LP’s compensation processes were somewhat rigid, making it difficult to introduce new strategic incentives. Calculating compensation was a manual process, and did not provide sellers with quick visibility of their performance.
By moving to IBM® Incentive Compensation Management, LP can now automate its compensation processes and deliver timely, accurate information to salespeople and managers.
Increasesthe visibility of sales strategies and performance, increasing motivation for sellers
Acceleratescompensation calculations, enabling payouts up to a month earlier
Automateskey processes such as accruals, saving a week’s work for the accounting team
Business challenge story
Rebuilding the foundations of compensation management
As a global leader in delivering high-performance building solutions, much of Louisiana-Pacific’s success can be attributed to its sales teams, whose detailed knowledge of the company’s product portfolio and strong relationships with buyers across the industry play a vital role in closing deals and lifting revenues.
LP recognizes the role that compensation strategies can play in maintaining a highly skilled sales force, and motivating them to maximize every client’s potential. The company had been running a target-based incentive scheme for over 17 years, and although the scheme itself was effective, the processes supporting it were no longer scalable or flexible enough for today’s needs.
To track sales and calculate compensation, LP was using detailed spreadsheets that were updated manually. As a result, the process had its drawbacks, especially from a timeliness and visibility standpoint. Without an easy way to check on their performance and targets, sales teams often spent considerable time tracking their own figures—time that could have been better spent meeting customers and making deals.
More valuable time was being lost elsewhere, too. To complete the quarterly compensation calculation process, data passed through IT, HR, accounting and sales, and each step could take considerable time. For example, the company’s accountants typically spent several days calculating accruals. The company wanted to find a more efficient solution to complete the process and pay its salespeople in a timely manner.
Jim Pierson, IT Manager for LP, adds: “It was hard to make changes to the compensation process, which stifled our ability to implement new incentives or set new goals for our sales teams. We had reached a point where the system’s limitations were driving the strategy, instead of the other way around.
“It was clear we had to make some changes, but when we realized how much work it would take to re-engineer our spreadsheets, we decided that the climb wasn’t worth the view. We knew that there were vendors who offered solutions for compensation management, so we began investigating new options instead of reinventing the wheel ourselves.”
IBM the outstanding choice
After a comprehensive survey of the market, LP chose to implement IBM Incentive Compensation Management.
“We chose IBM mainly because of the tight functionality of the system,” says Pierson. “The other solutions seemed to be trying to cover the entire sales performance management spectrum, with a lot of complex functionality that we didn’t need. IBM Incentive Compensation Management just focuses on making compensation processes easy and efficient, and it does a great job.”
IBM worked closely with the IT team from LP to design and implement the new system. The whole project was delivered in just 12 weeks, including a two-week extension when LP asked the IBM team to add on some additional reporting capabilities.
“We were dealing with very knowledgeable people who did an excellent job,” says Pierson. “We were always confident that the project would be delivered on time and on budget; and in fact, it came in slightly under budget. After we went live we didn’t experience any defects in the system at all, which is unique in my experience for a project of this size and complexity. It was a fantastic experience from start to finish”.
With the new solution in place, LP is now able to update its compensation strategy and introduce new goals to motivate its sales teams.
“Our salespeople are very skilled and focused on getting results,” says Pierson. “But they are located across the country and it’s not so easy to meet with them face-to-face. As a result, when we change our sales strategy, we need to be able to communicate very clearly what their new priorities should be. This system will help us do that.”
Boosting employee satisfaction
The outcome of moving to IBM Incentive Compensation Management has been overwhelmingly positive. Jim Pierson highlights the fact that the sales operations team is now in complete control of running compensation management day-to-day, without needing additional support from the IT, HR or accounting teams.
“The calculation process now runs automatically every day,” he explains. “And accruals can be calculated at the push of a button – saving our accountants a week’s worth of work. Even with the overhead of implementing the new system and checking the resulting data very thoroughly, we were able to make our payout earlier this quarter than we’ve ever done before. Next quarter we expect the payout to be at least a month ahead of our current schedule.”
Faster payouts should help to motivate the company’s sales teams too, although Pierson believes that the increased transparency of the new solution will make an even bigger difference to morale.
“Every day, each seller can see exactly where they stand in terms of their performance, right down to the level of individual transactions,” he comments. “They can trust the numbers and be confident that they will be properly compensated for their efforts. They can also see what goals we’re setting them and what they need to do to maximize their reward.”
Finally, by choosing IBM Incentive Compensation Management, LP not only has a robust solution for compensation management—it also has the support of a team of experts who are committed to solving any issues that may occur. Pierson says: “The IBM team has been extremely responsive throughout the engagement. They help with running a project the right way, with a good plan and a schedule. It speaks very highly of the IBM organization.”
As a proven leader in high-performance building solutions, Louisiana-Pacific manufactures uniquely engineered, innovative building products for single-family homes, multi-family projects, repair and remodel markets, light commercial facilities and other outdoor buildings. LP offers durable and dependable siding, framing and structural panels, backed by industry leading service and warranties to build smarter, better and faster.
Take the next step
To learn more about IBM Incentive Compensation Management, please contact your IBM representative or IBM Business Partner, or visit ibm.com/marketplace/automate-variable-based-pay-programs