incent360

Blog for Sales Performance and Commissions Professionals

Archive for the ‘Plan Management’ Category

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Sales Performance Management (SPM) involves multiple business processes, and hence, the procurement and implementation of an SPM Tool (such as Callidus, IBM, Xactly) requires a significant amount of planning and effort.

The planning must start long before you schedule vendors demos. There is no point in conducting vendor demos if your organization is not yet prepared to travel the road towards SPM automation. So how do you go about evaluating your preparedness?

To determine your organization’s readiness for an SPM tool, here are the top 10 questions you should answer:

 

1. What is the Business Justification?

The answer could be Cost Savings, Enhanced Reporting, Operational Efficiencies, Auditability, Calculating Payments or something related. Whatever it may be, if you can’t come up with a couple of strong business justifications, you will find it difficult to make a business case for the tool. Though it doesn’t all have to be about the financials, you have to be ready with a worksheet that shows the numbers. To learn how to build a business case, here is a link to a webinar that could be very helpful to you: http://bit.ly/2pvd1Ts.

2. Are the Executives on board?

Have you discussed your plans with your executives? Do they understand the high level budgetary needs for such a project? Do you have their verbal nod for a ballpark budget?

If your executives aren’t okay with the estimated budgets, maybe you have gotten ahead of yourself. Save yourself some time and initiate the vendor demos only after you see your executives warming up to the idea.

3. Are Compensation Plans Stable?

The most common reason for SPM implementation failure is that the compensation plans are in a state of flux, sometimes even changing while the implementation is in progress. If your organization’s comp plans are still going through significant changes because of evolving market landscapes, you will have a tough time keeping your SPM implementation on track.

If this is the case, you are not ready for an SPM tool. And yes, when you are told that the tool can handle all future changes without any time or effort, take it with a grain of salt.

4. Do we have enough Time?

From vendor demos to go-live, SPM projects will take no less than 4-5 months. If you are too close to the beginning of the new Plan Year and the deadline for Pay file is already in sight, you have probably missed your window of opportunity. If you decide to move forward at this point, you will be scrambling to move fast, thereby compromising the quality of your decisions, and creating a huge risk to the project overall. You are better off planning a mid-year rollout, which will have its own challenges, but at least you have time to plan for it.

 5. Are Business Processes Mature?

When the organization is growing rapidly, HR and Finance are constantly tweaking the organizational framework. For this reason, or maybe due to a recent M&A, if the processes and policies in the organization have not yet been solidified, it is difficult for the implementation team to configure the new tool.  A lot of time and effort would go to waste in changing the tool configuration again and again.

For example, if the new hire draw policy is changing every few months, the SPM tool can’t really be successful.

6. Do we have IT Systems providing Reliable Data?

SPM tools can’t operate in a vacuum. If you don’t have HR systems providing reliable Payee data or ERP systems providing sales data, you will have huge challenges with the SPM tool. Garbage in, garbage out. For instance, if new hire notices are coming to the commission administrator on Post Its, you are not ready for an SPM tool. You must first invest in HR tools and processes.

7. Is IT Leadership ready for one more Tool?

SPM implementation projects require IT budget and resources. If the IT team has resource constraints, or there is another large IT initiative, such as ERP upgrade planned for the year, then IT will not be very happy about supporting an SPM implementation. A quick synch up with your IT leadership would help ensure that no such major roadblocks exist.

8. Is Cloud OK?

Almost all major SPM tools are now available only as SaaS solutions, where the software is hosted in the vendor’s Cloud. What that means is, if your organization has a strong preference for On-Premise solutions, your choices of vendors becomes very limited.

It’s better to clarify with your business leaders if Cloud solutions are an acceptable option. If not, knowing the roadmap for all software vendors, you may want to abort the idea of packaged solutions or wait for your organization’s mindset to change.

9. Do we have Resources to support the Project?

After the tool is implemented, you may be able to cut the headcount in commission operations. But initially, you will have to dedicate a great deal of time and energy in evaluating and implementing the tool. If you are unable to free up any of your current resources and can’t find the budget to hire external consultants, it will be extremely challenging for you to get this to the finish line.

10. Is there an M&A on the Horizon?

Last but not least, if there is an M&A on the horizon, it’s better to wait on an implementation project. The new company may already have an SPM tool, and it is almost guaranteed that your business team will want a single SPM tool catering to the joint salesforce.

