March 19, 2019 | Written by: Jim Kvoriak
Categorized: Sales Performance Management
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Did you ever play the Mouse Trap board game when you were a kid? Do you recall how frustrating it was when you set the contraption in motion and it failed somewhere in the middle without setting the trap? Surprisingly, many organizations unknowingly exhibit an approach similar to playing the Mouse Trap game when it comes to managing their incentive compensation. Why are companies setting themselves up for the same type of frustration with their incentive compensation processing? Incentive Compensation is not a game, the stakes are far higher. Failed calculation cycles can result in missed deadlines for payroll, missed payments and ultimately, leading to angry, distracted, and unmotivated sellers.
Processing incentive compensation involves complex calculations
The processing of incentives is complicated. Every company has their own way of defining territories, calculating credits, performing rollups, overlays and splits, measuring attainment, calculating commissions and bonuses, generating draws and recoveries, and making adjustments. I can’t tell you how many times a compensation administrator walks me through a convoluted incentive calculation process and then caps it off by saying they want an “out-of-the-box” solution to handle their logic.
Finding a solution that supports complex logic in a single application
What customers really need is a solution that contains all their logic in a single box. When customers choose incentive compensation solutions that seem simple but lack flexibility, they end up with a calculation process that looks like the game itself. They might need to do some preprocessing of the data in a database since the crediting logic can’t be handled by the product. Then, the data has to go through an extract, transform and load (ETL) tool to be put into a specific table format accepted by your product before you start calculating incentives. Maybe now there’s some logic that doesn’t fit into the preset calculation structures in the product, so you need to create workarounds like exports and reimports of data to handle multistep processing. Any one of these steps could be a breaking point for the overall process. Even worse, every one of those steps may be running on a different platform, requiring a larger team of varying skills, some of whom have other responsibilities and are probably not incentive compensation specialists. Why would any company allow a critical process like incentive compensation to be run in such a haphazard manner?
There is a smarter alternative – IBM Incentive Compensation Management (ICM). The solution provides the flexibility to handle everything that I’ve just described in a single application that is business user friendly. IBM ICM has the flexibility to handle data in formats that you define rather than imposing a fixed data structure on your imports. More importantly, the IBM ICM calculation engine employs a building block approach where you can string together as many simple calculations as you need to complete your logic. Each step can be simple on its own but stringing these simple building blocks together supports complex logic. Most importantly, all of this is accomplished in a single platform where you are using one consistent set of configuration tools. One set of admins, with one set of calculations, that is on one platform. And with one audit trail for the entire process.
So, what’s the next step?
Stop playing games with your incentive compensation and speak with an IBM expert about how to really simplify your incentive process with IBM Sales Performance Management.
If you are already in the process of evaluating and selecting an SPM solution, then checkout our SPM Buyers Guide to experience interactive demos, read analyst reports, as well as host of other resources to make an informed decision.