Archive for the ‘Incentive Compensation’ Category

Webinar Galore – 2 SPM Webinars Tomorrow

July 28, 2008

I will try to provide coverage on this blog for these 2 webinars taking place tomorrow. The webinar hosted by Callidus features an Accenture partner discussing the insurance industry, and the Xactly webinar features Jeff Kaplan discussing on-demand sales performance analytics. Follow the links to register.

Callidus 7/29 @ 9A CST – Best Practices from Accenture – Align producer and advisor behavior, maximize mindshare – and effectively manage compensation

Learn about insurance industry best practices from Jon Walheim – Accenture Partner – North America Insurance Marketing, Sales, and Service Lead. You’ll learn about key trends in the insurance industry, challenges that organizations are facing, and what insurance leaders are doing to gain competitive advantage.

Xactly 7/29 @ noon CST – The Business Case for On-Demand Sales Performance Management Analytics

In this Webinar, Xactly’s Karen Steele and THINKStrategies’ Jeff Kaplan will discuss how post-sales analytics can provide new and strategic insight into an organization’s selling patterns, commission spend, product performance, sales rep and team performance, and sales plan effectiveness. They will examine how post-sales data – traditionally scattered across a variety of disparate systems including ERP, HR, and Payroll – can be now be integrated and analyzed with an eye towards enhancing business strategies, changing sales rep behaviors, and super-charging sales organizations.

Incentive Compensation Industry News

July 11, 2008

Callidus Software Reports Preliminary Financial Results for the Second Quarter 2008

  • Subscription and support revenues for the second quarter are expected to be approximately $10.0 million, an increase of 68% over the second quarter of 2007.
  • Callidus On-Demand (subscription) gross margins for the second quarter are expected to be within the range of 45 to 50%, up from 22% in Q1 2008.

WageWorks Selects Centive Compel(R) to Automate Sales Compensation Management

Centive, the leader in on-demandsolutions for sales compensation and sales performance management, todayannounced that WageWorks, the leading provider of tax-advantaged benefitsprograms, has selected Centive Compel to automate sales compensation and drivesales performance. Here is another related article.

Xactly Named World’s Best New Company by 2008 International Business Awards(SM)

Xactly Corporation took home theprestigious International Stevie(R) Award in The 2008 International BusinessAwards.

Sales Resource Group’s PlanIt solution earns finalist award at 2008 International Business Awards and for for Microsoft Bluesky Finalist.

Popularity Burst

July 10, 2008

I’m not sure what is happening to my search engine ranking on Google, but it has been climbing very quickly over the past few weeks! Here are a few examples as of this afternoon:

  • Incentive Compensation: 10 (1st page!)
  • Sales Performance: 17
  • Enterprise Incentive Management: 20
  • Incentive On-Demand: 7
  • Incentive Offshoring: 2
  • Incentive Compensation Implementation: 1 (woohoo!)

And that’s not including all the vendor-specific keywords where I’m also ranking very well.

Thanks to everyone who kindly link to this blog. Your help in making it more visible is very appreciated. Please keep the comments, topic ideas and questions coming.


EIM Solution Maintainability – Should you care about this?

June 11, 2008

People often consider buying an Enterprise Incentive Management (EIM) solution based on several criteria including cost, performance, ease of implementation, support, etc. One factor that if often overlooked in my opinion is the system’s maintainability.

What is Maintainability?
ISO 9126 defines maintainability as the ease with which a software product can be modified in order to:

  • correct defects
  • meet new requirements
  • make future maintenance easier, or
  • cope with a changed environment

Why is Maintainability important?

The ability to modify a software system is obviously important for any type of system, but it is particularly important for an EIM solution. Why? Because compensation plans, organizational data, quotas, etc typically change at least once a year. Modifying this information is not a task equally easy to perform in all software packages.

How to find out if a EIM solution is maintainable?

Any vendor will say their solution is maintainable… only an opinion from an unbiased person with experience implementing the particular EIM solution will be able to give a true account of how easy it is to maintain the application.

Effective dating plays a big role in maintainability. Being able to modify the information at anytime, but with changes effective only at a certain date, is critical to maintain a system.

Another key aspect of maintainability to consider the impact of year end on the plans. Some of the important information to find out is:

  • Are the plans still going to work at year end?
  • If plans need to be modified, how big of a change is it?
  • How easy is it to modify the quotas?
  • What about the rate / lookup tables?
  • If formulas are embeded within the tables, do those need to be modified as well?
  • How easy is it to move people in different positions?
  • What do I do when people leave the company?

It is not atypical to see a somewhat complex logic which could be impacted by a simple change. For example, a formula referencing a table which contains another formula pointing to a quota. If the quota values can just be updated, it’s not a big deal. If a new quota needs to be created, then the formula will also need to be updated to reflect the new quota.

Another example is when an EIM solution needs to be able to handle last year’s orders at last year’s rates. Depending on the system, this could mean creating new rules, new formulas, new tables, new quotas, etc.

