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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.

The Economic Truth About SPM

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Recently, I posted a blog looking back at the evolution of SPM, from the automation of sales commission calculations through today’s sophisticated sales performance management solutions. The evolution began with a tactical efficiency improvement tool and advanced to a strategic planning and sales force efficacy platform with applications that can enable, manage, analyze and plan in support of forecasting to corporate objectives.

So what does all this amount to? For one, spending 6 figures or more to implement a SPM solution is not a trivial matter. There is relative parity among the software vendors when it comes to software licensing fees in competitive evaluations, assuming of course that it’s an “oranges to oranges” comparison. Which is another reason why it’s critical to understand your requirements and align them to must-have functional attributes. On the other hand, the cost of implementing the software, along with associated support services is another story, and can vary greatly.

Over the last 15 years I have seen implementation estimates for the same project vary by 6 figures between vendors and sometimes between the vendor and its partners. One example is a project where the services estimate exceeded $450,000 across 2-3 vendor solutions for less than 500 payees. With a cost and variance like this, if I were responsible for the budget, I would kill it, and that is precisely what happened. Uncertainty amplifies risk and risk without mitigating factors, become nullified decisions.

Assuming the software will be delivered as a service via the Cloud in a subscription model, most organizations will itemize the software as an operational expense or OPEX, as most in this business are aware. Implementation services are typically capitalized, meaning a capital expense or Capex. Capex budgets are a battle for line item allocation and this is where a lot of SPM projects can be delayed or canceled. Renting software is one thing; implementing SPM software with 6 figure price tags, or more, plus paying for ongoing support, can require political stewardship and EMOTIONAL buy-in, high up.

Where’s The Beef?

When the evaluation of SPM software fails to deliver a predetermined value quotient, e.g., emotional buy-in, the project is prone to losing funding or getting bumped in favor of another project. One of the larger detractors with SPM is the lack of perceived value, which is overshadowed by the risk assumed by senior leadership. Financial models, hurdle rates, total economic impact, ROI and so on, become less of a factor if the software cannot provide ample evidence that it can help executive leadership capitalize and execute on corporate strategy. SPM is not viewed as a critical path at the ‘C’ suite level because the trajectory of the strategic outcome can be perceived as falling short of the goal line.

SPM software demonstrations, proof of concepts or workshops are not delivered with this these things in mind. Most vendors focus on either the tactical gains or just the performance improvements for sales operations and compensation teams. They fall short on demonstrating the overall impact to sustainability, growth and the financial benefits to the company as a whole. RFP’s can also do an organization more harm than good because many times they fail to synthesize the collective business benefits and outcomes of implementing a SPM solution. Rather, RFP’s can focus too heavily on the technical and functional attributes that are aligned with efficiency gains and short range performance improvements.

At a recent SPM conference, it was mentioned by a top tier analyst firm, that out of an estimated 250 SPM related vendor evaluations in 2015, 75% ended in a no-decision. That equates to a mere 63 projects out of 250 that made it to the vendor selection stage. The point being, a no-decision is usually linked directly to risk and the lack of value perceived by senior decision makers, the economic buyer being a key member of that team, among others. In addition, of these 250 evaluations, over 100 were RFP driven.

One Possible Financial Option to Help Mitigate Risk

A unique concept being offered by at least one SPM vendor is bundling the software licensing fees in a standard subscription model (SaaS) and the implementation services as a single monthly payment. For the first 12 months, customers can pay off or pay down implementation costs together with their software subscription fees. After 12 months, the customer will have either paid off the services or would carry a balance to be paid under extended terms.

An approach like this does a couple of things. First, it commits the vendor to perform against all SLA’s and manage the implementation to as close to perfection as possible since their implementation fees are at risk over an extended period of time. Second, it mitigates risk for the customer, allowing a predetermined expense to be amortized, thus having predictable costs associated with each phase of the project against a capital budget.

I think this is a model that has the potential of catching on. Perhaps the reseller channel should take note, provided they are financially sound, since most are private companies and not pressured by Wall Street and the SEC. It would also allow the partner to deepen their relationship with customers, leveraging experience working with customer data, opening future opportunities to provide ongoing support, managed services and more.

