How to Avoid the Most Common (and Costly) Sales Comp Package Implementation Mistakes

August 2011

Agenda

Welcome & Current Landscape

The Most Common Mistakes

The Silver Bullet Bad Requirements Misaligned Arrangements

Next Meeting

Copyright 2011

Current Landscape

The Way In Which Organizations Go to Market is Growing in Complexity

Rapid growth, evolving sales models and new incentives are leading to more complex, error prone and difficult to operate back office systems

Flexible multichannel models are now required to handle customer demands for both fast, simple transactions as well as highly complex solutions Direct sales Advanced solutions team Channel partners

The job of sales rep has become more complicated as well - 62% of companies reporting a sales rep ramp up period of more than 7 months

McKinsey Quarterly, Harvard Business Review

Copyright 2011

Current Landscape

Cost of Sales is Increasing While Chronic Sales Issues Persist

Over $1 trillion is spent each year on sales forces

Up to 30% of sales time is spent on low value activities with only 10% of a salespersons time actually spent selling It is not uncommon for a sales force to experience 2025% rep turnover. When taking into account search costs, training costs and lost productivity it can cost more than $150K to replace a sales representative Over 50% of companies are making changes to their incentives during the plan year as well as at year end

Bureau of Labor & Statistics, Sales Executive Council, Proudfoot Consulting, Alexander Group
Copyright 2011

Current Landscape

As a Result, the Sales Back Office is Constantly Being Asked to Complete Important and Urgent Projects
Support for new sales roles and coverage models New compensation plans and mid year contests and incentives Ad hoc reports to support forecasting and finance requests for information Support for new business pilots

Copyright 2011

Current Landscape

The Back Office Has Also Been One of the Last Places to Automate and Progress is a Mixed Bag
OnDemand CRM solutions are now prime time and deliver solid contact and opportunity management functionality.
Pricing and configuration solutions are beginning to hit their stride (e.g., BigMachines) and improving the quality of front end data Over 90% of compensation design and quota setting is still done via Excel Performance Reporting & Analytics tools are prime time, however, companies still struggling with data quality and availability issues

Compensation administration is performed on legacy systems (including Excel) for over 80% of organizations. Most companies report persistent and significant challenges in this area
Copyright 2011

Current Landscape

The First Decade of Sales Compensation System Solutions Has Been a Rocky Road
> 80% projects fail to deliver full scope
Ran out of money/conviction before original goals were attained

The actual business value realized is limited compared to the resources invested

Many companies cite the same problems they had before their installation
Takes too long to implement change Systems are error prone and difficult to operate Field not satisfied with statements or reports

Source: CompA Fall 2010 Survey

Copyright 2011

The Top 3 Implementation Mistakes Quick Poll

Silver Bullet Syndrome

Bad Business Requirements

Misaligned Arrangements

Copyright 2011

Most Common Mistakes The Silver Bullet

Technology Will Make Everything Better

Compensation Processing Challenges Are Assumed To Be Primarily Technology Problems

Some technology sales people can contribute to this belief

Focus Is On Selection Criteria And Functionality Scoring

Selection team doesnt usually fully understand what they are looking at Requirements are typically plan oriented (e.g., tiered rates, rules) not process oriented Focus is not on identifying root causes underlying problems (e.g., data insufficiency, hierarchy hygiene, skill and capacity gaps etc.)

Copyright 2011

Most Common Mistakes The Silver Bullet

New Technology Looks Really Good When You Are Coming From A Complex Legacy World

Copyright 2011

Most Common Mistakes The Silver Bullet

Drag & Drop Rule Builders and Graphical Custom Reports Look Much Simpler . However .

Model & Administer

Allocate Credit

Calculate & Pay

Report

Copyright 2011

Most Common Mistakes The Silver Bullet

There Are Often Underlying Issues that Must Be Resolved Before New Technology Can Work Its Magic
Data
Quality Completeness

Complex Business Policies

Chargebacks / Returns / Replacements Territory changes Terminations & transfers Cross Period Adjustments Etc.

Existing Processes & Technology

Who to Pay / Splits HR Functionality (e.g., Producer management, draws, debt management) Change and quality management Redundant activities across departments

Copyright 2011

Most Common Mistakes The Silver Bullet

Some Ideas to Consider

Complete a thorough analysis of your processes, policies and technology prior to commencing a vendor selection Stay focused on the functionality you need to address the issues discovered above Issue a detailed scenario based RFP to a short list of vendors Visit vendor office and have them walk you through their solution in detail
Understand vendor language (e.g., configuration vs customization vs extension) Just because the requirement is met, would anybody actually do it that way in a production environment

Make sure you really understand how your new application and business architecture will add value

Copyright 2011

The Top 3 Implementation Mistakes

Silver Bullet Syndrome

Bad Business Requirements

Misaligned Arrangements

Copyright 2011

Most Common Mistakes - Bad Business Requirements

Why Are Requirements Done So Poorly?