It may not all be about the Product

Implementing a software package is a bit like custom development. A quality architecture results in the possibility to re-use components. Some programming languages are easier to maintain than others; as we discussed, the same goes for EIM solutions. However, no matter how good a programming language, a bad programmer can make the maintenance a nightmare. A bad EIM implementation team can also make the system’s maintenance very hard, no matter how good the product is.

The bottom line:

Finding out the details about how maintainable an EIM solution is, is as important as finding out other characteristics such as how easy it is to implement it. You do not want to have to re-implement every plan every year; not only because it is time consuming, but also because major changes imply bigger risks.

The first part of the battle is to select an EIM solution which will make maintenance as painless as possible, but the battle is not won until the solution has been implemented properly.

The Moral to the ICM Saga

June 9, 2008

Read Part 1 and Part 2 of this story first.

The blame cannot be put on one person. ABC Corp, the ICM vendor and the consultant all own some of the responsibility for the issue.

The entire situation could have been avoided if the requirements had been better designed. Requirements could have been better designed if the compensation plans had been completed with enough details. The vendor would probably have done a better job at scoping out the work initially or in certain situations may even have not submitted a proposal.

What can we take away from this story?

  • Requirements cannot be fully defined unless the compensation plans are finalized. Requirements may be inaccurate or incomplete unless compensation plans show sufficient details and examples.
  • An ICM solution cannot be selected unless the requirements are fully defined.
  • Not all ICM solutions can handle very complex compensation plans (no matter what the vendor’s rep says). Some solutions are better suited for certain situations.
  • Good requirements are the foundation for any IT project, mess up the requirements and the entire project will be shaky.
  • Using an experienced consultant to help out with the requirements design, RFP writing and solution selection could be a good idea to select the ideal solution.
  • Consultants and vendors alike cannot “always” guess client’s intentions.
  • Mentioning or emailing a requirement is not enough, this requirement must find its way to the requirement document to ensure it is met by the implementation and properly tested.

The ICM Saga Continues…

June 5, 2008

It’s Thursday; meeting time. The vendor explains the requirements from the RFP did not accurately reflect what needed to be performed by the ICM solution. “Because the scope of the project did not include all this additional work, it will cost more and take more time to complete”, says the vendor calmly. “But your sales rep said it would not be a problem!”, exclaims the comp director of ABC Corp. “We specifically asked about this during the presentation and your rep said it you could do it!”.

The vendor finally agrees that because the relationship between their companies is valuable and because of their strong work ethics, they will honor the agreed cost and do everything they can to meet the deadlines.

However, problems keep piling up. The ICM solution is not intended to perform what would be required for the compensation plans to work how they are supposed to work. Data integration, workarounds and clever tweaking pushes the ICM solution to its limit. The client is asked to only include what is absolutely necessary in this release and push out the rest. The deadline is missed. The solution is finally implemented, but User Acceptance Testing keeps revealing new issues. The second pay-roll date is approaching but there is still no solution in sight.

Does this sound like a familiar situation?

Who should be blamed?
The vendor’s implementation team for not working harder, their sales rep for having mis-represented their solution or not asked for more detailed requirements, or the ICM solution for not being powerful enough? ABC Corp’s team or their consultant for not having defined the requirements properly?

The Saga of Purchasing an ICM System

June 4, 2008

ABC Corp hired a consultant with extensive Incentive Compensation Management (ICM) experience to scope the requirements to be included in the Request for Proposal (RFP) for the purchase of a new ICM solution. The consultant diligently researched the latest industry trends, ICM best practices, client needs and leveraged his experience to create an outstanding requirement document. Weeks later the RFP is born, after having spent countless hours being sent back and forth between the sales, finance, contract and legal departments.

The RFP is finally posted and it takes a few more weeks before all the proposals are in. The consultant is called again to help out evaluating the best proposal. A few solutions are short-listed, and vendors are called in to demonstrate their product. The vendor’s sales reps all claim their solution is the only end-to-end ICM solution, that it is the “best-of-breed”, and that it has the best analytics and reporting capabilities.

After thoughtful consideration, a solution is chosen. It was a hard decision, but everyone at ABC Corp are happy that this long procurement process is finally over. ABC Corp’s management is particularly happy that according to the timelines illustrated in the selected proposal, the solution will be in place to process this quarter’s commissions and bonuses. After all, this was one of the major criteria in the evaluation process.

A kick-off meeting between the vendor’s implementation team and ABC Corp’s employees is scheduled. The vendor requests to see all the existing documentation about the plans to be implemented including the requirements document, to start working on the functional design documents and solution architecture. The next meeting is scheduled for Thursday.

[Read Part 2 – The ICM Saga Continues]

Tweak your Sales Compensation Plan – A Tale of Diverging Opinions

June 2, 2008

In case you are not familiar with it, the Canadian Professional Sales Association (CPSA) has an excellent magazine called “Contact”. The best part is that this magazine is entirely available online, for free, and without any registration. Today I wanted to bring your attention to an article by Jay Somerset called “The Compensation Challenge” which appeared in the Contact Spring 2008 edition.