 

If you need further assistance in getting you prepared for an SPM project, please contact us at mktg@spectrumtek.com.

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Sales Performance Management, A Look Back

Back when I started my professional selling career over 35 years ago, the term sales performance management meant sitting though weekly sales meetings and performance reviews every 3 months. Sales performance management in those days had little to do with analyzing productivity, team performance, sales enablement or incentive compensation, except, if you weren’t performing, i.e. hitting your numbers, sales management took the keys to the company car in return for your last check.

24 Carat Gold Calculators

From the early to mid-90’s, sales compensation management software started to hit the market. There wasn’t much science or empirical data to drive business outcomes based on historical or regression analysis, just a more streamlined and efficient calculator of sales commissions. This software was sometimes referred to as a ‘24 carat calculator’ because of its overall cost relative to its utility. A lot of IT organizations began building rudimentary commission calculators and reporting tools more cheaply. In fact, my team worked with our IT folks at Textron Systems to build such a proprietary system in 1990 using Lotus Symphony (before IBM) on Unix / Sun Solaris.

From SCM to EIM to ICM and Now SPM…

Over the next decade or so, sales compensation management (SCM) as it became known, morphed into EIM or enterprise incentive management as finance looked to increase its focus, and control, over incentive spend relative to performance. Then, by the early to mid-2000’s, incentive compensation management (ICM) became a more common definition as incentive compensation management moved across lines of business to now include other forms of incentives, both cash and non-cash for sales and non-sales staff with varying degrees of reporting and workflow.

As the new millennium was nearing the end of its first decade, sales performance management (SPM) became the defining terminology. With advanced reporting and analytics, territory and quota planning, improved workflow and flexible user interfaces, SPM software was now the quintessential tool designed to align sales performance with company goals. Sales operations suddenly had a new face, with new responsibilities and for some, a seat at the table.

From a technology perspective, the adoption of the Cloud (SaaS) and advanced integration technologies made the economics more attractive. The newer generations of SPM software became technically superior over just a couple of years prior. For better or worse, functionality also became quite similar across vendor offerings making vendor selection even more challenging, at least visually.

SPM Software, The Devil’s in The Details and The Requirements

Today, there are nearly 30 software vendors, including the leading ERP vendors, that perform many of the common SPM functional attributes. Out of these 30 software vendors, fewer than 10 are considered to be best of breed SPM software vendors. Of these best of breed vendors, most can satisfy at least 70% to 80% of the typical functional requirements found in technically challenging RFP’s. However, any one vendor can fall short on reporting, analytics, workflow, territory & quota planning, data volumes, managing overly complex compensation plans – the list goes on.

This is why it is imperative for stakeholders to take ownership of defining, gathering and documenting requirements for their particular line of business. The most successful implementations of a SPM solution occur when line of business owners are directly involved from the onset, executive sponsorship is established and realistic project goals are set. SPM projects are like ERP projects in some ways; there are a lot of fingerprints touching various segments effecting a lot of people, the way they work and the financial impact to the company. SPM is not a compartmentalized nor a departmentalized tool.

Human Capital Management Software

Human Capital Management (HCM), Human Resource Information Systems (HRIS) and Human Resource Management Systems (HRMS) also have variable compensation management capabilities. A few have rudimentary sales incentive compensation management functionality but none can manage the volumes of transactional sales data, perform complex sales crediting, perform simulated scenario modeling of plans, territories and quotas then analyze this data for outcomes against a prescribed forecast. That is a fundamental difference between HR tools and SPM, currently.

Many SPM tools can also calculate bonuses, assign and measure MBO’s while enabling scorecard functionality, a core function for HR tools. But, they cannot perform many of the core workforce management functions such as salary administration, equity or stock distribution, deferred compensation and merit pay, together known as total compensation or total rewards. In addition, HCM tools provide a unified view across all employees that can analyze role-based performance, measure skill levels and prescribe best-fit candidates for a particular job and provide a holistic view of the total workforce.

If a top tier HCM or HRMS vendor were to acquire a top tier SPM vendor, or, the other way, around, then integrating the two successfully, while offering either as a stand-alone solution or together as one, that would be a market moving game changer. I’m surprised that hasn’t happened up to this point given the speculation and rumors that have circulated throughout the industry for years. I think further consolidation of the SPM market is inevitable, which can be a good thing.

