incent360

Blog for Sales Performance and Commissions Professionals

5 Reasons Why SPM Projects Fail

failure-success-300x225

Sales Performance Management (SPM) projects are complex and most don’t complete on time or within budget.  As a specialized SPM services firm, Spectrum has worked on numerous SPM implementations with a variety of technologies.  The following our five of the top reasons why SPM implementations run into issues and our take on what can be done to mitigate those risks.

# 1 – Lack of Executive Sponsorship

SPM projects involve participation from multiple business functions like Sales, Finance, HR, Legal et al.  There is always a possibility of participants losing momentum on project tasks, as they also need to focus on other regular job.  The presence of a senior leader as an Executive Sponsor of the SPM project, who everyone looks up to for directions and guidance, helps in keeping the focus of the team on the project priorities.

Decision making in a multi-dimensional team comprised of mid-level managers is a challenge.  The project runs into time pressure frequently.  The executive sponsor understands the success factors and constraints too well.  With the authority to take quick decisions, he helps aligning the team to his directives and ensures that timelines are met.

# 2 – Poor Project Governance Model

Since multiple functional departments have participants in the project, involving all the stakeholders throughout the life cycle of the project is an absolute necessity.  A consistent, proactive and methodical communication platform ensures that the all the stakeholders are well informed of all the elements of the system that are being impacted during the project.  It is important to form the steering committee very early in the project that lays down a simple and transparent project governance model, identified the dependencies and risks in the project, establish a versatile project plan involving all stakeholder participation and a sound  communication platform that keeps the directives clear.

# 3 – External Dependencies

SPM projects impact multiple functions such as Sales, Finance, Legal, HR, IT etc, and at the same time get impacted by multiple functions.  This puts SPM projects at high risk, especially the projects with long project timelines.

Several external factors like – a new executive, launch of a new product line, an M&A announcement, economic downturn or legal lawsuits, can very quickly bring in significant changes to business processes, incentive plans and resource availability.  The new VP of Sales walks in with new visionary ideas that put the in-flight project back to design phase!  An enhancement applied to ERP system breaks the data interface and so on.

It is important to realize that SPM projects are not happening in silo.  There are lots of dependencies!  While it is impossible to predict the unforeseen, one has to put in a conscious effort to look beyond the horizon and anticipate the factors that may impact the project.  If there are too many changes expected in the near term, you should consider pushing out the project kick off.

# 4 – Poor Resource Planning

Operational and project responsibilities are different, and it makes sense to keep them separate.

Can the driver of the car also be made responsible for engine tune up?  Yeah, maybe, but generally you wouldn’t expect one person to take on the dual role.  However, in SPM projects, we often see the commission operations team carrying on the added responsibilities for supporting the new project, especially testing.  This leads to severe operational conflict with project tasks.

Like any other complex projects, different specialists are needed to be assigned to specific roles.  Bigger the project, greater will be the resource needs.  If it is so deemed that operational team has to be the one doing testing as well, then one has to plan for the month/quarter ends, when operational team would have no bandwidth for the project.  Don’t assume 100% availability.

Planning of vendor resources is also important.  I have seen projects where multiple vendor resources are on-boarded on the project kick off, even though the ground work of the project is not yet completed!  It’s like getting construction workers on the ground when the floor plan is not even approved.  This burns a lot of money over idle vendor resources causing budget crunch for later phases of the project.

# 5 – Testing Approach

Most popular testing approaches are – Parallel Run and Test Case based testing.  Most often there is not much thought given to which approach is best suited for the project.

Parallel Run approach requires running the legacy (or current) system in parallel with the new (or enhanced) system, and comparing the results for a quarter or two.  This approach does not work, if there are significant changes in the plan design and expected results.  I have seen testing resources working arduously to identify and explain the gaps between the two systems.  If the new plan design is very different, or the old system has lots of known issues, then why waste time in doing reconciliation!  In such a situation, test case based approach is more suitable. However, building numerous test cases, test data, and expected results, is a time and effort intensive approach.

One needs to evaluate the two options, and take a conscious decision on which testing approach is most suited. Very often a hybrid approach works much better.  Compare the results with the old system where there are no changes, and build exhaustive test cases for some selected modules.

