Sales talent remains highly sought after in the current job market. As salaries for experienced sales representatives continue to rise, organizations face increasing pressure to optimize the utilization of their representatives’ time and skills. An effective incentive compensation management (ICM) system can play a crucial role in maintaining employee satisfaction, motivation, and productivity. Consequently, it’s not surprising that numerous companies are choosing to invest in this area.
Unfortunately, many firms begin implementing an ICM system with little to no preparation, mostly dependent on external sources to handhold them through the journey. Adopting a new ICM system is a big undertaking, but it doesn’t have to be a difficult one. By proactively preparing for such a transformative program, firms can maximize the benefits of their investment, drive better performance, and create a more engaging and rewarding work environment for their employees.
In our work designing and building ICM systems for enterprises worldwide, we’ve seen a few common factors that lead to success. Let’s dive into what steps organizations can take to be ready:
Onboarding your team early into the implementation makes sure that they’re aligned with the program’s goals and objectives. An ICM program relies heavily on people from different teams, many of whom will be impacted through upstream or downstream systems. As a result, it’s helpful to keep all of them in the loop. We recommend answering specific questions for three specific groups.
These are the day-to-day users of the ICM platform, so they’ll need to be heavily involved. Be sure to ask:
While the executive team won’t be using the ICM system every day, they set the strategy—so their input will also be important. Ask:
This is the team that will ultimately be accountable for the success of the ICM, so their buy-in will be critical here. Ask yourself:
When it comes to the process part of any implementation, organizations generally face the dilemma of choosing between lift & shift—replicating the current process in a new system—or process reengineering—overhauling the current process to accommodate best practices making the most efficient version.
Choosing which one to use depends on multiple factors but in either case it’s imperative to map out the entire process before beginning the implementation. Building out an architectural map of the process helps by:
While it’s often considered as an afterthought, the dispute & feedback loop is a vital part of the ICM process. The sales team will need the ability to dispute or question their payout/attainment numbers if they’re going to trust the new system. We recommend using a ticketing system with file upload functionality instead of back-and-forth emails to simplify the process and make sure outcomes are communicated appropriately.
As part of the process mapping exercise, your organization should invest time and resources in evaluating the current technical ecosystem and determine if it can support the complexities of the new compensation management system. This shouldn’t just be limited to what the technical landscape looks like today, but also other internal projects are in the roadmap or in progress. Make sure the timelines for your ICM system align perfectly with how it’s going to impact the upstream and downstream platforms if their implementation/enhancement is in progress – updates to the ICM system could delay the project to align with the data input/output mapping if not synced with other timelines. We recommend paying close attention to how your ICM system will interact with your CRM, your ERP, your HR System, and Payroll, the four systems to which it will be most closely connected.
Most of the biggest delays to any incentive compensation transformation is the lack of decent quality data. While definitions of “quality” differ, ask yourself—can you use this data to test real world scenarios in the new system? If not, you’ll need to address this before you can expect your ICM system to work.
Implementing data governance practices and assigning ownership for different datasets before kicking off the transformation will prevent delays, not to mention make your compensation calculations more accurate when the system goes live. Identifying your data resource owners early will also help you understand whether your team has the capacity and technical expertise to support the ICM system. Depending on what you discover, you may need to augment your team.
Often, at the executive level, success means more than reps getting paid the correct amount at the end of each month/quarter. Executives want to see a return on investment—an impact on your business’s success. For an ICM program, teams should establish measurable key performance indicators (KPIs) and metrics. We recommend measuring:
Note that bigger metrics like employee retention and improvement in sales numbers aren’t on this list. That doesn’t mean they’re not important—they are, and you should track them. But as you’re evaluating your ICM system, it’s helpful to keep in mind that these metrics change slowly, and they’re affected by a lot of other factors as well.
An effective change management strategy is more than just training and support once the system goes live to ensure a smooth transition. Your change management approach should focus on the complete path to user adoption. We recommend a four-phased approach to adoption:
Like with data, this is a step where your internal team’s bandwidth and capabilities will make a big difference. If you don’t currently have the team to provide training and support on your new system, these will be an important investment—one that turns an implementation success into success for your entire organization.
Even with these precautionary steps, the implementation of a robust ICM program may still catch you off guard. Still, it’s a worthwhile investment that has benefits well beyond the sales team. By staying well-informed and adaptable, you can set your organization up for success. Of course, with all the factors that go into an ICM implementation, you may prefer to have this handled by a single external partner. Many companies have asked Spaulding Ridge to help them gear up for a compensation management transformation—and we’ve helped them navigate these complexities to a better system. If you’re uncertain about how to begin your own preparations, don’t hesitate to reach out to us!
