Incentive compensation is the fuel that drives revenue growth and the sales back office works hard to support this critical function. As such, no one would deliberately ….
- Cloud their compensation plan details or send mixed messages on how commissions and bonuses will be calculated
- Pay their sales reps late or incorrectly
- Deliver confusing reports that make it difficult to link pay and performance
- Not promote and reinforce their carefully designed incentives throughout the year
- Under accrue for commission and bonus costs
However, we often see these shortcomings at many companies and, when it occurs, sales reps become distracted, sales performance is diluted and finance can be in for some expensive surprises when the books are closed.
Just in the last six months we have seen –
- One contract technology resource supporting a compensation system that pays 4,000 sales reps, while 12 IT resources are dedicated to supporting the HR and payroll systems for home office employees
- No maintenance on a compensation system that has been in production for 6 years resulting in major instability during monthly processing
- Poorly trained compensation analysts who routinely employ practices which create errors, pollute data and impact financial reports
- Accrual forecasts that are based upon incomplete information and simple linear extrapolations which have led to material restatements of earnings
Many companies are under cost pressures and must meet internal goals to reduce expenses. To hit these goals, they are squeezing their already small incentive management operations and technology teams. At the same time, sales management and new sales strategies are putting even more demands on these same groups with new business requirements.
Our viewpoint is that the potential negative impact on sales performance is much more harmful to your company than the incremental benefits of the costs saved by squeezing the incentive management back office.
When you allow your sales performance management capabilities to erode you will find “capability gaps” emerge, causing it to be more difficult to do many of the basic things that are required to grow revenue, such as:
- quickly introducing new products/services to the market
- aligning incentive compensation to motivate sales resources and drive growth
- quickly launching new sales incentives
- managing sales performance, including growing and retaining top sales talent
As your capability gaps widen, they become more complex to solve and often get to the point where the cost to transform/remediate the back-office requires significant executive sponsorship. To make the case for change you need to clearly articulate current gaps, quantify the impacts to your business and layout a new and improved future state with a plan to get there. This exercise is often difficult for teams who have not done it before and are too busy dealing with day-to-day operations.
We offer a couple of tools that can help you get your sales back office on the right track -
- SPM Transformation Workshops – a tailored one-half to two day program for organizations looking to begin rebalancing their SPM ecosystems
- SPM Diagnostic & Remediation Plan – a six to eight week deep dive assessment and planning effort for leaders looking for a comprehensive review, benchmarking and action plan
- An online self-audit – a questionnaire that only requires about 8 minutes to complete and provides basic benchmarking and highlights major strengths and opportunities