Sales Incentive Optimization
The recent e-Reward conference in London (May 12 2016) had a number of important messages for the Compensation and Benefits community. The event was oversubscribed – 90 applied for 70 spaces. The event had 2 interweaving themes of excellence of plan design and the contribution which Sales Performance Management technology can make through operational excellence but also predictive analytic insights.
OpenSymmetry shared the stage with IBM, Xactly and Beqom and the event was steered by Mark Donolo from SalesGlobe. The delegates were HR Directors, as well as Compensation and Benefits Managers representing a wide range of leading businesses all with challenges around sales compensation.
Compensation and benefits professionals are under pressure to provide guidance to achieve great plan design. The conference emphasised a strategic approach from two perspectives. So often the response from businesses to the plan design challenge is tactical and just focused on getting something in workable in place by the start of the new performance year.
A familiar scenario that salesforces experience is the excitement and optimism of the new sales incentive launch, followed by the realisation that:
- New rules have been introduced which limit the kind of high payouts experienced last year which made the plan unaffordable
- Territories have been arbitrarily changed and accounts reallocated so that Account Managers have to spend the first quarter getting to know new customers, so undermining their ability to hit target
- Quotas are higher because the company has unrealistic growth expectations
- Payout will continue to be late and inaccurate because the SPM technology has not been fixed.
Spring sunshine fades to reveal approaching storms as high performing salespeople start to polish up their CVs or resume.
The required response is threefold. Be more strategic about incentives design, think more broadly about what will motivate and retain salespeople. Deploy technology that will optimize sales incentive operations and provide predictive insights for the future.
Sales Incentive Design
Taking a strategic approach to design means using data driven insights. IBM can deploy Watson and Xactly can deploy their Insights programme that will do two things – identify how changes in plan design might drive particular business outcomes based on previous patterns and identify key benchmarks which show how your compares across many aspects of design like paymix and payout cycle.
Strategic thinking also means anticipating the impact of design and the behaviours the plan will engender. Two steps that will help taking a principles based approach and, secondly, mitigating against unintended consequences. There are a number of generic principles that will drive good design and these split into 3 types:
- Organisational – Linking to company goals, measurability and flexibility. Around half of companies change their plans every year and design needs to take account of changing company priorities
- Motivational – Paying for performance, delivering a significant opportunity and pay differentiation. A salesperson needs to wake up in the morning and know what the priority is and know that if they are successful they will be paid significantly more than the ok performer
- Behavioural – Role accountability, team alignment and simplicity. As Albert Einstein said, ‘If you can’t explain it simply, you don’t understand it well enough’. Simplicity is always in the top 3 of plan design principles, but this principle quickly gets eroded.
The conference clearly identified how SPM technology is enabling companies to move beyond the tactical. Beqom showed how Telecom Italia had automated what is quite a complex incentive landscape, so that they are now able to address more strategic issues such as cross-selling.
IBM reported an in-depth and rigorous 1 on the impact of SPM technology on business performance. Such studies are rare and the outcomes showed again the positive impact that SPM technology can have on reducing new plan roll out (75% quicker), reduction in SPM administration (50%) and reduction in overpayments (90%). IBM also illustrated the positive impact that Watson Analytics can have.
Xactly showed that deployment of their Insights programme can free up thinking to consider broader reward for the salesforce – recognition. Analytics moving beyond just the business case.
So, the need to take a strategic approach is clear. The business case for SPM technology is compelling and its impact is wider than just automating the comp plan.
OpenSymmetry can work with you to manage the journey from certainty to opportunity. The start of the journey is exemplified by the need to think through and design the right incentives framework, mobilise the business plan to generate budget and articulate a future state for business processes and sales operations organisation design.
The next stage of the journey is identifying and selecting the right technology option, then deploying it with enlightened change management. The third stage is optimisation – delivering change to business process but also improvement in capability to further refine incentives, broaden their impact and deliver additional reward initiatives.
In short – understand the business challenge, ensure an effective plan design and invest in technology.
What is the biggest challenge your organisation faces as it relates to starting your journey to sales incentive optimization? Let us know in the comments section below.
Interested in learning more about incentive plan design building and how to use technology to support the design process and reinforce the right sales behaviours? Download our full presentation today!
- The Total Economic Impact™ Of IBM Incentive Compensation Management Solution. Transforming Variable Compensation Processes To Achieve Efficiency, Alignment and Growth April 2016