About this Blog’s Author
Maneesh Gupta is the founder and Managing Partner at Spectrum Technologies.  Spectrum is a Silicon Valley firm providing specialized services in the area of Sales Performance Management Systems since 2006.  Maneesh can be reached at mgupta@spectrumbiztech.com
 

 

By: Dan Ganse, Spectrum Technologies

It’s that time of the year again, the leaves are changing, pumpkin lattes are back, and you’re starting to hear about changes to next year’s sales incentive plan.

You could sit back and wait and for these changes to find you, hope that they’re small and will be easy to make…but if you’re wrong, you’re setting yourself up for long days and a late program rollout.  It would be wiser to seek out these changes now and carefully analyze their impact on the current IC system.

Here are 5 tips that will help plan for next year:

1.  Start Early

An IC steering committee – typically formed with HR, sales, sales operations, finance, and other stakeholders – often decides on the annual plan changes.  And it’s not uncommon for major changes (e.g., new data sources driving new metrics) to take 2-3 months to implement.  It’s also not uncommon for this group to finalize these changes in mid/late December.  Failing to anticipate these changes will only put pressure on your timelines and the quality of your initial payroll and other deliverables.  And making mistakes – for any reason – will take you 3-6 months to regain credibility.

2.  Run It Like A Project

The key to managing annual plan changes is to make the stakeholders recognize what the key deliverables are to a new plan year rollout.  Push the steering committee to provide final compensation plans as early as possible.

Communicate timelines to all stakeholders early and publish and track dates to reinforce dependencies and accountability.  Establish a weekly meeting with all key stakeholders to share timelines, assess project risks, and resource plan for all roles (HR, support, IT, etc.).  If you’re planning to engage a vendor to help with your changes, secure the resources early on.  Don’t wait for the final plans to be ready as you’ll need to account for enough time for the vendor to plan their own staff and ramp up on your requirements.

3.  Model the New Plan

Modelling the new plan is crucial to ensure that the plan behaves as expected.  Monte Carlo simulation (running repeated simulations with random sets of data) can be particularly helpful to gauge the financial sensitivity of the plan.  You’ll want to understand how the plan behaves under a variety of conditions in order to (1) adjust the plan if the behavior isn’t desired before you launch and (2) serve as a baseline and reminder later in the year when discussions arise to change the plan.

4.  Archive Old Components

Too often, little or no time is spent archiving or removing unused components (rules, data, reports, etc.)  The reasons for not doing this are many – you assume this is a feature of your IC system, you don’t have enough time to do this and make the required changes, or it simply didn’t occur to you to do – but the consequences of not “pruning” these unused components is a more complicated system that is harder to understand and make changes to.

Be sure to allow for time to archive and remove unused components from your system to keep as clean as possible.  Doing so extends the overall life of your IC system, keeps the processing speeds faster, and allows for faster configuration changes.

5.  Communicate to the Salesforce

Your company is spending a lot of money on sales incentives.  Don’t assume that  just because you implement the changes requested that the salesforce knows what those changes are.  And just because you updated the Terms and Conditions of the plan for the new year, that also doesn’t meant the salesforce understands the plan or changes made to it.

Each and every year, it is essential to remind and educate the salesforce on their sales incentive plan.  This can be accomplished through a variety of ways such as testing and certification, road shows promoting the plan, sessions at a national sales meeting, webinars, on-demand videos, and more.  The key is that a concerted effort is made to remind, educate, and drive home the sales plan’s key metrics and overall corporate strategy of your organization.  Doing so, drives the performance of your sales organization and strong ROI in your sales incentive plan.

This is always a busy time of year, where you can be pulled in multiple directions.  Don’t let next year’s sales compensation needs sit idly by – take the time to prepare for what is to come.  Make it a good 2015!

3-Keys

By: Dan Ganse, Spectrum Technologies

Sales incentive compensation management (ICM) is a tough ballgame and has unique challenges.  ICM operates at the intersection of corporate strategy, behavioral psychology, and multiple corporate IT systems.

Managing sales compensation is a continuous process that does not end when a new ICM system is brought online.  Good ICM software clearly helps, but there are three critical factors required to effectively manage the sales compensation process.

  1. Expect change
  2. Seek continuous improvement
  3. Staff appropriately

Expect Change
Businesses are always changing and many of those changes have a direct impact on your sales compensation plans.

