Incentive, Compensation and Sales Performance Management

Gartner published an excellent research in July 2007 called “Market Scope for Sales Incentive Compensation Management Software”. This research discusses several of the sales incentive compensation management offerings and is surprisingly free.

The offerings evaluated are:
ACTEK
Callidus Software - TrueComp
Centive
Oracle (E-Business Suite)
Practique Associates
SAP
Synygy
Trilogy - Versata
Varicent Software
Westport Software Group
Xactly

The evaluation criteria were: Overall Viability, Customer Experience, Product/Service and Market Responsiveness. Results of the study are summarized in this table:


This study is a good start to help identify the prominent vendors of Incentive Compensation Management offerings. The best choice would be determined on a case-by-case basis since some of these vendors focus on a particular company size (number of payees), on a particular technology and in some cases on specific industries.

I would also like to highlight that several more vendors exist but were excluded from the study because they did not meet specific criteria including having at least 16 clients, of which at least 12 using the system in production, and with enough cash to fund at least one year of business operations.

There are dozens of Compensation Management Software available which can be categorized in two groups: on-premise and hosted solutions.

On-premise applications usually require dedicated hardware, and the company is responsible for keeping the application running, to apply upgrades when required, to ensure data security, etc. On-premise applications can further be categorized into turnkey solutions and high-end solutions, with offerings filling in the spectrum in between. Turn-key solutions include common incentive plans and work with limited integration efforts; these solutions are geared towards companies with few payees. High-end solutions require expensive hardware and very involved efforts from a team of compensation specialists and data integrators; these solutions are typically geared towards organizations with more than 1,000 payees.

Hosted solutions are also called software-as-a-service (SaaS) offerings and are usually geared towards companies with fewer than 500 payees. The biggest advantage of hosted solutions is that the vendor will provide all the required implementation work and be responsible for the upgrades. They can be a good alternative when on-premise solutions are too expensive or when in-house technical expertise is not available.

With fewer than 100 payees, it may be more efficient to handle compensation manually, using simple spreadsheets. However, when the number of payees grows beyond 100, or if the compensation models are very complex, Incentive Compensation Management (ICM) applications should be considered.

I will talk about different sales performance and incentive management applications later.

Christopher W. Cabrera, founder and president of Xactly Corporation, published a white paper on December 18, 2007: “Five Best Practices for Sales Performance Management”.

These best practices are:
• Use incentive compensation to align payments to strategic corporate objectives
• Motivate and reward performance with contests, SPIFs (special performance incentive funds)and non-cash incentives
• Model and forecast your compensation plans prior to deployment.
• Use analytics to drive sales performance
• Integrate CRM and compensation management applications for greater insight into sales opportunities

I think those points are very obvious… Actually, they are usually the driving force behind automating the compensation management process. I recommend reading the article, it's short and fun to read.

The Five Best Practices for Sales Performance Management paper can be found here.

Mitel is one of the companies headquartered in Ottawa which we are proud of. We are also proud of Varicent's success not far away, headquartered in Toronto. I might be able to work in my hometown some day...

Mitel examined its ICM procedures and processes and realized the company needed a better way to drive the behavior of, and communicate incentive compensation plans to its sales force. After a competitive evaluation consisting of product demonstrations and customized Proofs-of-Concept, Mitel selected Varicent SPM.

Read the original news release

The field of incentive, compensation and sales performance management was born from the need of companies to define and implement sales performance plans, specifically commissions and bonuses. Several applications exist to manage, measure, track and reward employees to influence sales force behavior.

The goals of compensation management applications are to:

• manage centrally pay-for-performance plans
• align strategy with incentive compensation plans
• reduce errors and inaccurate payments
• quickly adapt to evolving business challenges
• improve decision-making by providing timely information and analytics capabilities
• increase profitability and efficiency by reducing administrative, software development and maintenance costs

Common Acronyms:
CRM: Customer Relationship Management
ECM: Enterprise Compensation Management
EIM: Enterprise Incentive Management
ERP: Enterprise Resource Planning
ESP: External Service Provider
HCM: Human Capital Management
ICM: Incentive Compensation Management
SaaS: Software as a Service
SFA: Sales Force Automation
SPM: Sales Performance Management

ICM and EIM are often used to discuss similar functions and applications. More recently, several vendors have adopted the term “Sales Performance Management” to encompass ICM, EMC and EIM.

In this blog I will discuss various topics and news related to compensation, incentive and sales performance management. I will focus more particularly on the IT aspects of implementing compensation management systems.