by Mita Dave | Jan 24, 2019
We’ve all seen it—the burden placed on IT teams to be everything to everyone. And for a time back from the late 80’s to the mid 2000’s that was the reality. The ability of IT teams to tackle everything IT-related was nothing short of astounding—from building custom CRMs to managing phone systems, handling the company’s website, and even building homegrown Sales Performance Management tools.
The sad reality in all of this is that approach is no longer an option. The role of IT has changed greatly, to say the least. Gone are the days of building from scratch—replaced with managing projects and business processes that span from keeping the proverbial lights on to implementing new and exciting revenue-generating projects.
And though the days of custom infrastructure and platforms built by the IT team should be over, far too often companies still fall into the trap of believing that homegrown applications are better and more cost effective than publicly available options.
Unfortunately, few consider the reality of what it truly means when it comes to the do-it-yourself approach. The costs associated with maintaining legacy systems can be astronomical—after all, a software company needs to be built and maintained inside the organization for the long term. This is costly: developers, time and energy are spent in maintenance, upgrades to align with changing infrastructure, and the list goes on.
There is also the reality that talent comes and goes, leaving new employees burdened with learning legacy systems, code types, and processes that may eventually become obsolete. All of which lead to more costs in the long term with little to no upside.
However, that’s not where it ends. Far beyond the bandwidth of maintaining legacy, homegrown systems, there is also the stark reality of the new digital age. It’s no surprise that digital transformation has become the single greatest business driver of the twenty-first century. The dissolving of IT silos, the integration of disparate systems that now need to perfectly connect to deliver better user experience, and the impacts of the digital economy all play a major factor in future business success.
With that need for integration comes one of the biggest challenges that companies will face in the next five years—making legacy, homegrown systems work seamlessly with the outside world. For so many companies, the idea that internal systems would one day need to bend to the needs of the end user, be cloud-ready, and so on was simply not in the plan. The future view of legacy systems was simply a financial decision based on saving money at the time—never realizing the astronomical cost of maintaining and evolving systems as the world’s expectations changed.
Not to be the bearer of bad news, but this still gets worse. The single greatest threat to companies in the digital age is IT security. And as data breaches, attacks, and theft become more and more prevalent, the need for enhanced monitoring of systems is paramount. The question becomes: How does one monitor something as archaic as an Excel spreadsheet or aging SPM system? The unfortunate reality is that one of the most common security-related issues is processes built with no controls in mind.
On any given day, people from any department can easily access and make changes to systems without any Identity Access tracking. This situation can lead to everything from compliance issues to data breaches and outright theft—all due to the fact that no one can tell who is doing what, from where, and when.
So is it surprising that one of the most notorious examples of this is Sales Performance Management systems? Whether it be maintaining it, integrating it into more modern systems, or securing it, the fact is that eventually the homegrown SPM system fails—every time.
Eventually the cost will catch up in some way or another. Maybe it’s integration and cloud access that will cost too much (even in loss of productivity) or, worse, a data breach that will bring down the company due to lack of security.
My advice—don’t live in the past, because homegrown solutions always fail. Get the professionals to plan and implement a Sales Performance Management solution for you that will truly meet all of your needs, without the cost of bandwidth, productivity, or security. Then imagine what your IT team can actually do for you—drive business and revenue—instead of just keeping the lights on.
by Mita Dave | Apr 13, 2017
Sales 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. Although 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. Are your organization’s comp plans still going through significant changes because of evolving market landscapes? If so, you will have a tough time keeping your SPM implementation on track.
Taking this into consideration, 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 you 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 you 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 an 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 the Cloud an option?
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 choice 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 road map 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 you have Resources to support this 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 with getting you prepared for an SPM project, please contact us at mktg@spectrumtek.com.
by Mita Dave | Jun 16, 2016
Sales 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.
by SpectrumTek | Sep 16, 2015
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.
by Mita Dave | Oct 14, 2014
By: Dan Ganse, Spectrum Technologies
Sales incentive compensation management (ICM) is a tough ballgame and has unique challenges. ICM operates at the intersection of corporate strategy, behavioral psychology, and multiple corporate IT systems.
Managing sales compensation is a continuous process that does not end when a new ICM system is brought online. Good ICM software clearly helps, but there are three critical factors required to effectively manage the sales compensation process.
- Expect change
- Seek continuous improvement
- Staff appropriately
Expect Change
Businesses are always changing and many of those changes have a direct impact on your sales compensation plans.
Events like acquisitions and layoffs impact the sales team size, causing account alignments to change which impact sales quotas; new products are launched and/or abandoned, impacting sales quotas; field sales personnel move in and out of selling roles throughout the year often which has an impact on how those people are goaled, their contest eligibility, sales coverage of their departing territory, and more. The list is endless – but all require the sales IC system to adapt quickly.
It’s critical for those supporting these IC systems to build flexibility into their system and processes to accommodate change. Whatever can be parameterized, should be. Components like quotas, target incentives, commission rates, are easily accommodated by most designs. Policies should be established for common conditions and adhered to.
Larger changes are difficult to anticipate, but should be approached in a structured manner with standard change control procedures. Care should be taken to remove old code / rules / parameters to make future changes easier to make and maintain. When this care is not taken, you are shortening the life of your ICM system.
Seek Continuous Improvement
At the end of every processing cycle, review your processing procedures and be sure to note areas for improvement. Focus on both improving your team’s productivity as well as the field sales org and executive management user experience with better analyses and analytics. Take time to update procedural documents, look to automate frequent manual tasks, and maintain a “punch list” of necessary system changes and enhancements.
Staff Appropriately
Companies all too often fail to appreciate what it takes to manage an IC system well – trusting too much in the tool’s much advertised flexibility. Companies that do this well, acknowledge that this is a specialized skill set and requires people who are adept at managing multiple constituencies and who are able to translate requirements to produce deliverables.
It’s important to have skilled people supporting your IC system, but also to have enough of them. You should have enough staff to produce ‘higher value’ analyses that deliver true insight into how well your sales plan is performing and identify areas to drive your overall corporate performance versus simply managing to produce a payroll file. Be sure to anticipate and address peak staffing needs as well by cross-training beyond your core support team (for example, you can have the person who is responsible for quota maintenance also learn your ICM system).
For a longer term impact, there is an increasing amount of companies who are engaging SPM/ICM professional service firms to help them year round. These firms know the domain, the toolsets, and often provide their own cross training to mitigate your people development and maintenance costs. The more you use a firm, the better they will understand your business and systems, which increases their productivity and contribution.
In summary, managing and improving sales compensation takes considerable focus. Having an approach that concentrates on improving the effectiveness of your sales support operation is critical to its success.