Archive for the ‘Return on Investment’ Category

ICM News This Week

May 17, 2008

Centive Named as Finalist in 2008 American Business Awards
On-Demand Sales Compensation Management Leader Recognized for Providing Exceptional Customer Service

Xactly Analytics: Look at Sales Compensation On-Demand
Xactly, a sales performance management company, recently released Xactly Analytics, an on-demand application designed to provide analysis, metrics, ad-hoc reports and dashboards based on aggregated post-sales data.

Skin in the Game
Centive smoothes away the calluses for a dermatology-product vendor. Thanks to implementing Centive Compel, Obagi Medical:
– increased net sales by 32 percent;
– increased operating income by 56 percent;
– increased net income by 149 percent; and
– added 200 new active physician accounts, an 18 percent increase.

ICM Solution Return on Investment – Ask the Expert #4

May 6, 2008

Many companies often wonder what the Return on Investment (ROI) of incentive compensation system is. Most articles and research on the Internet are either sponsored or written by vendors and it is hard in most cases to truly measure the savings and improved performance as a result of that new system. I asked David Cichelli about his thoughts on the return expectations of a well designed and well implemented compensation system.

David’s Answer:

It’s a mystery. Since no one can conduct a double-blind test to confirm the value of sales compensation, we live in the world of anecdotes and observable behavior changes. My test of program effectiveness is the degree of “alignment” between product divisions and buyer/sales segments. The sales compensation program should ensure alignment of field efforts between these two moving parties.

What I have to say:
I talked about ICM ROI for the first time here, and discussed another story here. I agree with David that it is hard to assess if the new system is responsible for new behaviors. Taking this further, it is hard to assess whether a compensation program improves behaviors period.

However, assuming that a company does see benefits in an incentive program, the question is, will an ICM/SPM solution pay for itself. Presumably, positive behaviors are already encouraged by more labour incentive variable compensation. Real-time information, dashboards, accurate reporting and advanced analytics may help out sales people and management, but other factors are easier to quantify.

These factors are likely to depend a lot from one company to another. As I pointed out in the previous posts, some of the factors to consider are the implementation, licensing and upkeep costs, the quality of the existing system (how accurate it is), and the potential time saving to be realized with a new system (time spent calculating commissions, reviewing data, resolving issues, etc).

Incentive System Implementation Success Story

January 22, 2008

I was trying to find out more quantifiable information regarding the Return on Investment achieved by Incentive Compensation Management systems and finally found an interesting story: Telus – How to achieve ROI.

The article is already a bit over a year old, but it describes how Telus, a major Canadian telecom company, achieved positive results with a new ICM solution. The benefits stated in the article include:

  • reduced incentive overpayments by 60 percent;
  • recovered 52,500 days of selling time;
  • cut incentive management administration costs by $560,000 annually;
  • reduced compensation error rates 53.6 percent; and
  • cut average dispute resolution time from 40 to eight hours.

Return on Investment (ROI) of an Incentive Compensation Management System

January 16, 2008

It is no secret that a Compensation Management System is a significant investment. In the case of a SaaS solution, a fee per payee will become an on-going operating cost. In the case of an on-premise solution, license purchase, hardware and system integration fees will consist of the bulk of the initial cost, followed by related operating costs to keep the system running.

I collected a fact from a Gartner research for which I have lost the reference: “On average, companies that don’t use information technology to track payments from customers overpay their employees by 3 to 8 percent of their bonuses and commissions.”

One of the difficulties encountered when calculating commissions in some manual form or with an archaic system is that it is often challenging to process returns. When returning items, the commission for these returns should be taken back from the sales person. The task is even more complex when dealing with partial returns, where several items where purchased and only a fraction is returned; in such a case, only a part of the commission should be removed from the original sales person. A good Sales Performance Management application should be able to perform this type of calculation without too many difficulties.

The actual return on investment depends on the implementation cost, the quality of the existing system, time savings with the new system, the amount of commissions paid incorrectly (and above what they should be) without an ICM solution, as well as other factors.

From what I have seen, the Return on Investment promise is real and not just a marketing trick… But remember that when considering a sales performance solution, the ROI should also take into acount the sales performance improvements due to more accurate and timely incentives.

Here are a few articles related to Return on Investment in the ICM space:
ROI Study Report: Sales Performance Management Solutions
Building a Business Case for EIM
Gartner Survey