Events like acquisitions and layoffs impact the sales team size, causing account alignments to change which impact sales quotas; new products are launched and/or abandoned, impacting sales quotas; field sales personnel move in and out of selling roles throughout the year often which has an impact on how those people are goaled, their contest eligibility, sales coverage of their departing territory, and more.  The list is endless – but all require the sales IC system to adapt quickly.

It’s critical for those supporting these IC systems to build flexibility into their system and processes to accommodate change.  Whatever can be parameterized, should be.  Components like quotas, target incentives, commission rates, are easily accommodated by most designs.  Policies should be established for common conditions and adhered to.

Larger changes are difficult to anticipate, but should be approached in a structured manner with standard change control procedures.  Care should be taken to remove old code / rules / parameters to make future changes easier to make and maintain.  When this care is not taken, you are shortening the life of your ICM system.

Seek Continuous Improvement
At the end of every processing cycle, review your processing procedures and be sure to note areas for improvement.  Focus on both improving your team’s productivity as well as the field sales org and executive management user experience with better analyses and analytics.   Take time to update procedural documents, look to automate frequent manual tasks, and maintain a “punch list” of necessary system changes and enhancements.

Staff Appropriately
Companies all too often fail to appreciate what it takes to manage an IC 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.

It’s important to have skilled people supporting your IC system, but also to have enough of them.  You should have enough staff to produce ‘higher value’ analyses that deliver true insight into how well your sales plan is performing and identify areas to drive your overall corporate performance versus simply managing to produce a payroll file.  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).

For a longer term impact, there is an increasing amount of companies who are engaging SPM/ICM professional service firms to help them year round.  These firms know the domain, the toolsets, and often provide their own cross training to mitigate your people development and maintenance costs.  The more you use a firm, the better they will understand your business and systems, which increases their productivity and contribution.

In summary, managing and improving sales compensation takes considerable focus.  Having an approach that concentrates on improving the effectiveness of your sales support operation is critical to its success.

ALS IBC

By: Dan Ganse, Spectrum Technologies

The ALS Ice Bucket Challenge has taken over social media and its success has far exceeded all expectations. The objective is clear and simple, and the challenge doesn’t require much effort from participants: donate online and/or pour a bucket of ice water on yourself.

Sales Performance Management professionals can learn a few lessons about human behavior from the success of the Ice Bucket Challenge. We listed five of them below:

1. Challenge to Motivate
When people are challenged (especially, if done publicly), they get motivated to succeed. The ice bucket challenge did this very successfully utilizing social media.

From an SPM standpoint, the challenge is for the sales team to make its sales goal. Sales goals or quotas need to provide motivation for the sales team to push hard towards those numbers. Beware of goals that are too aggressive – you’re just as likely demotivating the very team you need to achieve your goals.

Frequent communication around your sales goals – and overall sales incentive compensation – is critical to maintain mindshare and motivation with the sales team. Multiple channels, from monthly statements, to leader boards, and communications from sales executives are necessary to keep the sales team on target.

2. Build a Sense of Urgency
We procrastinate! By giving a deadline of 24 hours, the ice bucket challenge made it difficult for people to put it off and forget.

Building and maintaining a sense of urgency within the sales plan is certainly more challenging, but consider establishing shorter term goals (semi-annual or quarterly from annual) to keep the sales team always ‘sprinting’. If this is difficult, other ways to maintain urgency are contests, leader boards, and other public recognition of top sales reps throughout the year.

3. Align to Good Karma
Human beings have an innate desire to do good things. Most of us would go extra mile, if it helps a charitable cause.

Attributing a tiny part of corporate’s resources to social charitable activities, would not only provide a team-building exercise, but also build personal pride for the company they work.

4. Create Social Visibility and Peer Pressure
Peer pressure can get us to do things that we left on our own, would not have done. There is an element of social disgrace for those who choose not to participate.

From an SPM standpoint, set highly visible goals and challenge your sales team to accomplish them. Don’t let the goals be buried in a once-a-year produced ‘goal sheet’ – or only listed on a monthly commission statement. Make the leaders public and let lesser performers know how they stack up against those leaders.

