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Our aim is to keep you abreast of developments which we hope will be of interest to you and your business. This ranges from an analyst or leading commentator’s perspective on the incentive management market to Seminars, Intelligence Briefings and Workshops centred on pertinent business issues. We will also take this opportunity to introduce new clients and share valuable customer insights on the benefits and experience they have realised through implementing our flagship Incentive Compensation Management solution, INCA. This summer Practique celebrated its 10 year anniversary. The company, which remains privately owned, is headquartered in the UK and was founded in 1997 by Jo Walker and Steve Bowe. In 2002 Practique identified a clear gap in the market for an expert Incentive Compensation Management (ICM) software system. INCA was born and it is now responsible for managing the commission of over 75,000 employees every day across Europe. Clients include Carphone Warehouse, Royal Bank of Scotland, O2 UK & Germany and Mazda, all of which have helped Practique become Europe’s leading specialist vendor of ICM software. Here’s to the next 10 years!
In today’s global business world, attracting and retaining the best employees is a complex challenge. Far-sighted companies must rethink their reward strategies if they hope to compete successfully. An effective compensation strategy is a wellreasoned, actionable plan that translates a company’s guiding principles about pay into tactical approaches around base pay, shortand long-term incentives, and recognition awards to meet business objectives. It ensures the company is directing its compensation investments for maximum impact. At the heart of the process is the disciplined practice of segmenting the workforce. This is especially challenging for businesses expanding into new markets such as Eastern Europe, or for companies that have traditionally treated all employees as a single block without distinguishing between job families. This “one-size-fits-all” approach, often dictated by country-based structures, has been prevalent in Europe among companies evolving from public-sector backgrounds. In contrast, segmentation helps companies understand where differentiation in compensation programmes will drive business performance. It can be a difficult topic for some organisations to address because it explicitly calls for treating employees differently and typically requires companies to develop jobfamily arrangements. However, few businesses today operating on a pan- European basis can rely on a “one-size-fitsall” compensation strategy because business needs and performance goals can vary significantly by region, market, business unit or function. Segmentation is absolutely necessary to align compensation strategy with business strategy. There are four important aspects of segmentation to consider: • Business life cycle – The company’s position on the business life-cycle curve has important implications for business strategy and, by extension, the compensation strategy. A compensation strategy suitable for a young, start-up company based in Eastern Europe would be vastly different than for a company in a stable or declining market. Adding complexity to the situation, large European organisations may have different business units or divisions at different points on the lifecycle curve, especially if the organisation is expanding globally. • Business design – A company’s business design (or business model) – how the entity is organised and managed to create value – also plays into the compensation strategy. There may be one overall design or different designs for units or divisions within a company. The compensation strategy – and subsequently compensation programmes – could vary dramatically, depending on the specific workforce required to create the desired value. Regional and national differences complicate this strategy but must be addressed. • Geographic impact – The geographic scope of business operations should be factored into decisions around compensation strategy and programmes. For instance, a business focus that is more European than local might suggest common managerial reward programs across geographies, centralised pay administration and decision-making, and a comparator group consisting of the business market rather than the local labour market. To look at it another way, building a presence in Europe is increasingly part of many multinationals’ business strategies. But the region’s diverse markets require more than just earmarking compensation. For instance, rewards beyond pay appeal to Western Europe’s more tenured professionals, while competitive base pay is critical for attracting and retaining employees in Eastern Europe, where talent is in high demand. • Brand impact – The company’s brand in the market can be an asset or a liability when it comes to attracting both customers and employees. If the brand is associated with innovative practices, career and social status, low employment risk and a desirable work environment, it will offer a competitive advantage in the labour market. So, a US-based firm with a well-recognised, even revered, brand will not have to pay a premium for talent because candidates want to work there. But it is important to consider how well a brand transcends geographic boundaries. If that same US-based firm expands to Europe where it does not have the same brand recognition, pay opportunities might have to increase to attract and retain qualified candidates not yet familiar with the company. Thorough consideration of these four aspects of segmentation can help an organisation determine the optimal mix of compensation elements. Coupled with a clear sense of compensation trends in the geographic regions where expansion is part of the business strategy, this can make all the difference between global success and failure.