The cost of implementations is not going down. While some vendors tout rapid implementation times and a faster time to value, the reality is, more time will be required to achieve a full, go-live production environment.  This includes administrative and end-user training, parallel testing and fixing initial bugs uncovered as a result of early software testing, both in the software itself and in workflow and design. In fact, like many other software implementations at the enterprise level and even some smaller, SPM implementations never really end, it’s just the beginning.

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.

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  • Data Quality for SPM Operations

    SPM operation, especially the Incentive Compensation part of it, is all about handling data. Poor data quality can significantly
    drive up the operational costs and cause the sales team to lose faith in the calculations. Good data is essential to producing correct pay calculations and reports, allowing sales team to focus on delivering sales, rather than dealing with discrepancies.

    But, having good clean data is not enough. SPM operations are time sensitive, and the data across various underlying systems is every changing. Hence proper data synchronization (across business and IT systems) is important as well.  Different Reporting Cycles, Payroll Cutoffs, and Period specific Adjustments can’t be handled accurately, until data is clean, and well synchronized.

    The following check list will help guide the decisions to deliver consistent and accurate data to the SPM system:

    1. Choose the data source carefully

    Companies that have a single source for revenue and customer sales data are more likely to have good data quality, thus generating the most accurate reports. Data quality suffers when companies have multiple production systems and data repositories that are managed by multiple teams.  If these systems and repositories are not in sync because of different adjustment and reconciliation processes, the data quality will be poor.  To insure integrity of the SMP reports, these companies must design requirements that sync up the various data sources and utilize the same data that is used for all other company reports.

    2. Consider full data loads vs. incremental transactions

    Based on the cost and time it takes to process sales transactions, the most common transaction loads are incremental. Because companies make periodic payments to Sales, the SPM data must be date-stamped and stored. This insures that future transactions do not alter or compromise the historical values previously used for pay calculations. Many core business systems provide the infrastructure to load incremental data without compromising the historical data.  Companies with known data issues however, may resort to full YTD data loads prior to the close of each pay period.  Still others still, design compensation calculations that factor the YTD data changes into the current pay period.

    Companies should decide on the type of data load best suited for them, based on factors impacting their sales crediting policies such as, type of business, number of transactions, and volume of revenue adjustments.

    3.Determine the impact of adjustment transaction

    Adjusting sales results involves different types of transactions, including contract revisions, cancellations, discounts, claims, and pricing revisions.  Three important principles should be followed to ensure good SPM data quality:

    • SPM data should be loaded in sync with adjustments posted in the core systems and those posted to management reporting systems
    • Do not attempt duplicate postings of core data adjustments directly into the SPM data loads. This could be a costly move.
    • Create a separate category for “SPM Only” Pay For Performance adjustments (small volume critical pay adjustments) that can be posted within a specific pay period for correcting payouts. By year end all final adjustments will be posted to the core systems and these SPM adjustments will show a net of zero.

     

    4. Reconcile with core systems before running compensation calculations

    Even the best designed data acquisition and validation processes need to be reconciled with the core system before pay calculations are executed. This is easily done by reconciling the SPM data loads with core system results during the period-ending data load process.  Make sure that the revenue and other key metric values are reconciled to the same reporting periods, so that SPM calculations are in sync with other business systems.

    5. Provide an easy way to create reports and data files for sales and support teams

    Add customized reports and data extracting options, specifically designed as inquiry tools, to the SPM system.  This will enable Sales Support and others to easily create reports whenever needed.

    6. Retain “locked” multiyear data available for SPM analytics

    The ‘locking’ functionality in many SPM systems allows access to detailed, multiyear performance data and provides a major advantage when producing sales team compensation analytics, internal pay plan performance trends, and business performance metrics.

    In summary, the first priority in the development of a SPM Pay and Performance reporting process is to design requirements that will produce superior data quality. This includes dictating that the SPM data is in sync with your company’s sales results reporting and business metrics.  Poor data quality will lead to a lack of confidence in the SPM system and Operations team, creating unease and discontent among your Sales team.

    Managing sales compensation programs takes planning; focus and a daily drive towards the organizations sales performance management objectives.  To discuss this further feel free to email us at info@spectrumbiztech.com.

    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’s 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.

    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.

    California Assembly Bill AB 1396

    Happy New Year!

    For those of you who deal with California based commissioned staff, 2013 brings in a new challenge – AB 1396.