5. Money isn’t Everything
Hardly anyone would have poured cold water on their head, if all they were getting in return was some money. People did it for reasons other than money, and in fact, most actually did it, and also gave money. What a deal!

Money alone may not be the only motivational tool for your sales team. Consider other motivational tools that can complement your cash rewards, like yearend recognition trips, merchandise, extra PTO days, and more.

 

  • Comments Off
  • Filed under: Plan Design, Sales Performance Management
  • Plan Changes and Locked Calculations within IBM Cognos ICM

    Managing a sales compensation program is not a “set it and forget it” process.  It takes constant attention as people move in and out of new roles, sales strategies change and evolve, new products are launched and discontinued, and more.  Key to it all, is a controlled change management process – one that allows a system to adapt in a structured and responsible way.

    Plan changes occur to accommodate changing business conditions and impact the rules and mechanics of a sales compensation plan, such as goals, accelerator rates, payout percentage, etc.

    When a compensation plan is built in an ICM tool, the data associated with the plan is stored in tables and business rules are applied to provide results based on the parameters of the plan. When plan changes are requested, these changes often require updates to table data , business rules, and reports.

    Cognos ICM Calendar Locking

    One specific ICM tool, IBM Cognos ICM, contains a core business function which is the Calendar Locking function. This function involves locking the calendar of the model in order to prevent changes to the data. This functionality is vital in keeping the integrity of historical data intact and preventing important aspects of the system, such as reporting and compensation information from being affected. A portion of the locking task is to lock the calculations within the selected model.

    While this process is necessary and provides benefit to the business, the locking functionality prohibits users from changing the structure (formula, number of columns, etc.) of calculations. One way to accommodate structural changes within the existing plan is to apply the changes to only where the specific calculations need to be modified. The following is a list of the step-by-step procedures to accomplish this:

    1.  Create an alternate version of the calculation.

    Although a locked calculation cannot be changed in certain ways, it can be copied.

    When copying a calculation, the system requires adding a suffix as a means to change the name, as no two calculations can have the same name. Once the copying process is complete, create a name that will allow other users or developers to easily identify with what’s happening in the model (i.e., Old Calculation = ‘Get Eligibility’; New Calculation =‘Get Eligibility 2014’)

    2.  Create an end date for the old (locked) calculation and a start date for the new (copied) calculation.

    Locked calculations can be changed in certain ways, such as changing the start and end dates of the calculation. In this case, after you have created a copy of an old calculation, modify the end date in the old calculation that will end the results at a certain point (particularly through the end of the locking period). Then modify the start date in the new calculation that will start calculating results at a certain point (particularly the start of the unlocked period).

    Example

    Old Calculation

    Blog Pic 1

    New Calculation

    Blog Pic 2

    3.  Merge the calculations.

    In the case that only a date has been set in the old and new calculations, the best option is to merge these two calculations together. Usually this can be achieved by adding the rows of the new calculation to the rows of the old calculation, while it is being used by another calculation that depends on its results. Otherwise, it would be ideal to create a brand new calculation (on an unlocked calendar so that results will be calculated for the unlocked periods) and merge the two calculations there.

    4.  Create a new Data Grid to display the new calculation data.

    In addition to date changes, a locked calculation can also have columns added to it, if necessary.

    In the case that this occurs, the new calculation will have to be utilized in the report in a different Data Grid so that the original Data Grid is not affected. Because the business will likely still be viewing the older report, the original Data Grid cannot be changed or removed. In this case, we will need to create a new Data Grid to display results from the new calculation.

    • Create a copy of the Data Source and modify it to use the new calculation.
    • Copy the old Data Grid and modify it to use the new Data Source.
    • Rename the new Data Grid using a similar convention as renaming a new calculation.

    Summary

    In conclusion, both plan changes and preserving historical data are essential to a business regarding compensation practices and IBM Cognos ICM provides a means to accomplish these tasks. Though the locking process has the ability to impede the progression of performing plan change duties, there is a way to circumvent it. Creating alternative versions of the calculations, Data Sources and Data Grids can provide continuity of the Compensation process without hindering the business’s everyday objectives.

    If you’d like to contact the authors of this post, Spectrum’s Firoz Razak and Larry Jackson can be reached on LinkedIn.

