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.

Julien

Upcoming Sales Performance Analytics Webinar, July 22nd 1pm Central

July 10, 2008

There is a very promising webinar coming up, hosted by OpenSymmetry and presented by Greg Livengood.

I particularly wanted to promote this event because I worked with Greg for several months on an Accenture project, and I know that when it comes to Sales Performance Analytics, he REALLY knows what he is talking about. Expect a very insightful presentation by a friendly, dynamic and easy-going individual who built a world-class reputation as a sales performance analytics leader and pioneer.

Event Description:

With the economy in a downward slope, sales leaders more than ever need ‘Sales Performance Analytics’ and efficient ways to proactively identify potential problems and opportunities.

Most companies have the information they need to improve sales performance, however, many sales managers are challenged with accessing and correctly interpreting the data.

Greg Livengood, Senior Business Analyst with Livengood Consulting Group, will discuss how to leverage the 5 best practices in sales performance analytics that can boost your sales force performance.

• Visualize Sales Performance
• Develop Corporate Alignment
• Simplicity
• Build a Self-Sufficient Solution
• Engagement at the Executive Level

Click here to register.

ICM Implementation Offshoring Pros and Cons

July 8, 2008

Projects can be partially or completely outsourced. The outsourcing can be done partially or entirely offshore. The most common scenario I usually encounter is when a company outsources a project to a consulting company. The consulting team usually works on-site, and often have several resources located offshore. There seems to be a trend for consultant who used to work on-site, to be allowed to work remotely.

As I pointed out, many EIM/SPM solution vendors and consulting companies will discuss the benefits which can be achieved by outsourcing parts of an Incentive Compensation Management implementation. I agree with these benefits, but there are also many challenges which must be carefully managed to be successful.

Working with an offshore team through a consulting company reduces a lot of the risk; you don’t have to worry about contracts, quality, infrastructure, intellectual properties, etc. Furthermore, consulting companies usually have a good relationship with their offshore arm.

Setting aside all ethical and macro-economics discussions about offshoring, here are some of the main pros and cons.

Main offshoring benefits:

Labor: Skilled labor can be very expensive, but it can especially be very difficult to find. Even a large consulting company may have problems finding an available consultant with the right skill set.

Cost: Offshore locations are usually developing countries where labor is significantly cheaper.

Speed: When a project is well managed, more people usually mean a more aggressive schedule.

Work 24/7: For North-American people, working with a country such as India makes it “easy” to work around the clock.

Some of the challenges to be managed

Communication and language barriers: Most of us have some experience working with team members who are located somewhere else, and have faced communication challenges related to this. Offshoring brings another layer to the communication challenges, a topic to which I will dedicate another article.

Coordination: Because of all the communication challenges, complex coordination activities become even more complex.

Cultures: Each culture have their own principles and values. Not being mindful of cultural differences can lead to big problems.

Cost: Savings could be only marginal, especially with rising labor costs in some countries (especially in India)

Quality: This is a challenge for on-site and offshore team alike. Offshore teams are usually very good at achieving very high quality standards. However, quality is still perceived as a higher risk with offshore teams.

Security: Quality is another concern most companies have, especially when dealing with confidential employment information. There are very secure mechanisms to collaborate, even across continents, but security is a topic which requires particular attention.

Key to Success

In my opinion, the key to successfully leveraging an offshore team is in:

  • Having a good manager and team leads experienced with offshore projects
  • Having A good [formalized] communication strategy, “hand-off” mechanism between onshore and offshore teams and processes in place
  • Having a good understanding of which project components can be tackled “at night” by the offshore team and handed to the onshore team “in the morning”, and vice-versa.

Outsourcing and Offshoring your SPM Implementation

July 6, 2008

I’m planning to write several articles related to sales performance management outsourcing and offshoring. Let me first define what outsourcing and offshoring means.

Outsourcing: This is when you subcontract the design and implementation of your compensation plans.
Offshoring: This is when you subcontract (typically parts of the implementation) to another country. India and China are well known IT offshoring destinations, but there are many others.

One of my first post on the blog was about in-house development versus outsourcing. Most SPM implementations I see follow one of these patterns:

Pattern 1:
An implementation partner is selected – this can be a vendor agnostic implementer, or the product vendor. As part of their submission, they propose the use of an offshore team to reduce the cost of their bid, or to be able to “go-live” more quickly.

Pattern 2:
An implementation partner is also selected. There are no upfront discussions about offshoring any work. The concept of an offshore team is brought up if the project falls behind schedule.

Upcoming Topics
The reality is that most vendors and consulting companies use offshore teams. I will write about the pros and cons of offshoring, the associated risks, the challenges it will add, the importance of communication strategies, and a few personal stories of managing offshore teams.

