7 Problems in Sales Compensation Management

On March 5th, Synygy hosted a live online expert panel discussion called “Ensuring Alignment of Strategy and Sales Compensation Plans: Assessing the Impact of Strategic Misalignment“. I promised I would discuss about what I learned in the Webcast, so here it is at last!

Synygy identified 7 areas affecting sales compensation management:

1. Strategic Misalignment
2. Limited Modeling
3. Misunderstood Plans
4. Errors in Results
5. Lack of Information
6. Inability to Adapt
7. Process Inconsistency

The focus of the Webcast was on the “Strategic Misalignment” aspect, with future Webcasts to cover the remaining six problem areas.

So what is the impact of Strategic Misalignment?

• Poor sales force effectiveness
• Inefficient resource use
• Confusion
• Low morale
• Sales force turnover
• Etc.

Some of the symptoms…

• Poor line-of-sight to corporate objectives
• Over-simplified plans
• Top sales people underpaid or leaving
• Increasing commission cost
• Undesirable behaviors
• Many contests / spiffs.

US Cellular:
US Cellular faced many of the problems above. They are the 6th largest US wireless provider with 6 million customers, 8100 associates, 32 billion dollars in annual revenues and an inventive budget of 200 million dollars.

Sales associates were dissatisfied for several reasons including targets that were too generalized, a lack of consideration to location potential, a soft sale environment, lack of accountability, inconsistent process, inconsistent quotas and inconsistent payouts.

By adopting an incentive compensation management solution, US Cellular was successful in aligning quotas with corporate goals.

The key challenges identified by US Cellular were to get a buy-in from executives, facing the ‘fear of the unknown’, and getting standardized data.

Some of the lessons learned include: understanding the objectives, understanding data, and getting support from executives from the very beginning.

Wyett:
Wyett (Pharmaceutical) has a sales force of 4000, with annual revenues of approximately 16 billion dollars.

Their old strategy involved having multiple specialists bothering the same physician. The strategy was driven from the HQ and the focus was on the market share.

The new strategy involved having an assigned specialist for a physician, and a focus on external competition instead of internal competition.

Their sales performance management solution was implemented in only 75 days and did a tremendous job at helping to better align the new strategy with objectives and improve sales force productivity and effectiveness.

Live Online Expert Panel Discussion Coming Up

Synygy is hosting a free Webcast “Ensuring Alignment of Strategy and Sales Compensation Plans: Assessing the Impact of Strategic Misalignment” on March 5th at 2:00pm EST. I will delay my lunch break by 2 hours to see what I can learn about Wyeth and U.S. Cellular’s experiences and report back.

During this live, interactive panel discussion you will gain insight into:

• how Wyeth and U.S. Cellular assessed the impact of strategic misalignment
• key symptoms indicating lack of alignment of sales compensation plans
• how to assess the impact of misalignment of sales compensation plans steps
  to ensure alignment of plans when rolling out new plans or plan changes
• best practices for ensuring alignment of sales compensation plans and
  strategy

Panelists:

Mark Bernstein, Senior Director-Sales Planning,Wyeth Pharmaceuticals

Lisa Ziembiec, Manager-Sales Incentive Compensation and Effectiveness, U.S. Cellular

Jeff Evernham, Vice President, Client Services, Synygy

By registering you will be able to download two pretty good papers: “5 Tips for Ensuring Strategic Alignment of Sales Compensation Plans”, and “Diagnosing Your Sales Compensation MAnagement Problems”.

I found the later article a particularly good read. Rather than focusing on strategic alignment and best practices, it takes the other angle of the problems in sales compensation management. The article goes on describing 7 categories of problems resulting in ineffective design, implementation and management of sales compensation plans and their root causes.

SAS70 Audit for On-Demand Sales Performance Applications

There are tons of resources about SAS70 and Sarbanes-Oxley on the web.

In a nutshell, SAS 70 is a Statement on Auditing Standards (SAS) for service organizations, developed by the American Institute of Certified Public Accountants (AICPA). It demonstrates that a firm has proper controls and processes to protect the data belonging to their customers (very important!). The SAS 70 report is issued by an independent auditing firm and includes the auditor’s opinion on the service organization’s controls. A SAS 70 report is particularly important since it is the preferred method of providing assurance for service organization clients subject to Sarbanes-Oxley Section 404.

These days, service organizations enjoy talking about their Type I and Type II SAS 70 reports when it comes to marketing their applications. A type I report includes the auditor’s opinion regarding to which extent the organization represents its controls, and their description. A type II report includes all the info in the type I report, plus the auditor’s opinion on how effective the controls are during a defined period.

This being said, according to the SAS 70 website and other online resources, “SAS 70 does not specify a pre-determined set of control objectives or control activities that service organizations must achieve”. This means that customers need to review the disclosed controls and ensure they are sufficient to meet their objectives and their own auditor’s requirements. It also means that a SAS 70 report does not guarantee data security.

More detailed information about SAS70 can be found on the SAS 70 website, on Wikipedia and from Deloitte.

How do Sales Performance Management Systems Stack Up?
As I mentioned above, since SAS 70 does not prescribe which controls should be used, it is not possible to compare SPM / EIM vendors. However I tried to find as much information as possible with respect to SAS 70 certification for every vendor.

Callidus

SAS 70 Type:	“Meets SAS-70 compliance”
Controls:	N/A
Sources:	Link 1
Comments:

Centive

SAS 70 Type:	Type II
Controls:	N/A
Sources:	Link 1
Comments:	Completed January 2008

EIM Software

SAS 70 Type:	“Guaranteed SAS-70 compliance”
Controls:	N/A
Sources:	Link 1
Comments:

SalesForce.com

SAS 70 Type:	Type II
Controls:	N/A
Sources:	Link 1
Comments:	The article dates from 2004

Synygy

SAS 70 Type:	“Completed SAS Audit”
Controls:	N/A
Sources:	Link 1
Comments:

Varicent

SAS 70 Type:	N/A
Controls:	N/A
Sources:	Link 1
Comments:	SAS70 Type II data center

Xactly

SAS 70 Type:	Type I
Controls:	Full redundancy throughout the production infrastructure, regular security patch updates, on-going evaluation of potential security threats
Sources:	Link 1 Link 2
Comments:	SAS70 Type II data center

Xactly and Synygy achieve outstanding results in 2007

Xactly Hits Triple-Digit Revenue Growth in 2007

In the 12 months ended December 31, 2007, Xactly achieved a triple-digit year-over-year increase in revenues. The company also doubled its customer base — and in doing so, has tripled its subscriber base. During the same period, the company achieved an enviable 94.4 percent customer-renewal rate, surpassing the industry average of 90 percent and underscoring Xactly’s ability to deliver sustained customer value. And in March, Xactly completed its third round of financing, raising an additional $15 million to fund further expansion.

Synygy Celebrates 17th Anniversary and Announces Strongest Financial Position in the Company’s History

Synygy Inc., an authority on sales performance management, celebrated its Seventeeth year in business and announced that the company is in the strongest financial position in its history. […] This marked the third anniversary of Synygy’s strategy to shift its business model to focus on providing sales compensation and sales performance management solutions to companies with at least 1000 salespeople, brokers, or agents (rather than smaller-sized companies) for a fixed subscription fee (rather than an up-front software license fee).