“It may be time to change – or tweak – your sales compensation plan to better compete in today’s employee-driven market, but if it is done incorrectly you could send your sales team packing. “

Indeed, tweaking a sales plan is tricky business. Stats mentioned in the article back this up: Less than 10% of North American sales organizations redesign their comp plans in a given year, while the other 90 percent only perform minor tweaks. I think ideally, closer to 100% organizations should only perform minor tweaks. Redesigning a plan could be a sign that it had not been planned out properly, and sometimes organizations are compulsive about trying new plans rather than improving their existing plans by tweaking them.

Diverging Opinions
Greg Blysniuk, president of TopLine Sales Compensation Solutions in Toronto advocates simplicity. He says that sales managers often believe their compensation plans must be sophisticated and complex to compete; Greg believes one or two quantitative measures is all what is required to incent people and to ensure the plans are easy to understand.

David Johnston, president of Sales Resource Group Inc in Oakville, Ontario believes compensation plans should factor in qualitative metrics. “Qualitative metrics can be measured according to milestones or key events”.

ICM Applications:
Greg says the main barrier to adopt an ICM application is their cost. He is in favor of using Excel spreadsheets for compensation data collection and analysis. He says that “Spreadsheets are simple to use, inexpensive and they do the basic job”.

David does not agree; he says that spreadsheets are “too basic and error-prone”. He also says that “sales is much too complex for a spreadsheet”. He concludes that there is a middle ground with smaller-scale on-demand ICM applications such as PlanIt (which I reviewed previously), that do not require a large upfront cost.

The Bottom Line:

No matter which approach is used, I’m sure we can all agree that the goal is to make the compensation plans as straightforward as possible. If there is a valid reason for a plan to use some “complex” measurement, fine… as long as it’s easy to understand and clearly communicated to the payees.

As for the need for an ICM application; if an organization is small enough with a low enough order volume and is happy with their current spreadsheet, and if they don’t see any benefits in real-time analytics and dashboards, auditability, modeling, forecasting, and all the other benefits provided by an ICM solution, then there probably no incentive to replace the spreadsheet by such an application.

I agree with Greg that spreadsheets do the “basic job”, but in my experience it does not take very long even for small organizations to realize that the “basic job” is not enough anymore to keep a competitive advantage.

For Love or Money: Social vs Monetary Reward

May 26, 2008

Social Status and cash activate the same reward centre in the brain. That’s what two papers in the latest Neuron journal (Volume 58, Issue 2) are saying. I’m always very interested by cognitive research attempting to explain how certain activities can affect human behavior.

The article “Know Your Place: Neural Processing of Social Hierarchy in Humans” by Dr. Caroline Zink and colleagues explains how information about social status activated the same brain regions.

The second article “Processing of Social and Monetary Rewards in the Human Striatum” by Dr. Norihiro Sadato supports how reputation affects people in the same way as money does.

A subscription is required to read those articles, but they were summarized in ABC Science article “Praise or Cash? Your brain doesn’t care“.

Personal Story:

These studies support my own view on the topic. Last month I discussed the impact of the size of a money bonus on performance. It would be very interesting to see a similar experiment where some a group receive a lot of encouragement and the other group receives no praise at all, to compare their performance.

One of my previous employers, as many employers do, offered an annual performance bonus. This bonus was a percentage of the annual salary, but every employee received a very similar bonus. Employees developed a sense of entitlement to this bonus, and always thought they had met all their performance objectives and deserved the full amount. I’m just giving this context to illustrate how the cash incentive most likely did not have a positive impact on performance.

The employer, aware of this problem, introduced a “praise” program, consisting of recognizing employees who had made a significant contribution. Managers were encouraged to simply give a “Thank You” card to exceptional employees. I have no idea how this program affected performance… But it’s impact on motivation was priceless.

Employees receiving these “praises” would shine for weeks. Common sense tells me that motivation can easily be correlated to performance. I can safely say that the thank you notes I received from colleagues I had helped during evenings and weekends really motivated me to keep working hard – there is nothing like feeling appreciated!

Another Story on Social Status

A few weeks ago I read an article about how job titles could be used to motivate employees, even if no pay increase is associated with the new title. I have a friend who had his job title changed from “Business Dev Manager” to “Manager, Entrepreneurship and Innovation Development”. He’s been jumping up and down since he got this “promotion”. His reasons for being so happy: the title is unique, distinguishes him from his peers, and sounds better from his perspective.

SPM Testing Template – Part 5

May 23, 2008

Incentive Compensation Management test results can be recorded in several ways. One of the approach I like to use groups all plan names, rule names, conditions, expected results and testing status on the same spreadsheet. I find that by keeping all this information together, it is easier to quickly get the picture of the overall testing progress. It also allows to keep all the information on the same spreadsheet instead of having to maintain 2 spreadsheets with identical information.

Here is an example to get started:

[download the spreadsheet]

Other benefits of using an Excel spreadsheet to record test results instead of a Word document include:

  • Ability to quickly highlight failing tests in red
  • Ability to filter information displayed (e.g. display only failing tests)
  • Test results can be printed on fewer pages
  • Ability to create macros to perform more “fancy” features such as displaying the number of days a certain issue has been opened.

Other columns could be added to add additional information such as the date at which the test was performed, the name of the tester, how critical the test is, the actual result when different from the expected result, and comments.