Ways to reward and motivate sales teams come in all shapes and sizes. While that’s great for companies keen to give the efforts of their salespeople a boost through innovative bonus and commission structures, it’s a nightmare for staff who spend countless hours monitoring and managing them.
Now there’s a small number of companies that have found a way out of this conundrum. They’re using the latest tools from incentive compensation management (ICM) vendors (ranging from niche players such as Callidus Software and Synygy to the major ERP vendors) to automate how and when bonuses are paid to sales staff.
So far, only about 1 percent of companies with revenue of E1 billion (about $900 million) or more are using ICM packages, says Katherine Jones, managing director of enterprise business applications at Aberdeen Group, an IT market analysis and consulting firm. And most of those can be found in the United States. Other companies, she says, have their incentive program administrators using old legacy software or spreadsheets, which is “cumbersome, error-prone, and can’t be changed easily if a company needs to add or update their incentive packages more than once or twice a year.”
ICM software lets companies break away from those constraints. Using data feeds from customer relationship management, ERP and other front- and back-end systems, it monitors the work of individual sales staff and then calculates payouts. On top of that, ICM packages are also now offering more sophisticated features such as analytics and modeling, which show the margins or other ramifications of specific incentive plans.
It’s not just plan administrators who benefit from those added features, notes Jones. “Sales staff themselves like those features,” she says. “They can key in different combinations of product mixes and target customers into their ICM programs, and then find out what their commissions will be. It lets them be proactive.”
Likewise, staff at head office can use ICM to help them figure out the best incentive packages that will, for example, encourage their global sales teams to target a particular market or item that needs to move out of inventory quickly.
ICM tools are also user-friendly. “The system is designed to be used by someone who is fluent in Excel,” says David Blume, UK general manager at Callidus, of his firm’s TrueComp ICM software. With a German version completed and French on the horizon, Callidus targets companies with sales teams of at least 200 people. License fees are calculated according to how many people the system will process, not how many use it, with a 200-seat implementation costing around $180,000.
The Pain and the Gain
Speed and accuracy are what sold Brad Savage, group compensation manager at Netscape Software, the California-based Internet portal company now owned by America Online. Before rolling out TrueComp to its 400 global sales staff three years ago, its sales incentive administrators were struggling to manage more than 30 commission plans.
“They were entering information manually, preparing statements on spreadsheets, and E-mailing them out one at a time to the sales organization. There was a lot of room for error,” Savage recalls. “The process was so painful it was only done quarterly.” Today, sales staff are paid their commissions monthly.
Against this backdrop, IT experts foresee a bright future for ICM. With more and more businesses introducing variable components to their remuneration packages, Aberdeen’s Jones predicts that ICM will spread beyond sales incentives to help companies manage their general compensation plans as well as all sorts of bonus programs “not just internally, but also externally for channel partners, distributors and even customers.”
Sidebar: Vendors of Incentive Compensation Management Tools
Consider best-of-breed vendors when timely reporting and payment of incentive compensation are the main priority. They include Callidus Software, Incentive Systems, Motiva, and Synygy. Consider enterprise suite vendors, such as Siebel Systems, Oracle, SAP, and PeopleSoft, if the company is already using a vendor’s other enterprise applications. (Some vendors might be willing to throw their ICM tools into a larger package.)Two vertical vendors provide pre-built, customized ICM applications for particular markets: Trilogy (for financial services) and CSC (for insurance).