About the Author: For more than 15 years, Tom Troiano has been a successful senior sales executive with the leading Sales Performance Management vendors including IBM / Varicent, Synygy (Now Optymyze), Callidus Cloud and Oracle. Throughout these years he has helped 100’s of companies across many industries evolve from spreadsheets and homegrown tools to today’s data driven SPM solutions supported by a strong business case. Tom has been in sales and sales management his entire career. Starting in 1980, where he led a sales team at a small startup that grew into a big sales team while designing his first sales compensation tools.

Author:  George O’Connell

I have observed a wide range of organizational structures for Sales Performance Management (SPM) operations. Compared to any other organizational operation, SPM operations are somewhat an oddball because there is no single department in the organization that is a natural fit to take full ownership. Roles and responsibilities are often undefined and spread across multiple functional groups.  There isn’t a standard best demonstrated structure that fits all businesses. The SPM operational responsibilities are by and large split evenly between the HR, Finance, and Sales Operations teams.

To ensure the most effective practices, the organizational responsibilities should be assigned to the most qualified, and experienced resources available in the organization.  Anticipated business changes, in addition to the existing workload, should be a factor in deciding how to build SPM organization.

If, at any given time, a particular department needs to focus their attention on other critical business issues, they should be excused from SPM’s operational responsibilities. For example, HR may be dealing with high turnover, core HR system installations, or a lack of experienced resources needed to manage programming staff.  Likewise, Finance and Sales Management, and Sales Operations will have their own specific challenges.  In fact, Sales Operations may be viewed as too closely controlled by Sales Management to be appropriate gate keepers for commissions and bonus payments.  Nevertheless, each one of the organizational options can be designed with all the appropriate management controls.

The right resources in any one of the three departments can produce excellent SPM operations results. For most companies, an evaluation of current talent and performance is needed to select the team with the highest probability for success.  Once the dedicated SPM operations group has been selected, it can function successfully under the guidance of any one of the three departments.

The following three steps will help guide a company through the organizational set up:

SPM Advisory Board

The company should setup an SPM advisory board to oversee and approve changes to compensation plans and processes. The approval process will involve many aspects, such as legal issues, HR compensation policy, cost analytics, strategic financial decisions, sales management objectives, systems capacity, security, performance issues, etc.  The senior advisory board should be the governing body that makes the final decisions for all SPM related projects and investments.  A well functioning board will give the SPM operations team clear and timely direction so they can deliver effectively on companywide pay for performance objectives.

The senior leadership group should be comprised of representatives from HR, Finance, Legal, Sales Management, and Technology.  Once the most qualified department is selected for direct SPM responsibilities, the board should monitor the performance of the dedicated team responsible for all SPM operations.  The most senior SPM manager should have a seat at the advisory board meetings.

RACI Chart

Once the SPM organization is formed, the detailed responsibilities and scheduled interaction with the advisory board should be documented.  Every company should put together a RACI chart to outline various functions involved in SPM and clearly define responsibilities and ownerships around these. Sample RACI Chart can be downloaded here. The best SPM organizations have “end to end” process responsibilities–from data capture, vendor management, SPM system design, plan development, pay calculations, testing, and reporting, to on-going support.   Effective management of these end to end processes insures that the SPM team delivers accurate and timely results critical to maintaining excellence in sales performance.

Another important role of the SPM team is to keep the advisory board apprised of systems development, data or calculation issues, company sales payout trends, resource requirements, and all other operational factors impacting pay plans, projects, and cost.

Flexible Staffing Model

SPM operations usually require close interaction with the company’s IT organization, HR payroll staff, Financial Planning, Sales Management, New Product Marketing, and Legal departments.   Due to the quick turnaround requirements, and the impact of revised or new annual compensation plans, SPM is best managed with a flexible resource pool.

Incremental resources from other departments, vendors, or outside consulting firms are frequently required to meet project deadlines.   It is unlikely that a cost effective Sales Operations team can deliver a new compensation plan within 60 to 90 days using only in-house staff and management.  SPM organizational resource needs are fluid, project based, and sometimes seasonal.  The quality and timeliness of the incremental resources are often critical to the success of delivering pay for performance responsibilities.