I will also write about which aspects of the implementation can be “offshored” more easily. The good news is that with an SPM implementation, once the design phase is completed, there are different way to “break-out” work in different components which are not on a critical-path to each other.

Finally I will answer several questions I have received on this topic. If you have any questions, please don’t hesitate to send them to me.

Six Disciplines Execution Revolution Book Review

July 2, 2008

I spend quite a bit of time every week reading books; technical books, business books, compensation books… But over the last few weeks I have mostly been catching up on classics. This is the only “excuse” I have for not blogging about a new book called Six Disciplines Execution Revolution, by Gary Harpst which was released just yesterday.

Gary is the founder and CEO of Six Disciplines, offering small to mid-size companies a business excellence program based on six business disciplines: strategizing, planning, organizing, executing, measuring and learning. Gary’s previous book, Six Disciplines for Excellence, focused on those disciplines and strategy. His latest, Execution Revolution focuses on the biggest business challenge: strategy execution in the real world.

Gary told me how business leaders often try to solve the wrong problem rather than addressing the root cause issues. He said that by fixing the right problem, the solution to every other problem will be more obvious. Without execution, strategy is useless. This book provides a concrete framework to put the plan in action. This is particularly challenging because strategy only relies on a few people for a short period of time every year. On the other hand, execution relies on everyone in an organization, all the time.

Achieving excellence is also tricky. Gary said that by solving current issues, an organization will grow, which will cause even bigger challenges. “Excellence is a journey – not a destination.”

Gary explained to me how business methodology was comparable to IT methodology; you have to be able to repeat a process consistently over the long term to be successful. In my experience, many book in this category read like a text book. Execution Revolution distils concepts, frameworks and real-life examples which can be applied by small businesses.

I was particularly interested by this book because not only does it talk about how a business can achieve excellence, it also focuses a lot on performance management. Throughout the book Gary acknowledges the importance of performance measurement, performance measurement, business intelligence and analytics, and performance management systems.

Overall, this book is straight to the point, well-organized, and as the title suggests, focused on execution. Order it today.

SPM News – Big News for Callidus, Varicent and OpenSymmetry

June 26, 2008

Varicent Software Announces Strategic Partnership with OpenSymmetry
Varicent Software, an innovator and provider of the only comprehensive application for sales performance management (SPM), recently announced a strategic partnership with OpenSymmetry, a largest independent consultancy specializing in sales performance management.

Other partners of OpenSymmetry include Actuate, Callidus Software, nGenera, Oracle, Sungard, TerrAlign and Xactly.

Callidus Software Broadens Performance Management Capabilities with Introduction of TrueTarget
The new SaaS-based software module, TrueTarget™, combines SPM and Employee Performance Management (EPM) capabilities to deliver Pervasive Performance Management (PPM) across the entire enterprise. The concept of PPM offers a single, business-wide, pay-for-performance solution for companies.

Pervasive Performance Management goes beyond standard incentive compensation management and includes objectives alignment, goal management, bonus allocation and employee evaluation.

I could be wrong, but as far as I know the only other major vendor currently offering a similar end-to-end solution is SuccessFactors. [Disclaimer: I have not seen Callidus TrueTarget or any of SuccessFactors’ solutions yet]

Don’t Automate Chaos

June 25, 2008

I came across an interesting article by Roy Altman: Avoiding “Gotcha’s” – Tips and Techniques that Drive Successful Implementation Projects.

Roy describes some of the common pitfalls that can undermine an HR System implementation project, including the importance of getting buy-in, of planning early, of knowing your organization, of not reinventing the wheel, etc.

There is one point which I haven’t talked about on this blog so far: Don’t Automate Chaos.

If your processes currently result in chaos, and you automate them, you end up with automated chaos.

That’s something a lot of companies implementing EIM solutions don’t always seem to understand. Many Compensation System implementations are subject to delay, budget issues or even failure because processes are not re-examined. Implementing a new large-scale system should be seen as an opportunity to redefine and improve these processes.

In a typical Customer Relationship Management (CRM) implementation such as SAP or PeopleSoft, business processes generally have to change to be in line with the application. However in the case of an EIM solution, it is easy to make the mistake to try to implement the system in the same way it is currently working… and that can result in automated chaos.

When planning your implementation, set some time aside to map out existing processes and logic to assess if/how they can be improved. Better processes should result in a higher quality implementation which will fulfills business requirements.

Sales Performance Management Glossary

June 24, 2008

There is a lot of very specific terminology used in the world of sales performance management. Different vendors may use different terms, so it is important when starting a project to make sure everybody understands what is what to avoid any confusion.

