Sales Compensation Administration: Easier Said Than Done

It is one thing to design a sales compensation plan, but it is often more challenging to administer the plans.

Calculating or Administering Commissions can be a challenge, especially when there are numerous sales people, multiple data sources and tight time schedules. There are many ways to automate steps or stages in the sales compensation calculation process. This can help address the aforementioned challenges. It can also increase accuracy.

Data used for sales commissions can come in many forms and from a variety of sources. If your company compensates sales people on what your business/ channel partners or distributors sell then you are most likely relying on third party sales data. This can present numerous challenges before you have accurate and reliable data from which to calculate commissions.

Before jumping on the sales compensation software train you need to first determine how best to administer your commissions whether it is by using software such as MS Excel, or more sophisticated solutions addressed in the section below.

Sales Compensation Software

There are a number of software applications and hosted solutions for calculating sales commissions.

Here are a few of the options you have for automating commissions:

• MS Excel or Custom Built In-House Solutions
• SPM (Sales Performance Management)
• EIM (Enterprise Incentive Management
• OnDemand Sales Compensation

MS Excel or a combination of in-house developed applications are the most common solution for small sales teams. These can be quick to set up and modify but as they reach a certain size or complexity they can become unstable and more complicated. We have and continue to use MS Excel to calculate and process commissions for many small and mid size companies.

SPM or Sales Performance Management is a term being used by a few software vendors and represents the next level up in sophistication and feature/ functionality from Excel. SPM Solutions are expected to fill the gap between in-house designed compensation systems, many of which rely on MS Excel, and the traditional EIM Solutions. These applications help automate much of the sales commission calculation process and provide valuable reporting tools. They can also help you create and benchmark sales commissions metrics.

Currently there is quite a jump in price between MS Excel based in-house solutions and EIM and that is the market niche these SPM Solution providers hope to address. This type of solution may be right for you if your company is mid size or approaching that size.

EIM or Enterprise Incentive Management solutions are the high end solutions for managing pay across an enterprise. These are not limited to sales people's plans but can also include other employees, business partners, executives, customers, etc.

EIM takes performance management several steps beyond just calculating sales commissions and often include robust plan modeling, reporting and integration with other sales operations applications. Many include detailed reporting pages designed for the sales reps, managers, and business partners. Think of this as a convergence of commissions automation and sales analysis.

While EIM and SPM solutions can automate and improve the sales commissions process they do not guarantee an effective compensation plan. If you have a poorly designed or misaligned sales compensation plan all this software will do is to process these plans more efficiently.

OnDemand Sales Compensation solutions are targeting the 50-1,000 users market and are essentially the same as the SPM referenced above in terms of functionality. Where they differ is in the behind the scenes mechanics of how the solution is hosted. We can help you decide if this is the right solution for your business.

Channel POS - 3rd Party Sales Data

Collecting and cleaning data from business partners including POS (Point of Sale) data from distributors, OEMs and resellers can be a daunting task. We can help you automate this process and provide a strong ROI.

For companies that rely on 3rd party data to pay commissions this stage of data collection, cleaning and allocation to the appropriate sales person is often the bottle neck in the sales compensation process.

Just like there are solutions for automating and hosting the commission process there are also companies that specialize in handling the data collection and cleaning process. Let us help you find the right solution to automate this process.