Focus on Sales Incentives?
Sales Incentive compensation is one of the most well-funded functions in an organization driven by sales. The way performance is incentivized is the key factor that affects the motivation levels of the sales representatives of a company and drives their selling behaviour. This directly drives how a company’s top line performs.
As a result, companies do not hesitate to spend on sales compensation, as it directly impacts the top line. Latest research from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc, shows that the total compensation and spending for U.S. employees reached a record high of 15.8 per cent in 2015, where the majority of funds were allocated toward variable pay, such as incentives, bonuses and cash awards.
“Organizations are under immense pressure to keep costs in line to remain competitive, and as a result, we are seeing more than 90 per cent of companies shifting more of their spending to variable pay because this type of strategy enables them to recognize and reward performance without growing their fixed cost,” said Ken Abosch, broad-based compensation practice leader, Aon Hewitt. “Pay is a top engagement driver for employees, and as the market continues to improve, organizations will need to differentiate through variable pay programs to attract and retain top talent.”
Performance-based pay is being increasingly incorporated into organisational strategies, where the aim is to reward top employees and recognise their efforts, measured in the amount of revenue they bring to the organisation. This allows organizations to control their attrition rate while retaining their top performers by keeping them motivated and engaged.
Now that we understand why sales incentive compensation forms a very important wing of driving an organisation’s revenue growth, we must look into the factors that drive the effective administration of sales incentive compensation to keep up the sales force morale and retain the right talent.
When it comes to the administration of any of the functions in an organisation, two main resources i.e. people and processes, play the most important role. However, they both work well when the technology that is supporting their interaction is at its best. Finally, irrespective of your incentive plan design quality, inefficient implementation results in undesired outcomes such as wrong payments, lower engagement and increased attrition rate. Without a doubt, outcomes are the most critical success parameters for sales incentive programs.
For any IC program to be successful, a skilled team is required with the right mix of technology, business expertise and processes. It is desirable for this team to understand the importance of quality and to incorporate it into the broader operational paradigm.
Why are Incentive plans difficult to implement?
There are many reasons why implementing an IC plan is difficult and cumbersome. Poor capture of sales data from various sources, inefficient processes, lack of centralized operations, and lack of automation lead to a poorly administered compensation plan. Additionally, insufficient details and intuitiveness in reporting add to the discontent of the sales reps over the IC plan.
Thus, it is very important for organisations to constantly review not just their IC plan but how well it is administered and incorporate techniques to improve the effective implementation of the plan.
How to assess the administration of the IC Plan?
We suggest a comprehensive assessment of IC plan administration based on four critical aspects – Outcomes, Processes, People and Systems. Our Incentive Plan administration health check tool helps you identify the effectiveness of your IC plan administration based on the above aspects.
Outcomes: This section focuses on the overall satisfaction of the primary stakeholders. This section evaluates factors such as pay accuracy, pay timelines, field reporting accuracy, number of disputes, etc. This is the first level of assessment which gives you a picture of whether your field reps are satisfied with how the IC plan is administered along with communication.
Processes: This section analyses whether the organisation follows best practices of process implementation and how well the established processes are adhered to. It takes into consideration factors like the establishment of documentation procedures, if operational KPIs are tracked, how well a quality framework is followed and how well communication protocols and approvals work.
People: This section helps analyse how well the individuals administering the IC plan adhere to recommended practices. It looks into factors like roles and responsibilities, ownership and accountability, work hours per day, training/onboarding practices and many more.
Systems: The last and one of the most important factors is whether technology supports all other three aspects effectively. This analyses the level of automation, reporting standards, access control, notification, disaster recovery and all such factors, which evaluate how well technology is implemented to administer the IC plan seamlessly.
How to use the tool:
- For each question, select the existing level of maturity for your IC Plan administration
- The questions are organized under each factor mentioned above
- The tool will then provide you with an assessment of how effective each factor of your IC Plan administration is, as well as an overall effectiveness quotient
- This will assist in analyzing the areas of improvement that exist in your IC Plan administration framework
After evaluation of all the above factors, this tool generates a score for how well the IC plan is implemented.
Please click this link to access the IC Administration Maturity Assessment Tool created by Aurochs Software to check the maturity of your overall IC Operations Capability.
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