Source: Mercer www.mercer.com
Telecommunications companies have very demanding and complex multi-channels. Practique has a strong heritage in the telco sector, as its web-based Incentive Compensation Management (ICM) software application, INCA has already been deployed in five separate divisions of British Telecom, O2 in the UK and Germany, Cable & Wireless and now, we are delighted to announce, across 12,000 payees at The Carphone Warehouse. Sales behaviours at Utility companies display similar characteristics to the telco sector, so it is fitting that this industry is also investing in Incentive Compensation Management software. British Gas Business, part of Centrica awarded Practique the contract to deploy INCA to its sales staff and this 750 licence implementation has now gone live. Centrica is a significant win for Practique as it is the first implementation in conjunction with our hosting partner Rackspace. We recognise some clients have specific hosting requirements, so Practique works closely with Rackspace as they can meet all high specification criteria with their dedicated servers, 24/7 support and high level of in-house technical knowledge. Practique was also awarded the contract at global recruitment company SThree. Commission payment and calculation accuracy are the ‘life blood’ of the recruitment industry and increasingly industry sectors which are based around commission payments are shifting from spreadsheets and bespoke systems, to more sophisticated software such as ICM. INCA for example, will be less admin intensive, more scalable and flexible and it will handle large volumes of complex data in multiple currencies. In fact, typical operational efficiencies provide up to 90% error reduction and 50% reduction in related IT and administrative staffing. Intelligence Breakfast Briefing Practique has hosted a series of complementary Breakfast Briefings, designed to give a flavour of how ICM can positively impact an organisation and its staff. Issues which have been previously discussed include; gaining stakeholder buy-in, how ICM technology can retain top talent and how an incentives strategy can drive sales, influence and motivate behaviours. These short seminars are restricted in number and are opened by a leading commentator who discusses industry trends. Past speakers have included Hewitt, Mercer and Watson Wyatt, this isthen proceeded by a customers experience and the hurdles they have overcome, with which many attendees empathise.
Practique will host this event with its alliance partner, Mercer, a leading global provider of consulting, outsourcing and investment services. This Intelligence Briefing will be held at Mercer’s London offices at Tower Hill, London EC3 on 13th November. For further details of this Intelligence Briefing please visit www.practique.co.uk or contact marketing@practique.co.uk. Achieving an Effective Compensation & Benefits Strategy Conference The ‘Achieving an Effective Compensation & Benefits Strategy’ conference was held in London in early October with the aim of offering inspiration to employers with regard to pay plan designs. The conference demonstrated how pay plans can be designed to motivate and influence employee behaviours and demonstrated how to link employee performance to reward strategy, retain top talent, design appropriate compensation schemes and strategies and in doing so identified how cost savings could be made. The two day conference was attended by Global Heads of Compensation & Benefits in companies such as Shell, Procter & Gamble, Hewlett Packard and the Woolworths Group. Practique was the event’s ‘Gold Sponsor’ and Managing Director Jo Walker gave the keynote speech on how technology is changing the way organisations use incentives to influence sales behaviours as well as building and presenting the case for change.Practique’s presentation focused on gaining shareholder buy-in which is one of the key hurdles many organisations face when thinking about changing the incentives strategy. This is because there is a perception that changing the reward strategy is too complex and time consuming. Walker dispelled this myth by looking at individual customer experiences on how this has been achieved both on time and within budget. The typical return on investment for deploying an incentive compensation solution such as Practique’s INCA is within 12 months. For more details of relevant conferences, seminars and market intelligence briefings, please contact marketing@practique.co.uk Practique in the Press Incentive Compensation Management is growing in momentum amongst many organisations. Analysts Gartner forecast that more than 90% of enterprises will focus on using ICM systems in 2008 and in Europe the Telco and Hi-Tech sector are the biggest purchasers of third party ICM solutions, accounting for over 40% of the market. Practique is active in educating the media on ICM and why businesses will benefit positively from the impact a strategic incentives programme will have. Our recent media highlights include: �� An opinion article in the compensation and benefits trade magazine, Pay & Human Resources, written by Jo Walker. The piece examines the increasing issue of corporate governance and how ICM can provide much needed transparency to tackle this growing issue �� Pay Magazine interviewed The Carphone Warehouse’s Financial Director, Nick Willcox, in its May issue putting into context how strategic incentives will motivate employees and how INCA’s flexibility will support its complex commission structure Of the decision to purchase INCA, Willcox states: “(Practique) seem to have an extremely flexible solution, but it is also reasonably straightforward in terms of the technology…”In regard to direct measurement, this will be incentive costs as a percentage of gross margin: “We’re not just trying to reduce our costs to maximise our margin. If we drive the right behaviour the outcome will be that incentive costs as a percentage of margin will improve.” And of the benefits: “We probably do have three to four payroll heads working through the exceptions and queries that come through…we expect that queries will be massively reduced so we could reallocate two to three heads out of the query management process.” �� Employee Rewards & Benefits magazine highlighted the transparency issue for all bonus and incentive schemes was paramount and provided a detailed insight into how INCA can streamline with existing IT systems and is also, by its very nature, transparent and Sarbanes- Oxley compliant: “If achieving transparency is a key ‘do’ for bonus schemes, then real-time information on an automated online system is one of the best ways of achieving this… An automated system can be programmed with more flexibility and goals can be