  • Comments Off
  • Filed under: IBM ICM, Varicent
  • Improving Business Strategies with Management Dashboards

    By Larry Jackson, Spectrum Technologies

    In my experiences, I’ve rarely come across managerial staff with a crisp picture of what reports and management dashboard should contain.  A management dashboard is simply a canvas you can paint with key information to help businesses break away from simple operational commission summaries and line item information.  With a good dashboard, businesses can have a powerful tool at their fingertips.

    Here are some potential elements for creating an effective management dashboard.

    # 1 Top and Bottom Performers

    A traditional ranking report usually consists of employee names, rank number, and the performance measure (i.e., Goal Attainment). It’s typically multiple pages or screens long and merely a “data dump”.  To improve and make this a relevant part of a dashboard that provides managers with useful information with which they can use, focus on the top AND bottom performers to show the ‘best of the best’ and the ‘worst of the worst.’ In addition to goal attainment percentages, add sales figures and other performance metrics to give management an opportunity to identify areas of improvement, or to even motivate employees with various incentive prospects. The possibilities are endless.

    Example – Top and Bottom Performers

    1

    Click to enlarge

     

    # 2 Geographic Performance

    Assessing geographic performance view will allow businesses to extend their strategies beyond improving the performance of employees. Managers can employ strategies to improve performance in specific areas/regions. The information provided in this report can shed light on the trouble areas of operation.

    2

     

    # 3 Performance by Product Lines

    Corporate-level reporting shows management where areas of improvement can be met with effective sales and marketing strategies. At this level, sales and marketing tactics can be created and applied at the top level and deployed business-wide. This approach could be efficient provided it addresses areas of improvement universally. If this approach is only somewhat effective, the combination of Dashboard elements will ultimately prove to be effective in deploying strategies that work to improve business. Case in point, the efficacy of implementing a Corporate Sales report can be astounding.

    bbb

    Analyses of aggregate regional performance and performance by product line can greatly increase strategic effectiveness by providing detailed sales figures, or other information, at a higher level for each location. Combine this with totals for each component and full totals are provided on a company level. This will be effective in giving insight on how the company is performing in each of the key categories. An effective instrument exists to give management an edge in strategy.

    4

     

    # 4 Product Line Sales Performance by Region by Quarter

    It is important for leaders to add time dimension to their dashboard, to be able to spot the trends that may be buried in the reams of data. Noticing the declining annual sales of a particular product line in a particular region can be fixed by top management, only if noticed.

     Region Attainment by Quarter

    6

    From an SPM perspective, management dashboards can be very helpful in quota and territory setup. A dashboard that stacks aggregated rep attainment for various territories against time dimension would help in setting up Quotas and Territories.

    When building a management dashboard, it is always good practice to provide users with the ability to download data to an Excel Spreadsheet, or print the report using a pdf format. In addition, customization that allows users to drill-down (i.e., select a date, then select a region) gives more flexibility to the management dashboard, providing a better user experience.

    Conclusion

    In conclusion, a good management dashboard creates a world of opportunities for managers. The information presented with a dashboard can provide clarity to not just sales managers, but to departments company-wide.  Good dashboards help answer key business question and drive organizations forward.   With a good management dashboard, the possibilities are endless!!

    About the author

    Larry Jackson is an SPM Analyst with Spectrum Technologies LLC. He has 6+ years of enterprise system experience with last 3+ years in the field of SPM. He has worked with several large companies in banking and telecom industry on their SPM implementation projects.

  • Comments Off
  • Filed under: Plan Design, Sales Performance Management
  • A Must Read Book on ICM

    If you are reading this blog, you must be someone entangled in this complex world of Incentive Compensation and Sales Performance. Like everyone else in this industry (including myself), you may still be searching for ways to enhance your understanding on this subject but business schools don’t offer courses on Incentive Compensation, nor do we have any industry journals on this topic. Therefore, I am thrilled to see someone publishing a book on ICM. I am particularly excited because the author – David Kelly – is a good friend and an industry stalwart with reputation for being brutally candid about his opinions.

    The Book on Incentive Compensation Management

    David’s newly published 200 page book is simply titled – The Book on Incentive Compensation Management.I received a pre-release version of the book, but I confess its text book style cover was a bit intimidating. I finally finished the book this weekend, and I am glad I did!