In summary, org structure for SPM operations is unique for every company. An SPM advisory board can provide guidance and decisiveness. A RACI chart helps clarifying who does what, and creating a flexible staffing model will ensure an effective SPM operation.

About the Author:  George O’Connell has on premise and SaaS expertise in the area of Sales Performance Management (SPM) and Incentive Compensation Management (ICM). His experience includes design, development, operations, governance, and analytics for a company with $2.5 billion in sales to over 500,000 customers.   He has managed SPM operations for a wide range of sales channels including telephone sales, sales executive channels, union contracts, new business start-ups, call centers, third party vendors, sales management plans, and director / sales VP compensation.

“Broken” SPM / ICM Systems

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“Our incentive compensation management software is broken. We need something new.”

Over the past few months I’ve heard that statement and similar sentiments from at least four companies. All were using Gartner defined Sales Performance Management (SPM) “Leaders” ) yet all believed their SPM system was failing them. The companies complained about the lack of flexibility to adapt to their changes and some were moving to manual processes to get commission calculated.

Speaking further with these companies highlighted the same core issue at each firm and it had very little to do with their SPM technology and everything to do with their staffing decisions. For instance, one of these companies had been successfully operating their sales compensation system for over three years. Three years of success and then the only trained person to maintain and operate the system left the company.  Then, much to the company’s surprise, everything came to a screeching halt. The company blamed the software for not being flexible enough and set off to find a new system.

While it’s easier to blame a vendor than to accept responsibility, this company was operating with a naïve assumption that anyone could step in at any time and keep the system running.  IC systems are complex and require the proper staffing, training, and maintenance to keep them operating smoothly. Single points of failure are never safe (would you fly with only one pilot?). Maybe it was the original sales pitch that told them how easy things would be that led them to this point? Maybe it was a short term situation that turned into a long term situation? Regardless, if you want to minimize your risk of a service disruption and make proper use of your SPM solutions, take the following steps.

1. Document
You must maintain some minimum level of documentation. In the case cited above, there was nothing in writing – it was all in the head of the one user. Start with a simple ‘run book’ that documents the major steps in your commission cycle (i.e., data loading, calculations, QC steps, outputs) as well as a Data Flow Diagram. Each cycle, make note of special cases and exceptions and use the history of multiple cycles to guide you to process improvements.

2. Staff Appropriately and Cross-train
It’s important to have skilled people (more than one) supporting your IC system. Companies all too often fail to appreciate what it takes to manage an SPM system well – trusting too much in the tool’s much advertised flexibility. Companies that do this well, acknowledge that this is a specialized skill set and requires people who are adept at managing multiple constituencies and who are able to translate requirements to produce deliverables. Be sure to anticipate and address peak staffing needs as well by cross-training beyond your core support team (for example, you can have the person who is responsible for quota maintenance also learn your ICM system).

3. Stay Current
SPM/ICM vendors are constantly rolling out new features. Pay attention to those and proactively work to incorporate those into your configuration. That means staying on (or near) the latest version of the software as well as investing in training – both base-level training to new staff and advanced training to more tenured staff. Join and participate in local user group meetings and attend the vendor’s national conference (i.e., Callidus’s C3 and IBM’s Vision) each year.

4. Archive Old Components
Be sure to allow for time to archive and remove unused components (rules, data, reports, etc.) from your system to keep as clean as possible. Doing so extends the overall life of your incentive compensation system, keeps the processing speeds faster, and allows for faster configuration changes.

In summary, managing sales compensation programs takes considerable focus and proper staffing. Recognizing and addressing this is critical to its successful operation. To discuss this further feel free to email us at info@spectrumbiztech.com or call us at (408) 813-1443.


About the Author: Dan Ganse has 20 years of deep expertise in the area of Sales Performance Management (SPM) and Incentive Compensation Management (ICM). His experience includes assisting customers in all aspects of enterprise-wide incentive management and brings a unique combination of business and technology expertise to address customers’ incentive management issues.

Spectrum Technologies

Spectrum’s ICM team consists of technology and business professionals with solid expertise in implementing and supporting various ICM packages and Commission systems. Spectrum has been involved in ICM implementations since 2004 and our team has an outstanding track record of successful deployments at several Fortune 500 companies. For more information, please visit www.spectrumbiztech.com.

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