M

ore often than not, problems with incentive com-

pensation plans can be attributed not to the plans
themselves but rather to the systems, processes and
people associated with administering and managing the
plans. Inflexible, hard-coded systems; inefficient, labor-
intensive processes; and lack of expertise and
resources are the root causes of nearly all problems
with incentive compensation plans.
Three companies that have solved these problems
and turned their sales commission plans into a source
of competitive advantage are ADVO, Wyeth and GE
Healthcare.
ADVO Addresses Lack of Best Practices
Everyone has received a missing child postcard and
advertisement in the mail at some time if not at
least once a month. The successful company respon-
sible for combining a public service with junk mail
is direct mailer ADVO Inc. of Windsor, Connecticut.
Focused on building on their success, ADVO
wanted to change the behavior of their salespeople
to be more consultative. But instead of focusing
on supporting its sales staff, corporate attention
was being consumed by commission processing.
The salesforce in turn wasnt promoting the right
messages to prospects. Rather than selling
products as key to a customers business growth
and success, the mind-set was one of push product
and get paid.
However, their existing mainframe sales commis-
sion system built internally over the years was
inflexible and proved to be a constraint that prohibited
them from deploying a more innovative incentive com-
pensation plan. Despite a lot of time spent by IT on
upkeep of the system, their plan remained out of
alignment with their strategy.
Furthermore, the system was administratively inef-
ficient, causing late and inaccurate payments and
resulting in distractions for the salesforce. Instead of
communicating with customers and negotiating deals,
salespeople were engaged in shadow accounting
and speculating about their futures.
ADVO knew they needed to find a solution. They
also knew they didnt simply want a new commission
system; they needed to find a company with expertise
in rethinking their incentive compensation manage-
ment processes. They began looking for help and
ultimately selected Synygy, based in Chester,
Pennsylvania, to provide ADVO with a plan manage-
ment outsourcing solution where Synygy assumed
responsibility for the management of ADVOs sales
commission plan.
With Synygy, ADVO now has the flexibility it
needs to design plans that are truly aligned with their
strategy. Synygy does this by being able to quickly
adapt to desired changes, paying salespeople accu-
rately and on time and streamlining the reports that
go to sales associates, reducing them from as
many as 100 pages of data to a mere five pages of
meaningful information. They see their goals, their
progress toward them, their reward for goals met,
and more importantly they see the bigger ADVO
business picture.
As a result, ADVO was able to change how their
salespeople approach the sales process. They were
also able to redirect their internal human resources,
accounting and information technology resources to
sales support and business growth initiatives that
were critical to the companys success all while get-
ting greater control over and better visibility into the
entire incentive compensation management process.
Wyeth Finds R
x
for Resource and
Process Deficiencies
Wyeth Pharmaceuticals, a division of the pharmaceuti-
cal and healthcare products giant Wyeth, headquar-
tered in Madison, New Jersey, is a longtime supporter
of performance-based incentives. But the internally
developed system the company was using lacked a
clear link between performance and payments.
Further complicating the situation, Wyeth merged
with another company, American Cyanamid, and dou-
bled the size of its salesforce. The two companies had
different methods of managing performance and driv-
96
Case Study: Solving Incentive
Compensation Management Problems
Mark A. Stiffler | President & CEO, Synygy
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ing business behavior. The executives at Wyeth won-
dered how they could marry two sales cultures when
they couldnt even get one incentive compensation
system to work effectively.
Wyeth turned to Synygy for help. Opting to fully out-
source the management of their incentive compensa-
tion plans, Wyeth now takes advantage of Synygys
domain expertise instead of diverting precious internal
IT infrastructure and analytical resources to maintaining
an in-house system.
Wyeth has over 50 plans that cover different
groups, products and levels in the organization.
Participation of sales reps in the plans depends on the
products they sell and where they work within the
organization. With Synygys assistance, Wyeth has been
able to keep the plans in sync so that a consistent mes-
sage is delivered throughout the company.
In addition, Wyeth creates specific budgets for its
incentive compensation programs and tracks how the
funds are spent. If Wyeth goes over budget for a partic-
ular product because it is outperforming expectations,
Synygy can tell them why. Wyeth now also can tie pay-
ments to specific reps and their performance so that
there are no longer any end-of-year surprises.
Having visibility into sales results and getting paid
sooner enhances the satisfaction of the sales reps,
which in turn improves performance. Wyeth salespeo-
ple now receive their incentive compensation payouts
twice as often as before and monthly sales reports are
available online and updated monthly, with information
available one week earlier than when paper-based
reports were used.
GE Healthcare Reaps Healthy Rewards
The feedback at a sales meeting five years ago for
Amersham Biosciences (now a part of GE Healthcare
Biosciences, a $3 billion business based in Little
Chalfont, U.K.) was loud and clear: Sales reps had lost
confidence in the companys incentive compensation
systems. The companys sales compensation system
had not kept pace with its increasingly specialized
salesforce, growing product line and the need for com-
pensation plans targeted to each sales role.
Incentive plans were being managed with four dif-
ferent software tools, including Microsoft Excel, Lotus
Notes, Oracle and Business Objects. When the compa-
ny was smaller, the system wasnt as troubling. But the
company was acquiring two to three companies per
year and soon had 175 sales professionals operating
on 30 different incentive compensation plans in four
sales areas.
The manually produced spreadsheets were neither
flexible nor adaptable to changes. There were no exec-
utive-level reports and no way to calculate what if sce-
narios. It often took up to six weeks to calculate
payments and four weeks to correct errors. Sales
reports were invariably late because the company did all
its sales territory reporting and incentive compensation
processing in-house. Averaging 18,400 sales reports
each year, the mailing task alone took an entire day
each week.
The company knew it needed outside help and
decided to outsource its incentive compensation man-
agement process to Synygy. Synygys staff of plan man-
agement experts now produces a full suite of sales
reports including new modeling and analytics that the
old system couldnt produce and the company has
been able to refocus information management
resources on other projects. Amersham saw a 40 per-
cent return on investment in the first year and a 175
percent ROI in the second year.
Today, GE Healthcare BioSciences makes its quar-
terly incentive payments within four weeks of the quar-
ter close and has the highest level of sales rep
confidence in their sales reports and incentive compen-
sation in more than five years. In fact, there has been a
20 percent drop in sales rep turnover.
Outsourcing Is the Solution
Managing incentive compensation plans is not a core
competency of most organizations. Similar to payroll,
it is now something that can be outsourced where
another company maintains plan rules, does data vali-
dation and cleansing, calculates and certifies results,
communicates individual performance to each partici-
pant and analyzes plan effectivenessfor management.
Each of the industry-leading companies highlighted
in these cases chose to outsource management of their
incentive compensation plans rather than continue to
devote disproportionate amounts of time and resources
struggling with in-house processes and systems.
Turning outside their own organizations to improve flexi-
bility, efficiency and effectiveness of their plans, these
companies are now realizing the full potential of their
pay-for-performance programs while focusing on doing
what they do best.
Strategies for Global Leaders
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