    This book is not yet another prescription on Compensation Plan Design, nor a bunch of Project Management tips from a Big 5 consultant, nor a collection of author’s favorite project stories. It offers a world much like the diary of a wise consultant providing candid commentary on the quandaries of ICM world.

    The book has taken a holistic approach towards ICM. Rather than focusing on any one stakeholder, or specific business process, or a particular industry, the book delivers on its title by addressing all stakeholders across all project phases. It starts by defining the term ‘ICM’, and then dives straight into the complexities of the ICM landscape. The second half of the book provides a candid narrative on project phases, common challenges, pitfalls and sage advice. The book not only talks to the implementation consultants, but also makes business leaders aware of what an ICM project entails.

    My favorite part of the book is where David answers the question often asked by industry outsiders and newbies – Why is ICM so hard? Chapter 2 provides a roof top view of the answer, while Chapter 7 gets into the trenches. I wish I had this book during my early days at Apple, when neither business nor IT leadership had a clue and there was no one available to guide us. If you are dealing with a manager or a client who undermines your ICM challenges, do yourself a favor and gift a copy of this book to them. You may also want to take a bright red pen and underline the parts that are relevant to your situation (just saying…!).

    Chapter 5 of the book is specifically targeted towards the companies that are somewhat new to rolling out enterprise level ICM projects. Whether you are on the business side of the project or IT, if you have been thrown into a new ICM initiative, you would benefit from the words of wisdom spread throughout this chapter.

    In spite of his long association with providers of the ICM tools, David has been honest to his audience, and doesn’t waste any ink writing about specific tools. The book follows the theme that irrespective of the choice of ICM tool, one has to make sense of business requirements, operations, and processes ahead of kicking off an ICM project. The book focuses on educating and preparing both sides – the company’s compensation administrators and the implementation team’s consultants.

    The author’s witty and often sarcastic tone directed to his peers and business teams keeps the reader engaged.   The writing style, as explained early in the book, is characteristically informal and chatty. But don’t be fooled by it, as you would find the book loaded with wealth of information and industry insights, reflective of David’s years of experiences in the trenches of ICM.

    While not a bible on Compensation Plan Design (there are plenty of those already available), this book does provide some high level guidance. If you are from a small size company undertaking a simple ICM project, you may find this book over the top. But if you are in the middle of a large ICM project, you would be nodding all along as David talks about challenges, hurdles and craziness of ICM projects. Your challenges, after all, are not so unique.

    Whether you are an expert practitioner of incentive compensation, or you are facing your first ICM implementation project, this book can save you months of misunderstandings and wrong paths in a system implementation project.

    I’ve been consummately engrossed in this book for the last two weeks. It is loaded with heavy textual content with sparsely sprinkled graphics. This made it a bit of a daunting read for me, but David’s friendly tone and jest helped me pull through to the finish line. ICM is a complex topic, and the book provides a holistic and impartial commentary, while offering helpful guiderails for all of us in ICM industry.

    A must read book for anyone who is passionate about the world of ICM.

    To learn more, or to purchase the book please visit:

    http://amzn.com/0996081003

    About this Blog’s Author
    Maneesh Gupta is the Managing Partner at Spectrum Technologies. Spectrum is a Silicon Valley firm providing niche services in the area of Sales Performance Management Systems since 2007.

    Maneesh can be reached at mgupta@spectrumbiztech.com
    To learn more about Spectrum please visit – www.spectrumbiztech.com

     

  • Comments Off
  • Filed under: Implementation, Sales Performance Management
  • Simplifying the Sales Compensation Program

    By: Dan Ganse, Spectrum Technologies

    Author’s Note: This blog looks at possible ways to help simplify the Sales Compensation Program.  Simplification can lead to better overall plan understanding and subsequent improved sales execution (higher revenue), as well as reduce overall administration support time (lower costs).

    Topic # 1 – Simplifying Mid-Cycle Transfers

    Recently, I spent time with a customer discussing and analyzing their sales compensation program.  The customer shared with me a recent plan change, a pretty simple change, which greatly reduced the plan administration effort required to support employees in one role.

