Archive for the ‘Variable Compensation’ Category

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.

nGenera – The Birth of a new nGen Company

April 26, 2008

I blogged about BSG Alliance when they purchased Iconixx 2 months ago. Today BSG Alliance was reborn as nGenera, a business innovation platform for Next-Generation Enterprises.

Another news which did not get much attention is that BSG Alliance/nGenera recently acquired Ncent, a fully integrated Sales Performance, Bonus and Salary Management software company. The cached version of Ncent website can be found here.

Mark Hall wrote a bit more about nGenera on his blog at ComputerWorld.

Here is more information about nGenera, straight from their website:

We’re a different kind of company – built to enable our customers’ journeys toward becoming a Next Generation Enterprise – and our innovative core is made of three distinctive capabilities:

  • A business platform and components that create an agile mechanism for identifying, creating and configuring our assets
  • Collaboration software that enables community-driven innovation (Wikinomics) and interconnects the new global workforce
  • An on demand framework that turns Big Ideas into reality for leaders, employees and customers 10x faster than traditional means

Our customers plug-and-play into our platform to enable:

  • Revenue growth without additional costs
  • Significantly greater utilization of employees and resources
  • Breakthrough responsiveness to opportunities & threats

The agility of our platform enables us to configure product offerings directed at our customers’ most pressing challenges and opportunities. Currently, nGenera offers three core products:

nGen Leadership gives companies the tools to understand, orient, define and plan their company’s transformation into a Next Generation Enterprise. Capabilities include Enterprise 2.0 training, leadership development, management chain automation, strategy on demand and simulation on demand, all powered by Web-based software.

nGen Talent enables enterprises to identify, source and retain key resources anywhere in the world, and to provide an attractive, compelling work environment for the new workforce. Major capabilities include recruiting and on-boarding, learning and development, performance management, total compensation and collaborative culture.

nGen Customer gives companies the means to turn customer insight into compelling, differentiated products and services – to co-create complete customer experiences. Key capabilities include customer experience assessment, emotion mining, community-driven innovation, customer experience design on demand, multi-channel interaction, knowledgebase management, and Web monitoring and analytics.

Do Big Money Bonuses Really Increase Job Performance?

April 22, 2008

I came across an interesting study in the “PsyBlog” about the impact of large bonuses on job performance. In this experiment, professor Dan Ariely went to India and recruited [poor] local people to accomplish several tasks, offering a performance bonus equivalent to up to a month’s salary. In 8 of the 9 tasks, the promise of a large bonus significantly decreased people’s performance.

The summary of the paper on the PsyBlog seemed a bit counter-intuitive. Most companies around the world would most likely not have some flavor of a pay-for-performance program if a bonus was actually decreasing performance.

So what is happening? On one hand, I think that if the bonus is very high, participants could have been really stressed out about the task and not performing as well because of that pressure. It is also possible that performance decreased because participants did not actually believe they would receive the bonus for a variety of reasons – sometimes when only a certain number of people can receive the max bonus, participants feel they don’t have a chance to perform at the required level and behave accordingly. Even if there is no maximum number of participants who can receive the largest bonus, the performance required to get the bonus could be perceived as being unattainable or not worth it.

The relative value of bonuses versus the effort required to obtain them is another factor which could affect the participant’s behavior. If working exceedingly hard is required to get the max bonus but that only a moderate amount of work is required to get a bonus which is only slightly inferior, many participants could be settling for the smaller bonus.

I spent some time looking for other papers on this topic and found a few other possible explanations. The “crowding out” theory supports the hypothesis that incentive pay decreases employees’ motivation to perform up to abilities. The explanation generally given for this is that the introduction of an obligatory amount of output to produce is often considered by employees as a signal of distrust. The papers I found discussing the crowding theory are: Titmuss (1970), Rothe(1970), Gneezy and Rustichini (2000), and McNabb and Whitfield (2003). Papers by Kruse (1992), and Ichniowski and Shaw (2003) “prove” that incentive pay positively affects employees’ effort.

As for me, based on my own observations and “empirical evidence”, I will side with Kruse, Ichniowski and Shaw to say that incentive pay (if used properly) can positively affect employees’ performance.

Ask the Expert – Pros and Cons of Variable Compensation

March 14, 2008

I recently asked several sales performance related questions to David Cichelli, author of the popular book “Compensating the Sales Force“, a national expert in sales compensation and the sales compensation practice manager at The Alexander Group. He was kind enough to share his expertise with me, and to allow me to share his insight on this blog. Thanks again David for your time.

Question: Several readers end up on my blog by trying to find an answer to the pros and cons of variable compensation. You begin your book with an affirmation that ‘sales compensation works’. What are your thoughts on the pros and cons – the rewards and benefits versus the risks. If it is a fact that pay for performance works, why are not all companies adopting such a system.

Answer: Companies use a wide variety of incentive compensation programs for a diverse array of jobs. Incentive compensation continues to be a mainstay of contemporary management practices. Sales compensation holds an almost legendary status as an expected part of the employment equation. However, sales compensation is a management choice. It’s neither a birthright nor a requirement. In fact, in my view, sales compensation programs are cross elastic with supervisory practices. Frankly, a well-supervised work force does not need an incentive program to be effective, and that observation is true of sales compensation. But, its use is widespread and prevalent. Almost 85% of all companies with sales personnel provide a reward program tied to sales results. A famous—if somewhat inelegant—argument was made against incentives by the author Alfie Kohn in his book “Punishment By Rewards.” But, generally, most sales management teams believe that incentives help bring focus to the efforts of a dispersed workforce…the sellers of the company.