Best-of-breed players like Callidus Software, Centive (formerly Incentive Systems), Incentive Technology Corporation (ITC), which is the recent spin-off from Centive which continues to sell the former Centive's CompCentral on-premise software), Oracle, SAP, Practique Associates, and one of the first companies in this market, Synygy, all provide EIM or ICM solutions. By and large, they enable powerful, flexible ICM by automating many of the major tasks related to sales compensation:
* modeling compensation plans from strategy to execution
* processing and calculating incentive compensation, from sales transaction to accounts payable (A/P) system integration
* maintaining multiple levels of reporting hierarchies, for complete organizational support
* effective dating applied to all major compensation plan components, for flexibility and change management
* supporting business units running on different fiscal calendars and in different currencies
* automating dispute resolution, providing for easy entry, research, and communication of compensation-related disputes
In general, insurance, health care, financial services, and certain manufacturing companies (such as high tech) are prime users of full-blown EIM solutions. Large enterprises with several hundred sales employees use these systems to model, set up, administer, analyze, and reportt on incentive management plans that compensate employees and distribution channel partners for the achievement of targeted quantitative and qualitative objectives, such as sales quotas, product and territory milestones, and customer satisfaction. That's to say that these software products enable companies to access applicable transaction data; allocate compensation credit to appropriate employees and business partners; determine relevant compensation measurements, payment amounts and timing; and accurately report on compensation results. Furthermore, additional analytics software allows customers to analyze the effectiveness of their incentive programs, which in turn gives them insights into driving greater sales performance. By facilitating effective management of complex incentive and sales performance programs, such products should allow customers to increase sales revenue, make better use of their incentive budget, and drive productivity improvements.
In other words, automating incentive management should not just enable businesses to pay workers more accurately; they also make user companies more accountable, by providing them with better modeling and reporting (so they can react to changing dynamics and improve relationships with their employees). As a result, some EIM providers have lately been drifting away from simply providing big, calculating, number-crunching solutions that help user enterprises pay their employees �right,� and are rather trying (more in tune with the performance management space) to help companies align strategic company objectives with sales execution. This way, they can be regarded as the execution platform for business performance management (BPM) and corporate performance management (CPM) (see Financial Reporting, Planning, and Budgeting as Necessary Pieces of EPM). Naturally, the focus for EIM is on all customer-facing roles that may have an impact on revenues. Initially used, therefore, for sales force compensation, EIM applications are also finding traction in call centers; in financial institutions for bank tellers involved in cross-selling and up-selling; and in retail situations where employee compensation is tied to store productivity and profitability.
As for a simplified description of how an EIM suite works: one starts by configuring the software to model the internal rules and structure of the user enterprise's commission and bonus programs. The software then imports sales and other performance data from a company's enterprise resource planning (ERP) or back-office system (meaning the sales and service order management and human resources [HR] modules), and calculates the commissions, whereupon it feeds the payment data back into the company's payroll system. Along the way, the software generates reports for managers which can also be used in audits to catch errors and cheating attempts, which is especially important in environments where one of the biggest expense items is cost of sales.
In addition to these policing capabilities (which are not to be sneezed at�companies keep missing their earnings because they cannot audit their compensations), managers can also use the applications more strategically, to model changes to their incentive-pay programs, for instance, so that they can better understand the financial effect of new rules before instituting them. Business users, without needing to be at the mercy of the information technology (IT) department and nerdy programmers, should be able to leverage intuitive graphical user interfaces (GUIs) with all-too-familiar drop-down menus and check boxes, in order to quickly implement any business rule changes�of course after verifying the potential outcome before the payment even takes place.
Naturally, many different organizational parts are affected by and are in need of EIM, starting with top or executive management. In fact, two critical concerns of corporate executives are
1. delivering consistent and predictable financial results; and
2. ensuring customer satisfaction.
Furthermore, to continually succeed, it is imperative that executives stay abreast of market conditions and adjust strategic business objectives when necessary. Executives must operate their businesses nimbly enough to shift from one major initiative to the next within a very short time frame. Whether the key initiative is revenue growth, driving a competitor out of the market, reducing discounts, expanding internationally, or introducing a new product line, EIM systems can play a crucial role in aligning the actions of the entire company and its partners with overarching corporate objectives.
Regarding EIM programs, executives have traditionally faced various concerns:
Limited ability to align compensation programs and strategic direction
Traditional manual and spreadsheet-based processes make it difficult to figure out how to motivate sales to execute on simple elements of corporate strategy (such as "sell more product XYZ").
Limited predictive impact analysis
Predictive analysis is necessary to forecast the impact of new or modified plans, for instance. Aggravating the problem is lack of access to historical performance data; consolidating prior period spreadsheet data is time-consuming, and often difficult to organize for any meaningful analysis. Executives are thus forced to create and modify incentive plans based on mere hunches, as opposed to a fact-based forecast of financial impact.