changed easily on a weekby- week basis if necessary. And, with output figures fed into the system, there is a better chance of aligning reward with performance and getting real-time information on how much the bonus programme is costing.” Analyst’s Corner Traditionally North American organisations have been quick to capitalise on the benefits of ICM, however this strategic software is gaining momentum across Europe as forward thinking companies realise the benefits it can generate. These range from an increased competitive advantage and financial profits to boosting staff motivation and retention.European analysts have also started to turn their attention to ICM and have recently highlighted it in trend reports; some such examples include Forrester, The Butler Group, Hewitt Associates and Mercer. Renowned global analysts Forrester will shortly complete a report on RFP in the ICM software market. Practique, alongside a number of American ICM vendors has contributed to an examination of the reasoning why companies have opted for ICM. The report will also focus on customer interviews outlining why they have invested in ICM as a business solution in addition to lessons learnt and recommendations for what information to request in an ICM RFP. Mercer is currently conducting a Sales Force Effectiveness Survey for a report it is compiling. The results of this report will be presented at Practique’s Intelligence Briefing in February 2008. For more details on this report please contact marketing@practique.co.uk In the Butler Group’s regular OpinionWire industry report, ICM was highlighted as a strategic tool which would help businesses focus staff and partners to actually deliver what the organisation expects. It examines the area that bonus schemes are not always profitable for the company and that incentives actually need to examine whether or not they incentivise the right people in the right way to make them effective. Hewitt offers a Reward Risk Analyser service to clients. In essence this service analyses a company’s risk in relation to its incentives, rewards and commissions and offers a set of recommendations.Practique is working closely with Hewitt to produce a software package focused on the Reward Risk Analyser. Based on answering a number of set questions the Analyser will identify any key risks to the successful operation of a sales incentive plan and will focus any design changes accordingly. In London, on 27th November, Hewitt and Practique will be presenting the latest thinking in sales incentive plan design and implementation, including an overview of the Reward Risk Analyser. If your company would be interested in experiencing the software on this day, please contact marketing@practique.co.uk for more details.
In each edition of Practique Perspective,
we will focus the spotlight on one client
and the benefits they have gained from
implementing INCA. Much of this issue
has focused on Practique’s heritage in the
telco sector, however STA Travel, the
market leader in student and youth travel,
provides an excellent example of how this
retailer has, strategically used INCA to
drive up sales performance, influence
sales behaviour and increase employee
motivation.
STA Travel employs in excess of 2,000
staff, with a network of nearly 400 retail
branches worldwide and is responsible for
the travel plans of more than six million
people each year.
The leisure industry is competitive, margin
driven and as a sales orientated
organisation, STA Travel required a
flexible but robust global incentives
solution to manage its commission and
bonus schemes and reduce its reliance on
spreadsheets.
Criteria defined
The system criteria needed to be flexible
so it could be modified to meet local
market requirements and STA Travel
needed to ensure effective measurement
as well as rapid deployment for new
incentive schemes.
The software was also required to
conform to the business strategy of
centralised IT and feed seamlessly into the
existing IT, finance and payroll
infrastructure. All of which INCA was able
to achieve.
STA Travel’s strategy focused on two
goals; for employees it centred on placing
the responsibility on sales staff to manage
their own performance and influence their
own earning capacity. For the business it
was key to understand where the
company’s earnings derived from, to
communicate changes to the sales plan
immediately, to promote a performance
driven culture and to demonstrate that
transparency between sales behaviour and
pay existed.
Reaping the rewards
As a result of implementing INCA the
productivity of STA Travel’s sales advisors
increased overall by 11% and a direct
pattern was identified whereby 100 percent
of all sales staff logged onto INCA 15
minutes prior to the start of their shift and
straight after it ended. This demonstrated
that the transparency between sales
behaviour and pay existed.
There was also a positive shift in sales
behaviour; previously sales had pushed
flights however with the new INCA
software a performance driven culture was
promoted. The result saw sales of travel
insurance up by 21%, an accommodation
increase of 14% and tours up by 6%. All
new incentives, month-end drivers and
sales messages are now sent through an
employee’s online sales statement.
Consultant’s earnings are also in line with
business performance.
Life after INCA
Practique’s INCA software has
positively impacted on the business as a
whole. STA Travel now has a system
which drives performance across the
whole company globally, as previous
systems just promoted the top sellers. It
has increased its sales margin and the
business is now more focused on
directional selling, promoting a
performance driven culture.
As INCA has automated the calculation of
commission and bonus, the number of
queries relating to pay have decreased.
This is because employees can access
their pay and targets via a real-time online
statement. INCA is transparent and so it
automatically creates a full audit trail. This
has helped to reduce the previous
administrative burden and as a result there
has been a reduction in unnecessary
admin support.
Immediate return on investment
The return on investment has been
measured in several ways, from a financial
standpoint sales productivity has increased
and directional selling has driven up the
sales profit margin. However staff are
more motivated with target setting and
incentives to drive sales. They can see an
immediate breakdown of how their
individual and team sales are impacting on
their monthly salary so they can focus on
selling rather than shadow accounting.
In summary, Practique’s INCA software
has effectively helped to shape STA
Travel’s business model to meet its
internal targets, drive up sales and
ultimately positively impact the business’
bottom line.