Incentive Compensation Management (ICM) is a relatively new software application in the UK and Europe. It is a strategic business asset fully automating the process of pay plan maintenance, commission calculation, forecasting and analysis and in doing so increases sales productivity, performance and growth. Here are some common questions answered, about ICM systems:

	What is SPM?
	What is ICM?
	Why do I need an expert system?
	So what's wrong with the spreadsheet approach?
	Are bespoke solutions a better option?
	What are the benefits of and ICM solution?

What is SPM?

Sales performance management uses both method and technology to motivate and manage an organisation, by aligning sales and the complete customer service package, with strategy.

What is ICM?

Incentive Compensation Management or ICM, is the process of creating performance reward schemes that motivate and compensate the workforce and/or channel partners for the achievement of performance targets. It enables the business to effectively align the reward policy with the top level organisational focus. One of the most tangible and effective ways to compensate is to introduce some form of variable element to pay structures. Most companies equate compensation with monetary reward but this is no longer exclusively the case. Stock options, air miles, holiday entitlement, vouchers etc. all represent examples of other types of compensation offered to employees in today’s workplace. Reward for performance is not revolutionary, but the process - application and measurement - of incentive compensation is undergoing significant change. It is no longer viewed as a back-office admin function, it now represents a strategic asset in the executive manager's handbook. ICM provides a single solution through which ‘any’ type of incentive plan can be designed, modelled, administered and measured. Alignment with ERP, CRM and HR systems provides busy administration teams and managers with the tools they need to implement a compensation strategy. The remit of today's breed of ICM systems extends way beyond the traditional commission calculation for sales teams, to take into account company goals, profit measures, product and management objectives plus territory considerations to plan, motivate and reward both teams and individuals to attain targets. Click here for our Whitepapers on ICM.

 

Why do I need an expert system?

Gone are the days of simple rate-based pay. In today’s competitive market, there is a need for accelerators, spot bonuses, logarithmic performance adjustments, inter-plan dependencies and any manner of innovative ad-hoc adjustments. Despite the increased level of complexity, most companies are still largely reliant on manually intensive schemes such as spreadsheets or bespoke database solutions. Bespoke spreadsheet systems lack the scalability to handle the level of complexity associated with today’s compensation schemes and the flexibility to react swiftly to changing market conditions.

 

So what's wrong with the spreadsheet approach?

The limitations of calculating commissions using spreadsheets are numerous. They fail to deliver executive visibility, analysis and integration that significant business process automation demands. Examining these issues in more detail we find: Battling with numerous spreadsheets, maintaining macros, creating and modifying import and export routines, producing paper based commission statements and reports is an onerous, time consuming and costly exercise The spreadsheet approach is prone to inaccuracy, relying heavily on manual data input and adjustments. The cost of errors (overpayment and underpayments) can be significant in financial terms and can damage employee trust and motivation Employees, whose remuneration is calculated on a base salary plus commission, manage their time and effort according to results. More often than not valuable selling time is lost whilst individuals assume a shadow accounting role to check end-of-month statements and query results Tracking and administering adjustments is equally time-consuming. Spreadsheet applications don't provide audit trail capability which makes tracking changes and reporting on change virtually impossible Implementing new incentives to stay ahead of market changes or steal the competitive advantage are greatly hindered Modelling and forecasting of sales potential and commission costs is a lengthy, time consuming process with automated ICM it is a quick and easy procedure

 

Are bepoke solutions a better option?

A bespoke solution is capable of providing exact functionality to support the commissions and incentives strategy and it can also be integrated according to need. The primary disadvantage of this approach is the maintenance overhead associated with change. Hard coded systems lack flexibility and often need extensive code enhancements to support strategy changes.  A further drawback is the time taken to implement even a minor change. External contractors often require 4-6 week lead times before undertaking project modifications which can have a significant impact on the company’s ability to respond to an end-of-month alteration.

 

What are the benefits of an ICM solution?

Specialist ICM software such as Practique’s INCA offers the following benefits: Seamless integration with transaction, payroll and existing IT systems, automating the complex process of multiple plan creation and compensation calculation Provide extensive maintenance facilities to streamline the administration process Support unlimited employees, channel partners and plans Support the definition of virtually any type of incentive structure Provide sophisticated analysis of incentive payments, target achievement and transactions Present payment and achievement results to the workforce in an accessible and meaningful format via online statements Will influence sales behaviours and align with corporate goals Provide visibility and a full audit trail The automation of processes reduces queries and administrative burden which frees up valuable time Accountability, control, measurement and rapid ROI ICM offers plan modelling and analysis capability

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