From a financial manager's standpoint, incentive compensation represents a significant line item in the budget. Finance staff (and ultimately the chief financial officer [CFO]) are responsible for accurately accounting for variable compensation costs, especially those associated with sales incentive management. Compliance with the US Sarbanes-Oxley Act (SOX) dictates that organizations accurately and properly account for payments made to individuals based on transactions (a product sale, for example). Given the overall fiduciary responsibility that organizations are exercising, the following business issues clearly need to be resolved:
Unacceptably high levels of overpayment
Finance departments not only need to account for the disbursement of funds, but also need to identify errors and inaccuracies. Spreadsheets and in-house systems do not allow for easy analysis of incentive plan payouts, making it extremely difficult to identify potential discrepancies.
Cumbersome and error-prone accounting and auditing
Spreadsheet systems (to say nothing of manual systems) do not lend themselves to easy tracking, resulting in a difficult and time-consuming auditing process.
Sales executives and management, who require tools for creating and changing incentive compensation plans, are also driven to EIM solutions by various factors:
Lack of "operational agility"
Sales management teams have traditionally been limited to an annual plan modification policy, whereby they cannot make on-the-fly changes to existing incentive plans as dictated by market conditions, new product introductions, sales promotions, or corporate strategy shifts.
A shortage of timely data about plan effectiveness, employee performance, and financial impact
Compensation plan data needs to be consolidated in a format conducive to analysis (to properly understand the effect of compensation plans on staff behavior and to develop more effective plans). Management requires analysis and reporting tools that facilitate accurate, timely, and straightforward examination of incentive plan data; this information is required via a mechanism that can be accessed anytime, anywhere (the Internet).
Difficulty in managing commission pay disputes
Traditionally, sales management has to comb through spreadsheets for exact transactions, conduct follow-up analysis and fact checking, check accounts and inventory, and verify records before a resolution can be made. There is thus an acute need for a more efficient pay dispute resolution process to reduce administrative time, and maximize time spent on revenue-generating activities.
Compensation administrators are responsible for the calculation of the incentive compensation payments that go out to the sales force and partner channels, and while working extremely long hours ensuring the accuracy and timeliness of those payments, they must field frequent (and often irate) inquiries from the people they're compensating. As the last line of defense between compensation plan design, and implementation of those compensation plans in a system to calculate payments, they face some key EIM difficulties:
Limited ability to implement management's desired compensation plans
Without the flexibility to support whatever compensation plans are right for the business (the plans executive management wants, and that are appropriate for overall business strategy), compensation administrators are forced to do manual calculations, or to rely heavily on overbooked IT staff to code around system limitations.
Limited ability to query or access all aspects of compensation results
Compensation results include payments, quota performance, sales credits, or performance measures; manual adjustments also need to be made, when necessary. In many cases, while questioning their payments and other aspects of incentive compensation (and then placing calls and sending e-mails to the compensation administration group), the sales representative or channel manager catches an error that needs to be manually corrected by the compensation administrator.
* modeling compensation plans from strategy to execution
* processing and calculating incentive compensation, from sales transaction to accounts payable (A/P) system integration
* maintaining multiple levels of reporting hierarchies, for complete organizational support
* effective dating applied to all major compensation plan components, for flexibility and change management
* supporting business units running on different fiscal calendars and in different currencies
* automating dispute resolution, providing for easy entry, research, and communication of compensation-related disputes
In general, insurance, health care, financial services, and certain manufacturing companies (such as high tech) are prime users of full-blown EIM solutions. Large enterprises with several hundred sales employees use these systems to model, set up, administer, analyze, and reportt on incentive management plans that compensate employees and distribution channel partners for the achievement of targeted quantitative and qualitative objectives, such as sales quotas, product and territory milestones, and customer satisfaction. That's to say that these software products enable companies to access applicable transaction data; allocate compensation credit to appropriate employees and business partners; determine relevant compensation measurements, payment amounts and timing; and accurately report on compensation results. Furthermore, additional analytics software allows customers to analyze the effectiveness of their incentive programs, which in turn gives them insights into driving greater sales performance. By facilitating effective management of complex incentive and sales performance programs, such products should allow customers to increase sales revenue, make better use of their incentive budget, and drive productivity improvements.
In other words, automating incentive management should not just enable businesses to pay workers more accurately; they also make user companies more accountable, by providing them with better modeling and reporting (so they can react to changing dynamics and improve relationships with their employees). As a result, some EIM providers have lately been drifting away from simply providing big, calculating, number-crunching solutions that help user enterprises pay their employees �right,� and are rather trying (more in tune with the performance management space) to help companies align strategic company objectives with sales execution. This way, they can be regarded as the execution platform for business performance management (BPM) and corporate performance management (CPM) (see Financial Reporting, Planning, and Budgeting as Necessary Pieces of EPM). Naturally, the focus for EIM is on all customer-facing roles that may have an impact on revenues. Initially used, therefore, for sales force compensation, EIM applications are also finding traction in call centers; in financial institutions for bank tellers involved in cross-selling and up-selling; and in retail situations where employee compensation is tied to store productivity and profitability.
