For any incentive compensation (IC) program to be successful, a skilled team is required with the right mix of technology, process and business expertise. It is very important for this team to understand the importance of quality and build a strategy to incorporate an appropriate quality framework into the broader operational paradigm.
There are many important elements which should be included as part of the broader IC operational strategy:
- Process maps with detailed exception handling information
- Communication protocol
- Standard operating procedures (SOPs)
- Change management guidelines
- Operations data tracking with clearly defined KPIs
Quality Assurance (QA) and Quality Control (QC) are equally important for the success of any Incentive Compensation project, and it’s desirable to understand upfront how that has been incorporated into the overall IC process design. This is imperative for incentive compensation management because of the financial implications and because of its impact on salesforce engagement. A disengaged salesforce can have a much broader impact on top line revenue, and the company may face the risk of losing high performing reps to competitors.
Detailed process maps should be created during program definition and should always be kept in the updated state. These process maps should highlight details about exception handling and any integrations with upstream and downstream processes. A detailed Input/Output dictionary is critical to maintaining any system in the future.
There should be clear strategy and framework in place to account for various touchpoints during any processing cycle. These touchpoints are:
- Input receipt
- Data discrepancies
- Payment approval
- Field dispute resolution
- Process or data adjustments
- Output delivery
Clear process also needs to be defined to look back on the processing month and identify any improvement opportunities which can then be fed into broader program timelines for continued success of the IC operations program.
Standard Operating Procedures
SOP should describe the activities necessary to run the process successfully and deliver the desired outputs. This document acts as a “How-to-Guide” to run the process on an ongoing basis. This document should include all the information including any additional manual checks (QCs) that needs to be done on intermediate and final outputs. There should be clear roles and responsibilities defined to avoid any confusion during the process run. Required checks and balances should be worked in to ensure that any step is not overlooked by one individual. There should also be provision to track ongoing processes along with some capability to provide sign-offs and approvals. Key benefits of SOPs are:
- Standardization of process with repeatable activities
- Supports business continuity in cases of leaves/resignations
- Reduces learning curve for new hires
- Defines clear roles and responsibilities for successful delivery
Change Management Guidelines
Given the dynamic business environment, it is extremely critical to agree on a broader framework as part of initial operations strategy to support ongoing system and process changes. To make the operations guidelines effective, it is also important to incorporate certain design principles during system and process implementation. These design principles enable simplicity and ensure flexibility for any future changes. These guidelines should also clearly lay out a communication plan and approval hierarchy for any future system or process changes both internally as well as externally. It should also clearly define activities which include process maps and SOP changes.
Operations Data Tracking
It is also very critical to clearly define the KPIs that need to be tracked on an ongoing basis to check the overall health of the IC operations process. Relevant KPIs can then be reported to different stakeholders with the help of reports and dashboards. There are various metrics which can be tracked and can help measure the effectiveness of existing IC operations process
a. # of issues each month (broken down by activities)
b. Processing time for each activity
- Manual time
- Automated time
c. Payment delays
d. # of field disputes/month
e. Overpayment dollars
f. Underpayment dollars
g. # of issues by type of input
h. Time spent / month for changes
Analyzing the process periodically for each of the above parameters is critical for the ongoing success of the IC program. IC plan operations are generally considered more tactical and are not given the importance it deserves. Some of these elements may look trivial but play a significant role in the overall impact of the program and its ability to meet desired business objectives.