    This new California law, effective January 1, 2013, requires that employers paying California based employees on commission basis must enter into written commission contracts with those employees. Key requirements of the law:

    – Employer must have a written contract with the employee stating how the commission will be calculated and paid.
    – Employer must provide the employee a copy of the contract and obtain a signed acknowledgement from the employee.

    FAQ
    Q 1. What is AB 1396

    Former Labor Code section 2751 required out-of-state employers to have written contracts with their California employees who are paid on a commission basis, including details regarding method of computing and paying the commissions. The law was held to violate the Commerce Clause of the United States Constitution in Lett v. Paymentech, Inc., 81 F. Supp. 2d 992 (N.D. Cal. 1999), because it treated California based companies more favorably than employers who had no fixed place of business in California.

    AB 1396 corrects this defect in the law by imposing the same onerous requirements on California employers. By January 1, 2013, both California and non-California-based employers must have written contracts with employees in California who are paid in whole or in part on a commission basis.

    Q 2. Our company’s HQ is not in California, but we have a few sales personnel based there. Does AB 1396 impact us?

    If you have employees based in California, then AB 1396 requires you to have written contracts with those employees. It does not cover employees who are based out of California. To determine if an employee is considered as based in California, one can refer to the EDD Guidelines

    Q 3. Where can I see the actual text of AB 1396

    Well, the actual text in the bill is not very descriptive, but since you asked here it is. – AB 1396

    Q 4. What are the timelines to comply with AB 1396?

    The text in the law states that it goes in effect on Jan 1st, 2013. In terms of operations and execution, it is safe to say that your company should obtain the signed copies of commission contracts from your California employees, prior to paying them any commission in 2013. You may also want to refer to your legal team.

    Q 5. What about digitally signed contracts?

    While legal opinions may vary, there is no language in the law that stats that employer must collect hand signed contract from employee. So if you have a digital signature system like DocuSign, it should meet the requirement.

    Q 6. We use an SPM package such as Callidus or Varicent. What should we do?

    Most SPM systems have the functionality to prepare, distribute and track Plan Documents. You may just need someone to configure the tool and roll out this functionality.

    To discuss this further feel free to email us at info@spectrumbiztech.com.com or call us at (408)-813-1443.

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  • SPM Industry News 11/05/2010

    Not many happenings in the industry this week.

    There is an upcoming event from Callidus Software. Click the link below for details.

    Are You Ready for 2011? How Best-In-Class-Organizations Will Be Managing Sales Compensation

    http://tinyurl.com/2f65ued

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  • After struggling for months you finally have an SPM package deployed in your organization.  All of your commission related business processes are finally automated…or may be not!

    One area of commission processing that SPM packages fail to fully automate is – Territory Assignment (TA). The process of assigning the sales order to an appropriate territory or sales rep(s) often ends up being done outside of SPM packages.  The scope of manual work varies across companies and industries.

    WHO needs Territory Assignment?

    Companies which have one or more of the following characteristics

    • A large Field Sales Operations
    • Network of channel partners, VARs, Distis, Resellers, Retailers etc.
    • Heavy Order Volume
    • Complex Territories based upon Named Accounts, Products, Zipcodes, Partner Name etc.

    Hi Tech and Pharmaceutical industries are some of the very common industries that fit the above profile.

    WHY Don’t SPM vendors have a solution for TA?

    Most SPM packages offer a vanilla version of Territory Assignment but not a full blown solution. A lot of customers, especially in the Hi-Tech worls, are still using spreadsheets. Some of the reasons that come to mind as to why SPM vendors do not offer an integrated Territory Solution :

    • Their main focus in the commissions engine and they do not want to get into the nitty-gritties of Territory Management and Assignment.
    • They should ideally be receiving data from a TA system and want to keep it that way.
    • TA is a back office operations problem, that is solved (to some extent) by xcel spreadsheets and human bodies.
    • Just a few industries (hi-tech, pharma etc) probably have the need for a dedicated and robust TA engine. For SPM vendors, the ROI may not be tangible.
    • A smart TA engine has to deal with data cleansing and de-duplication for Account Names, Addresses and other such data. It is best solved by leveraging the services of specialized third party vendors (like D&B and Infonow) and adds to the overall complexity of the solution.

    Where does Territory Assignment fit in the BIG PICTURE?

    So, what do you think? Does it make sense to integrate Territory Assignment within an SPM system or is it better left stand alone?

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  • 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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