Callidus has an excellent lexicon of incentive compensation terminology. Here are some important terms used frequently:

Bonus: A performance-based reward or payment to an individual, team, business unit, or work force, made in cash, stock, options, or other form.

Calendar: A set of continuous, non-overlapping periods that define when a compensation plan is in use.

Commission: One type of incentive, often expressed as a percentage of sales, gross margin or dollar amounts per unit sold.

Credit: The amount of credit received for making a sale, where revenue is usually the measure for sales credit, although sometimes the number of units or some other measure is used.

Draw: Cash payment advanced against future income. There are two types: non-recoverable and recoverable.

Formula: A method of calculating compensation that relates pay opportunity to performance achievement, generally falling into one of three categories: 1) Unlinked incentive formula; 2) Adjusted-value incentive formula; and 3) Linked-incentive formula.

Lookup Table: Multi-dimensional: Created by the user to store values for use in rules and formulas.

Participant / Payee: Person participating in your company’s variable compensation program.

Plan: A collection of rules that specify how to compensate the participants assigned to that plan.

Position: Defines a specific, unique job.

Quota: A predetermined sales performance goal, expressed as a percentage, percentage change, in absolute numbers, or in units sold.

Quota Attainment: The percentage calculated from dividing the amount of sales credit earned (represented by a performance measure amount) and the quota for a performance period and participant.

Rate Table: One-dimensional: A lookup table used for calculating commissions. The first column in the table represents ranges of quota attainment. The second column represents the pay-out rate for transactions within that range.

Rule
: A way to filter and calculate in the form of an “if-then” statement. The “if” contains a Boolean expression that selects objects from the database (for example, which transactions to use). The “then” part contains formulas that calculate and save new values.

SPIF: Acronym that stands for “Sales Promotion Incentive Fund.” SPIF is a loose term referring to an on-the-fly addition to the compensation plan used to motivate the sales force in a particular way by providing additional sales credit or payment for certain types of sales.

Territory: A way of defining which transactions a participant should be credited with. It is usually a geographic area, but could also be an industry or a specific set of customers.

Title: Occupational grouping, such as engineers, systems analysts, etc. Titles are used to group similar positions related by job function across the organization.

Transaction: The original sales data, wich includes sub-line data on an order.

Variable: A placeholder in a rule or formula for a fixed value, rate table, or territory.

Stick to a Naming Convention – It’s not Rocket Science!

June 23, 2008

Wikipedia has one of the best definitions on the net for a “naming convention”: A naming convention is a convention for naming things. Awesome!

In the Enterprise Incentive Management and Sales Performance Management world, this means naming all plan objects in a consistent way. Naming will vary from tool to tool and there is not a single set of best practices that can be followed. Most vendors provide some recommendations, but it’s up to the implementers to decide which naming format will be used. Since there is no generally accepted “convention”, it may be more accurate to call this a naming strategy.

Why is sticking to a naming strategy important:
Incentive Compensation Management is not difficult. What makes ICM systems complex is the volume of plan elements (plans, rules, formulas, tables, variables, etc..) A large implementation can quickly become a jungle if not everybody agrees on a common way of naming different objects. Not only will it make building and testing the system easier, a good naming strategy will especially be important once the original implementation team is gone and others have to understand the logic of the system. Finally, aside from clarity, a naming strategy will also help search for plan components more efficiently.

Choosing a naming strategy
As I said, since all applications do not share the same objects, and also because each application works differently, I cannot provide a silver bullet for all situations.

Generally, I try to stick to these principles:
  • Make the name descriptive
  • Use abbreviations to identify object type
  • Begin object name with its object type abbreviation

For example, a credit rule could be called CR_AE_description. Some systems could have a direct credit rule and an indirect credit rule; in such case my abbreviation could be DC and IC instead. In some systems I may want to prefix a formula with F (if all objects can be displayed in the same view), if not, then it would not be necessary to explicitly say that a formula is a formula.

Naming of output is also important: The importance of naming an object may be obvious, but in the case of rules, the output of such rule should also be named carefully. A result name that makes sense can often by “Rule name _ result” or something similar.

Getting Started…

It is important to define a naming strategy early on in the project – before any detailed / technical design documents are created. The strategy should be illustrated on one page to enable the implementers to quickly see how to name the different objects. This “page” should be distributed to everyone involved in the implementation and be given to new joiners as well.

The first steps in defining the naming strategy is to find out if the application being used has a set of best naming practices or standards. In the case of an upgrade, it is important to stick to previously used naming strategy.

Happy Naming!