM Seminar Series – A multi-city educational event for sales leaders, sales operations staff and others involved with managing sales force performance. Sure sounds like a good learning as well as networking opportunity –  http://tinyurl.com/2fhp3xr

If you would like to share a relevant news item or event, do write to me at adeo@spectrumbiztech.com



Ascent of Incentive Compensation Management Solutions

The dangling of the proverbial carrot has been a time tested mechanism to attract and retain talent, leading to the evolution of variable incentive compensation software. ICM software came on the horizon in late 1990s, to a lukewarm reaction from the market. Finally, after all these years, we are seeing rapid adoption of ICM software across various industry verticals like insurance, banking, high tech, health care, pharma, telecom, SaaS etc.

What is shaping up the ICM landscape? What are the key drivers for this growth?

  • Declining Costs – ICM solutions started with mammoth on premise implementations that used to cost millions of dollars. As more vendors entered the market, costs went down. With the advent of SaaS, costs were further slashed and small and medium sized businesses (SMBs) could now think about adopting ICM solutions. Cost effectiveness and affordability paved the way for companies to jump onto the bandwagon.
  • Expanded Scope -ICM Solutions are no longer just ICM solutions. Most vendors have expanded their offerings  into Sales Performance Management(SPM) solutions by including analytics and intelligence in their product suites. SPM addresses the broader objective of aligning sales strategy with the corporate goals as against just computing accurate payouts. Thus clients find it easy to fund an ICM project, because it not only solves their compensation problem, but also, the bigger sales visibility problem.
  • Sales Management influence – The SPM concept is  more appealing to higher sales management as it provides better visibility into performance metrics. In order to achieve more productivity, Sales is now driving the decision to implement SPM solutions. The Sales organization has proven to be a much stronger influence than the Comp Admin or Operations personnel when it comes to spending money.

In short, reducing costs, ease of implementation, evolution of SPM as a strategic tool, increasing influence of Sales Management are some of the drivers for the growth in the SPM landscape.

Below is a list of some of the leading vendors who are enjoying the rapid adoption of ICM solutions.

Callidus Software was founded in 1996 and their flagship product is called TrueComp. Their best-in-class solutions have been chosen by more Fortune 1000 customers than any other vendor. Callidus acquired Acteksoft in early 2010 to extend its SPM footprint.

Merced Systems was founded in 2001 and has been offering the Merced Performance Suite for call center employees since then. They acquired Practique Associates in mid 2008 and added Incentive Compensation Management to their suite.  They have been enjoying significant growth the past couple of years.

Varicent was founded in 2003 and their incentive compensation offering is called Varicent SPM. The company is based in Canada and has established a global footprint in a short span of time. The list of their customers is growing fast and they already have significant Fortune 500 names in their kitty.

Xactly Corporation was created in 2005 to meet the needs of the broader market by providing the most affordable on-demand sales compensation solution allowing companies to improve their business performance through the use of more effective sales compensation programs. Their main solution is called Xactly Incent. They acquired Centive in early 2009 and have consolidated their customer base.

ZS Associates, founded in 1983  is a global management consulting firm specializing in sales and marketing consulting. Their Javelin Software Suite is a comprehensive set of tools that includes Javelin Incentives which helps customers manage and administer incentive compensation plans.

Excentive was founded in 2002 in France and enjoys a wide customer base in France and Europe. They are now trying to break into the Americas market with their Total Compensation suite of products that addresses both variable and fixed compensation and several other aspects of compensation.

Makana Solutions was founded in 2004 and their offering is called Makana Motivator. Its offers a complete range of solutions from planning to administering sales compensation plans.

Oracle offers Oracle Incentive Compensation (OIC) which is a global variable compensation application that automates the design, administration, and analysis of transactional pay-for-performance incentive programs. Oracle acquired Hyperion in early 2007 and took over their ICM solution. Oracle is strong contender in the vendor evaluation stage due to existing client relationships and more importantly, their strong ties with Big 5 consulting companies.

Please drop me a comment if you’d like to include any other names in the above list.



ICM Implementation Project Gotchas – Part II

In my last entry, I talked about the issues involving project objectives, software selection, business processes and data feeds. In Part II, I will cover common issues during implementation and testing phases.

Over Customization – As I have stated in the previous post, your best bet is to buy a product that fits most of your needs OFF THE SHELF. Sure, customization does address some of the needs but the overall outcome may nullify the positives. It can put the package out of warranty, cause support problems and lead to performance issues. Performance and other benchmarks provided by the vendor are useless in case of significant customization. So educate your stakeholders about the risks of customization. Learn to live with what you get out of the box!

Insufficient and Inaccurate Test Data – Often times, customers are reluctant to release real data(customer numbers, revenues, account numbers etc.) to external consultants for testing. I strongly recommend using a data scrambler to hide the real numbers but use SIMILAR VOLUME of data as it is in your production system. Compromising on the quality or volume of data leads to poor testing. If you can’t get a data scrambler, put in adequate time to generate realistic data and scenarios. For instance, generate enough data to walk each tier of a Rate Table.

Too many reports – Prioritize. Prioritize. Prioritize. Loading up the project with too many reporting requirements causes a huge distraction from the main objectives. Break down the reporting wish list into multiple phases. Identify the ones that are absolute must-haves for Phase I and defer the nice-to-haves to Phase II. The fewer reports you have to deal with in Phase I, the better your resources can focus on the more important aspects of the project.

Perpetual Parallel runs – I have seen parallel runs go on and on and take over the entire project. It not only drains the budget and resources, but also risks the Project Go Live! A common mistake is to perceive parallel runs as ‘extended testing opportunity’. It is important to remember that the objective is to prove the integrity of the new system and not achieve a 100% match between the two systems. In order to manage a parallel run, limits need to be set and cross-checking criteria clearly defined. Set up a weekly status review to do a health check and resolve issues ahead of the go-no-go decision. It is important to publish a date for the end of parallel run, so users are prepared to cut the chord when the time comes.

Unclear Go-No Go criteria – The previous point leads into this one about defining the acceptance criteria for the new system. If limits aren’t set on what is acceptable and what is not, it is impossible to change over from the old system to the new. Projects are seen to be abandoned at this stage not because the testing did not meet the criteria but because of lack of clarity on the acceptance criteria.

When to Go Live? – It is common for business teams to overlap the go-live with the new fiscal year roll out, so they can get away with one time testing for both the projects. This is a double edged sword since the testing scope is generally very different for both the projects. In my experience, it is a better to keep the two projects independent from each other, especially in large scale implementations. The project team gets overwhelmed by taking on both the projects simultaneously, leading to poor planning and testing.

This brings me to the conclusion of the list. There are a lot of things that can go wrong in a perfectly well thought out project. Timely action can prevent the project from going off track but just being aware of what can possibly go wrong is a first step in the right direction.

Your comments are most welcome!