February 19, 2019 | Written by: Dennis Murphy
Categorized: Sales Performance Management
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Transparency in Incentive Compensation Management (ICM), as in many businesses, can be seen as an imperative. You could argue that it’s something that benefits all parties involved. Not only are you establishing trust with your commissioned sales agents by paying them accurately and with the proper documentation, metrics and calculations. You are also providing the visibility and insight to finance, sales, and compensation teams to help dramatically overpayments and other compensation errors.
What is a business value assessment and why should you complete one?
A business value assessment helps quantify the value of your incentive compensation management via self assessment and transparency. It is calculated using two major components: optimizing sales effectiveness and streamlining operations. Creating a compelling business case can help you secure executive support and funding when starting your incentive compensation management project.
What results should I expect?
In January 2019, Forrester Research conducted the Total Economic Impact study, commissioned by IBM, to analyze the savings realized by implementing IBM ICM. Forrester interviewed a series of current IBM ICM customers to gain a better understanding of challenges experienced before implementing the solution. Some of these challenges included issues with scaling to meet the needs of a growing organization, disparate compensation systems across many geographies, and lack of transparency in payouts for sales teams. They created a composite organization based on these interviewees and found that the average ROI of IBM ICM is 242%. The report detailed findings into quantitative and qualitative benefits that organizations realized after adopting IBM ICM. Key findings of the study included:
- 90% improved accuracy of payments
- 60% reduction of shadow accounting
- 65% reduction of time spent on payout process
- 80% reduction of time spent on auditing and compliance
- 75% reduction of time spent on implementation and rollout of variable compensation plans
By adopting IBM ICM, many organizations interviewed for this study also realized qualitative benefits. Although more difficult to measure, these results have significant impact on a business’ efficiency and productivity as well as manual compensation processing. These benefits include:
- Increased sales from improved visibility into compensation plans and results
- Increased sales from marginal performers due to improve coaching
- Increased sales from quickly implementing targeted incentives
- Reduction in sales turnover reduces risk of unmet sales opportunities
- Future benefits from IBM ICM’s continuous delivery model
In the end, offset by the cost of ownership, the composite organization realized a payback period of 7 months and net present value of $7.1m over 5 years.
Who recently completed one and what benefit did it add?
One use case example is large North American bank who was managing their commissions using a homegrown compensation system in an MS Access database. The bank had a mandate to develop a more reliable, secure, and effective process to calculate and pay the thousands of sellers’ monthly commissions. After an impactful introductory demonstration, the stakeholders for the project were interested in moving forward but concerned with budget. The bank was nearing the end of the fiscal period and running out of time to secure budget for the project.
The project sponsors collaborated with the IBM Sales Performance Management team to create a business value assessment which would quantify the benefit of the IBM ICM solution for the bank. After the initial analysis, the project sponsors saw impressive results. They had the results validated further by their internal finance department – not only improving the impact of the business case but gaining more support for the IBM ICM solution.
The final result of the business case was a 5-year ROI of 223%. Armed with an impressive ROI that underscored quantifiable tangible benefits of time and money, the project team was successful in obtaining project approval to proceed with the ICM project during an off-cycle budget request.
Are you in the process of evaluating and selecting an SPM solution?
Detailing the value of your ICM plan is integral to a successful SPM solution, something that can be achieved through illuminating business value assessments. We recommend speaking with an SPM expert to learn more about how this is done.
Prior to making a business decision on SPM, please read our IBM SPM Buyers Guide to help you make an informed and educated choice.