Being in a hurry to install new technology shifts the focus away from streamlining operations and improving communications. IT can often run ahead of the business. The business is usually consumed by day- today operations and has little extra time

No one really understands the big picture

Lack of vision for how it should work in the future

Copyright 2011

Most Common Mistakes - Bad Business Requirements

The Result

Late implementations that exceed budget as major new discoveries are made late in the project timeline
Missed business improvement opportunities Business policies are not simplified nor standardized across the organization (e.g,. rep transfer rules, chargeback rules etc.) Adjustments and split handling can become more complex versus simplified Dispute resolution processes are not streamlined

Missed technology improvement opportunities Inadequate legacy input files are fed into new system rather than undergoing a redesign (i.e., garbage in = garbage out) Unwieldy custom legacy code is retained and bolted on to new solution Pipeline performance is optimized at the expense of data transparency

Sometimes it can even make life more difficult as people try to do their work with a poorly implemented and unfamiliar tool

Copyright 2011

Most Common Mistakes - Bad Business Requirements

Critical Success Factors

Build in time to do it right. Utilize a structured approach to quickly get into the details and design value added solutions
Challenge and simplify outdated and complex business policies Reduce cycle times Eliminate redundancies

Engage end-users extensively (e.g., DILOs, process reviews, design workshops, solution walkthroughs / sign-offs) Leverage experienced delivery resources who understand the complexities of compensation Build one team with a shared definition of success

Copyright 2011

17

The Top 3 Implementation Mistakes

Silver Bullet Syndrome

Bad Business Requirements

Misaligned Arrangements

Copyright 2011

Most Common Mistakes Misaligned Arrangements

Misaligned Arrangements
Large Fixed Fee Arrangements

Abdicates control to integrator (e.g., approach, staffing). Incents integrators to deliver the minimum acceptable scope as quickly as possible. Anything not spelled out in advance will become a change control (these can really add up)

T&M Contracts With Band Of Contractors

Incents maximum hours Focus is usually on acquiring technical skill sets not on experienced consultants who can design solid business solutions Contractors rarely understand big picture (e.g., laying bricks not building a cathedral) Client organization must provide leadership, discipline, approach and vision

Copyright 2011

Most Common Mistakes Misaligned Arrangements

Where Do Good Business Requirements Come From?

New, Inexperienced Consultants ?

Offshore Developers ?
Copyright 2011

Experienced, On-site Analysts?

Most Common Mistakes Misaligned Arrangements

Match Resourcing Model to Your True Needs

Large SI Model Offshore Model Compensation Specialists Incomplete vision and/or limited business capacity Looking for help designing new and improved end-to end solutions Have core internal team but need to add experience to complete the project

Know what you want and can articulate it easily Looking for help with project processes and disciplines

Know EXACTLY what you want and can document it in precise detail Require additional technical capacity Have experience communicating complex requirements to an offshore team Mandate for lowest cost

Desire for risk sharing

Budget is not an issue Firm of choice for your organization

Mandate to deliver value

Copyright 2011

Most Common Mistakes Misaligned Arrangements

Some Ideas to Consider

Identify internal strengths and weaknesses across core delivery skill sets (e.g., project management, business analysis, solution design, testing etc.) Develop a risk sharing model that balances control, quality and costs Determine resource capacity needs

Utilize short term performance based contracts regardless of type of resource (e.g., SI, contractor, independent consultant)
e.g., fixed fee analysis phase for management compensation

If not satisfied, escalate and resolve sooner rather than later

Copyright 2011

Most Common Mistakes Bonus

On-Going Care & Feeding

Imagine, you have finally completed a long awaited landscaping project Careful selection of landscaper Put up with back yard torn up all summer Dealt with issues / delays Accepted final product

Now imagine
You forget to water the garden You dont set aside time to fertilize or weed

Before long Your beautiful garden isnt looking so good

Copyright 2011

Most Common Mistakes Bonus

Maintain a Disciplined Operation

Successful projects are disciplined

in their approach

Successful operations are also

disciplined

Standard operating procedures for pay cycles and report generation Scheduled releases versus ad hoc solutions / work-arounds Version control on code base

Extensive testing before moving new functionality into production

Copyright 2011

Looking to Get More from Your Existing Operation or Recent Implementation?

Sales Comp Ops CheckUp
Identify gaps and underlying root causes
Document and benchmark core compensation processes Review organization capacity Review current business policies Assess existing technology

Design pragmatic business solutions Estimate and plan implementation efforts

Email info@compensationanalytics.com to learn more

Copyright 2011

Next Meeting
When: September 29th, 1:00pm CT / 11:00amPT / 2:00pm ET Topic:

How to Get More Out of Performance Reporting & Analytics

Questions? Email markcoleman@compensationanalytics.com

Copyright 2011