As for a simplified description of how an EIM suite works: one starts by configuring the software to model the internal rules and structure of the user enterprise's commission and bonus programs. The software then imports sales and other performance data from a company's enterprise resource planning (ERP) or back-office system (meaning the sales and service order management and human resources [HR] modules), and calculates the commissions, whereupon it feeds the payment data back into the company's payroll system. Along the way, the software generates reports for managers which can also be used in audits to catch errors and cheating attempts, which is especially important in environments where one of the biggest expense items is cost of sales.
In addition to these policing capabilities (which are not to be sneezed at�companies keep missing their earnings because they cannot audit their compensations), managers can also use the applications more strategically, to model changes to their incentive-pay programs, for instance, so that they can better understand the financial effect of new rules before instituting them. Business users, without needing to be at the mercy of the information technology (IT) department and nerdy programmers, should be able to leverage intuitive graphical user interfaces (GUIs) with all-too-familiar drop-down menus and check boxes, in order to quickly implement any business rule changes�of course after verifying the potential outcome before the payment even takes place.
Naturally, many different organizational parts are affected by and are in need of EIM, starting with top or executive management. In fact, two critical concerns of corporate executives are
1. delivering consistent and predictable financial results; and
2. ensuring customer satisfaction.
Furthermore, to continually succeed, it is imperative that executives stay abreast of market conditions and adjust strategic business objectives when necessary. Executives must operate their businesses nimbly enough to shift from one major initiative to the next within a very short time frame. Whether the key initiative is revenue growth, driving a competitor out of the market, reducing discounts, expanding internationally, or introducing a new product line, EIM systems can play a crucial role in aligning the actions of the entire company and its partners with overarching corporate objectives.
Regarding EIM programs, executives have traditionally faced various concerns:
Limited ability to align compensation programs and strategic direction
Traditional manual and spreadsheet-based processes make it difficult to figure out how to motivate sales to execute on simple elements of corporate strategy (such as "sell more product XYZ").
Limited predictive impact analysis
Predictive analysis is necessary to forecast the impact of new or modified plans, for instance. Aggravating the problem is lack of access to historical performance data; consolidating prior period spreadsheet data is time-consuming, and often difficult to organize for any meaningful analysis. Executives are thus forced to create and modify incentive plans based on mere hunches, as opposed to a fact-based forecast of financial impact.
From a financial manager's standpoint, incentive compensation represents a significant line item in the budget. Finance staff (and ultimately the chief financial officer [CFO]) are responsible for accurately accounting for variable compensation costs, especially those associated with sales incentive management. Compliance with the US Sarbanes-Oxley Act (SOX) dictates that organizations accurately and properly account for payments made to individuals based on transactions (a product sale, for example). Given the overall fiduciary responsibility that organizations are exercising, the following business issues clearly need to be resolved:
Unacceptably high levels of overpayment
Finance departments not only need to account for the disbursement of funds, but also need to identify errors and inaccuracies. Spreadsheets and in-house systems do not allow for easy analysis of incentive plan payouts, making it extremely difficult to identify potential discrepancies.
Cumbersome and error-prone accounting and auditing
Spreadsheet systems (to say nothing of manual systems) do not lend themselves to easy tracking, resulting in a difficult and time-consuming auditing process.
Sales executives and management, who require tools for creating and changing incentive compensation plans, are also driven to EIM solutions by various factors:
Lack of "operational agility"
Sales management teams have traditionally been limited to an annual plan modification policy, whereby they cannot make on-the-fly changes to existing incentive plans as dictated by market conditions, new product introductions, sales promotions, or corporate strategy shifts.
A shortage of timely data about plan effectiveness, employee performance, and financial impact
Compensation plan data needs to be consolidated in a format conducive to analysis (to properly understand the effect of compensation plans on staff behavior and to develop more effective plans). Management requires analysis and reporting tools that facilitate accurate, timely, and straightforward examination of incentive plan data; this information is required via a mechanism that can be accessed anytime, anywhere (the Internet).
Difficulty in managing commission pay disputes
Traditionally, sales management has to comb through spreadsheets for exact transactions, conduct follow-up analysis and fact checking, check accounts and inventory, and verify records before a resolution can be made. There is thus an acute need for a more efficient pay dispute resolution process to reduce administrative time, and maximize time spent on revenue-generating activities.
Compensation administrators are responsible for the calculation of the incentive compensation payments that go out to the sales force and partner channels, and while working extremely long hours ensuring the accuracy and timeliness of those payments, they must field frequent (and often irate) inquiries from the people they're compensating. As the last line of defense between compensation plan design, and implementation of those compensation plans in a system to calculate payments, they face some key EIM difficulties:
Limited ability to implement management's desired compensation plans
Without the flexibility to support whatever compensation plans are right for the business (the plans executive management wants, and that are appropriate for overall business strategy), compensation administrators are forced to do manual calculations, or to rely heavily on overbooked IT staff to code around system limitations.
Limited ability to query or access all aspects of compensation results
Compensation results include payments, quota performance, sales credits, or performance measures; manual adjustments also need to be made, when necessary. In many cases, while questioning their payments and other aspects of incentive compensation (and then placing calls and sending e-mails to the compensation administration group), the sales representative or channel manager catches an error that needs to be manually corrected by the compensation administrator.
No comments:
Post a Comment