Incentive Management

Motivate and Compensate
Adam LincolnJune 1, 2002

There are any number of ways to motivate a sales force, from the pink “Kay-cars” dangled before Mary Kay cosmetics salespeople to the “Third prize is you’re fired” stick wielded so memorably by Alec Baldwin in Glengarry Glen Ross.

No matter what approach a company takes, someone, somewhere, has to keep track of those ever-more-complex bonus and commission structures. That has given rise to a category of software known as incentive compensation management (ICM). Niche players such as Callidus Software Inc., Incentive Systems Inc., and Synygy Inc., and ERP vendors such as Oracle and PeopleSoft now take much of the grunt work out of determining how and when commissions are paid to sales staff.

So far, only about 1 percent of large companies are using ICM packages, says Katherine Jones, managing director of enterprise business applications at Aberdeen Group, an IT market analysis and consulting firm based in Boston. Most use old legacy software or spreadsheets, which she says are “cumbersome, error-prone, and can’t be changed easily.”

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“Compensation analysts have been spending too much time number-crunching and not enough time examining what the results mean,” adds Jennifer Kemmeter, an analyst at AMR Research Inc., another IT analysis and consulting firm.

ICM software lets companies break away from those constraints. Using data feeds from CRM, ERP, and other front- and back-end systems, it monitors the work of individual sales staff and then calculates payouts. On top of that, some ICM packages offer more-sophisticated features such as analytics and modeling, which show the margins or other ramifications of specific incentive plans.

It’s not just incentive plan administrators who benefit from those added features, notes Jones. “Sales staff themselves like those features. They can key in different combinations of product mixes and target customers into their ICM program, and then find out what their commissions will be. It lets them be proactive.”

ICM tools are designed to be used by someone who is handy with a spreadsheet, according to David Blume, UK general manager at Callidus, of his firm’s TrueComp ICM software package. Callidus targets midsize to large companies with sales teams of at least 200 people. Licensing fees are calculated according to how many people the system will track, not how many use it (managers, in a sense, ride free), with a 200-seat implementation costing in the low six figures.

Speed and accuracy are ICM’s biggest attractions, says Brad Savage, who led the implementation of TrueComp at Netscape Communications, the Internet browser company now owned by America Online. Before the roll-out to the company’s 400-person global sales staff three years ago, Netscape’s sales incentive administrators struggled to manage more than 30 commission plans. “Entering information manually, preparing statements on spreadsheets, and E-mailing them out one at a time to the sales organization created a lot of room for error,” recalls Savage. “The process was so painful, it was done only quarterly.” Today, sales staff are paid their commissions monthly.

Against this backdrop, IT experts see a bright future for ICM. With more companies introducing variable components to their remuneration packages, Aberdeen’s Jones predicts that ICM will spread beyond sales incentives to help companies manage variable-compensation plans as well as all sorts of bonus programs, even those aimed at channel partners, distributors, and customers.

Eye on the Clock

Efforts to make employees more productive take many forms, and are often measured in minutes or even seconds. Even something as simple as punching a time clock or filling out a time sheet may offer room for improvement. Workbrain Inc. makes a time-and-attendance software system that uses a biometric clock triggered by an employee’s eyeprint or thumbprint to track hours worked. Among the first customers was United Rentals Inc., which says that by trimming two to four minutes a day off this routine administrative chore, it can reap big rewards. With well over 10,000 employees using the system, the company may be on to something, although it may be the back-end reporting functions that provide the biggest savings. The system is part of Workbrain’s larger ERM (employee relationship management) product family, which also addresses scheduling, training, and skills management. Other ERM players include Synygy, PerformaWorks, Replicon, and Incentive Systems. –S.L.