Top 5 Incentive Compensation Management Challenges and Solutions

by | Nov 7, 2022

Whether you’re a sales manager or a compensation administrator, the process where you track your sales team’s performance and pay periodic incentives can be pretty frustrating. The many challenges you may come across in incentive compensation management can lead to reduced productivity and morale.


A sound and effective sales compensation management system is an absolute must for pharmaceutical and medical devices organisations, whether to manage salespeople efficiently and give them appropriate sales compensation or incentives.


But before you can chalk out a compensation system that fits your salesforce, you need to address the challenges coming your way. In the hope of helping you understand common issues, we have compiled a list of the top 5 challenges that sales operations teams face in managing incentives, along with their possible solutions.


Challenge #1 – Quota Fairness 


Your salesforce comprises a diverse and elaborate set of resources. While they may be working towards the same broad goals, they aren’t individually have the same potential in ther geographies. All sales positions and territories aren’t equal, so it won’t be fair to base the pay on the same quotas. Many organizations have difficulty allocating fair sales quotas, which can lead to reduced workplace morale and under performance from your salespeople.


When the non-potential based factors determine each sales representative’s goals and variable pay, they won’t have absolute authority and control over their compensation.


Solution – Take a Tailored Approach to Set Sales Quotas.


It is paramount that sales force enablement teams tailor the sales incentive plan to meet the specific needs of the representatives, taking the varied positions within the team into account.


Challenge #2 – Complexity 


When your sales representatives are unable to comprehend the incentive schemes, it negatively affects their performance and sometimes even makes it difficult for compensation admins to implement the plan accurately.


An overly complicated incentive plan can lead to errors in commission calculations, leading to delays in payment completion. Ultimately, it will hinder organisations from achieving their objectives and drive towards growth.


Solution – Keep Incentive Compensation Plans Simple and Easy to Understand.


The best way to remedy such situations would be to keep incentive compensation plans simple and effective – one that can be explained and understood easily. The simpler your incentive plans are the better. Make sure you clearly state what you expect each sales representative to do and the rewards they can earn when they achieve the prescribed goals.


Besides driving your salesforce, a straightforward plan will make it easy for compensation management admins to optimise the operations and pay salespeople accurately on time.


Challenge #3 – Strategy 


While a perfect balance of simplicity and complexity is necessary to drive top-tier performance, you also need the correct KPIs that are aligned to strategic goals and can be measured accurately.  Essentially, this can inspire your salesforce to achieve their goals. Using the same strategy without conducting periodic incentive plan health check the following year for determining and offering incentives wouldn’t be the right approach because it is important to check if you incentive plan is working well on all statistical performance benchmarks.


Additionally, the market will shift and evolve, so a lack of changes in strategies can leave your incentive compensation plan outdated. Recycling the same strategy without looking for ways to improve it can cost you productivity.


Solution – Review and Adjust Your Sales Compensation Plan Based on Data.


Your incentive compensation management solution should enable a proper review of the program, looking for appropriate strengths and gap areas, so you can look for ways to get past the weaknesses.


Challenge #4 – Trust and Transparency


Your salespeople will need clarity, assurances, and without a transparent sales compensation management plan, achieving that can be pretty difficult. Sales representatives who lack faith in the process may quit or file disputes. Attribution tends to be rather costly when you consider the lost opportunity and additional onboarding costs. On top of that, unnecessary disputes along with shadow accounting could end up consuming valuable time that could be put into generating more revenue and establishing better customer relationships.


Solution – Get an Automated Tool with interactive reporting to Improve Transparency in the Incentive Compensation Process.


When you have automated solutions with detailed reporting to provide the necessary assistance, you make the compensation management process as transparent as possible for your salespeople to instill a high level of trust in them. Your automated tool can offer accurate incentive payments and credit updates, and better clarity with regard to specific transactions through intuitive dashboards and IC reports.


Regardless of when or where the tool is being used, making details accessible to your sales staff allows them to assess their past and present performances to work on their future prospects better.


Challenge #5 – Compliance


It is probably one of the most common challenges in sales compensation management. When managing multiple sales representatives, you must have a set of adequately written terms and conditions in place. You also need to get your sales staff’s acknowledgment of the incentive plan design to ensure they are aligned with the corporate strategy. Managing and preventing compliance issues often becomes a problem, especially with multiple stakeholders involved.


Solution – Get an Automated Solution for Sales Compensation Management.


With an automated solution, it is possible to capture the actions performed by different stakeholders through workflows. Thus, it could help by reducing the chances of future disagreements. Also, all the changes can be audit-tracked which helps with transparency across all stakeholders.


Your salesforce needs to be familiar with the relevant guidelines to protect their rights and know how they are responsible for the overall business growth. With an automated tool, sales professionals will be able to accept their set targets, check their performances online, and capture various actions performed by other people in the system. Having access to such a history can be particularly useful during an organisational-level audit taking place from a compliance standpoint.


Wrapping Up 


As a compensation administrator, you need to look for ways to enhance your incentive compensation management system by eliminating various hurdles that may come along the way. A robust incentive plan allows you to drive revenue and growth for your organisation.

If your organization has a large salesforce, you can particularly benefit from Aurochs incentive solution suite that is designed specifically for the pharmaceutical and medical devices industry. With our incentive compensation management tool at your disposal, you can reduce manual errors, improve administration, and save time for every individual in your organization.