    The role in question was the Regional Marketing Manager (RMM).  For this company, the RMM is a sales overlay position – a position that can influence a sale through local marketing events– but not a person responsible for the direct sale of their product.  Additionally, the position has a relatively low incentive lever of approximately 20% of the role’s Total Target Compensation (TTC) which, when combined with their high volume sales transactions, translated into relatively low payments on a per transaction basis.

    The prior commissioning process was to align the RMM to each sales transaction within their assigned region.  However, this company found that the RMMs were people frequently on the move within their organization – and consequently the crediting process (and adjustments to that process) was a source of constant administrative pain.

    Solution

    To ease this pain – the company instituted a quarterly geographic performance metric and managed any necessary proration by adjusting the quarterly target earnings for the RMM.  For example, the first quarter’s regional performance was 103% to goal and the RMM was in the field for the first half of the quarter.  Instead of looking at the actual transactions from the first half and prorating a goal, to compute some sort prorated attainment that then only applied to this person – the company now takes the first quarter’s performance (103%) and adjusts the target bonus by the 50% eligibility of the RMM.

    The RMMs found this easy to understand and welcomed the change.  Field management liked the change because it simplified their reporting and underscored the importance of a regional metric.  Lastly, plan administrators saw exceptions and complexity drop – shaving a day off a five day commission cycle for the company.

    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.

  • Comments Off
  • Filed under: Plan Design, Sales Performance Management
  • 7 Tips to a Successful 2014 Sales Compensation Year

    2013 has come and gone, which means new 2014 sales compensation plans will soon be rolling out. Whether you are modifying your current plan or creating an entirely new one, be sure to keep these tips in mind to save you from a potential headache.

    1.   Align the sales compensation plan with corporate goals and strategy.

    The key objective in plan design is to ensure your sales compensation plans align with corporate goals and strategy. A well designed compensation plan embodies the strategy of the organization and drives the right sales behaviors towards the corporation’s business goals.

    2. Evaluate the current compensation plan’s effectiveness.

    When designing your new plan, it is helpful to determine what worked and what didn’t in last year’s plan. Some questions you should consider while evaluating your plan: Are your territories balanced? Does your quota attainment plot a standard bell curve? Is sales turnover higher or lower than expected? Do you have the ‘right’ kind of turnover (poor performers leaving) or the ‘wrong’ kind (high performers leaving)?

    3. Use simple and objective measurements.

    The best plans are those that are simple and easy to understand. The more complex a plan is, the less effective it can be. For instance, a plan that includes four or more measures is usually too complicated and may require the need to define another sales role. Avoid complexity by setting individual and/or team-based measures as appropriate for each role. These should align with corporate sales goals that focus on aspects such as margin, profitability, new customer acquisition, new product introduction, etc.

    4. Define policies.

    Your plan should be clearly outlined and defined. Develop clear and absolute policies for crediting, adjustments, liabilities, windfalls, etc. There should be no surprises.

    5. Model the plan.

    Model your compensation plan to evaluate the impact at both the macro (plan cost) level and the micro (individual earnings) level. Make sure your plan fits within budget parameters and adequately rewards your top performers.

    6. Follow a formal process to communicate the new plan.

    By now, you should have the structure of your 2014 sales compensation plan. Avoid any confusion or worry that may arise by allocating adequate time to roll out and explain the plan to your sales team. Highlight major changes from the prior plan year with a “What’s New” summary. Be sure to train (and possibly certify) first-line sales managers on the plan(s) because they will be the first to field questions from your sales reps and will need to be able to reinforce the plan details (and the corporate strategy) with their sales team.

    7. Monitor the compensation plan.

    Once a sales compensation plan goes live, be sure to establish ongoing processes to continuously monitor your sales compensation plan’s performance.  Be prepared to make mid-cycle changes as strategies change and/or unexpected events occur that require plan adjustments.

    Sales Performance Management (SPM) software can be extremely helpful with ongoing monitoring as well as enable faster implementation times when changes are needed.

    Conclusion

    When you look at the right things when designing and administering your sales compensation plans, you’re more likely to reward the right sales behavior and achieve the corporate sales performance you want.

    Make it a good year!

  • Comments Off
  • Filed under: Implementation, Sales Performance Management
  • 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.

  • Comments Off
  • Filed under: Uncategorized
  • 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.

    Subscribe by Email

    Archives