Observations from CFO Enterprises CPM conference

I had the opportunity to present at CFO Enterprises annual Corporate Performance Management (CPM) conference in New York last week.  Robert Kaplan opened the conference with an update on The Balanced Scorecard and Activity Based Costing.  He used some great examples of companies like Volkswagen to illustrate how organizations are mobilizing the entire company towards executing a few key strategies utilizing the Balanced Scorecard.   David Axson, of Accenture (formerly a partner at the benchmark research firm – The Hackett Group),  opened the second day with a great session on our need to recognize that the speed and impact of world politics, business events and even weather have an increasingly stronger direct influence on this year’s financial plan.   Organizations must be more nimble in their planning, forecasting and budgeting processes in order to survive.

Most of the speakers talked to the finance audience about alignment, strategy and execution.  Each and every presentation I attended mentioned increasing revenue and increasing forecast accuracy – from both a revenue and cost perspective.  The challenge I observed however is that many of the follow-on conversations led back to the traditional topics of how to improve budgeting, consolidation and forecasting.   This has been the traditional view of CPM over the years.   I believe that while this is important and necessary, it’s missing a key element - sales force alignment.   It’s hard to find an organization that doesn’t have strategies that involve penetrating new markets, selling more to customers, launching new products, yet there was precious little conversation about how to align and motivate sales teams in order to execute these strategies.  

Based on the feedback that I received at my session and the follow-on conversations I had with attendees, it appears that I hit a nerve. When CFOs think about strategy and organizational alignment their perspective on what sales should be doing is quite often at odds with what the heads of Sales believe.  One example of this disconnect is that most sales organizations are striving to introduce incentive plan simplicity.  Many CSOs believe their sales compensation plans are too complex, too confusing, too rigid, and are looking for ways to simplifying them in order to drive the desired behavior from their sellers.  Many of the leading compensation plan consultants argue that a good sales incentive plan should have no more than three components.  

Yet when CFO Research Services surveyed CFOS about the same topic, CFOs responded the most important thing that Sales could do to ensure reaching its goals is to Encourage Sophisticated Sales Behavior.   They want to drive up-sell, multi-year deals and other high-margin offerings.  The goal is to drive bottom-line improvements and overall customer retention.   Increasing sophistication is at odds with increasing plan simplicity.

Both the Sales and Finance leadership are motivated to improve sales but their views of the solution lead to conflicting tactics.  This is just one area of the discord.   Sales Self-Service, the right role for business analysis,  how best to set sales targets,  technology to support sales management are just a few of the topics that Sales and Finance need to agree on in order to work together to drive organizational alignment and driving increased high-margin business.

When considering how to execute strategy and improve organizational alignments CFOs and CSOs need to make sure that they are aligned first.


If you would like copies of some of the research I reference here just let me know and I will forward it to you. 

Six Trends document

On this blog, I have been writing about the 6 new trends in Sales Performance Management that I have observed over the past few months.  I have also had the opportunity to present these at  conferences and seminars.   Based on the feedback I have received, and some requests for a complete document,  I packaged up the list and put it in one document.    If you would like a copy it's posted at www.varicent.com  or leave me a comment here and I will forward it to you.

6 New SPM Trends - Trend 6 - Integration with More Applications

Traditionally a lot of Sales Performance Management Systems have been focused on the incentive compensation process.  While there can be many (occasionally hundreds) of input sources to an SPM solution, organizations generally consider outputs to be - commission statements, a payroll feed, and few summary reports.   

As SPM systems mature, it is more often the case that the SPM system houses the highest quality information in the organization about who is selling what to whom, at what price.  As commissions are paid of this data, it is normally the most scrutinized, up-to-date and accurate information in the company.  Organizations want to leverage this asset, typically by demanding new management reports.  This quickly moves to requests for more complex and broad-based reporting, often requiring new and different source data.  The natural evolution is then to make this information available to an even broader set of recipients.  This expansion generally requires feeding data to other systems.

 Some common examples are:

•          Feed information into a corporate data warehouse or business intelligence system
•          CRM integration between commissions and customer data
•          HR systems to integrate commission data with other payroll and compensation data
•          ERP system so that this information resides in the original system-of-record

Ensuring that your SPM system can pass data to other applications through standard interfaces like ODBC, web services and star schema generation allows compensation teams to provide compensation data in any format required by the receiving application.

Michael Dunne - 4 stages of Sales Performance Management

I just finished reading the draft of a whitepaper I commissioned with Michael Dunne.  Most people involved in Sales Performance Management know Michael from his years as an industry analyst with Gartner. He has a wealth of experience, and a unique perspective on this market.  

I asked Michael to write-up his thoughts on the evolution of Sales Performance Management.  He has segmented the adoption of SPM into four distinct phases and he provides guidance for organizations in each of these phases.  The full whitepaper and accompanying webinar will be announced shortly so keep an eye out for the announcement over the next few days. 

Follow @bhartlen or @varicent for regular updates and to get the details on the webinar and whitepaper when they are announced.

6 New SPM Trends: Trend 5 - Transition to the Cloud

Much has been written about the advantages of cloud based computing.  It’s not that cloud computing is new in 2011, but rather that many large organizations had thought that cloud based computing was only appropriate for small to medium sized businesses.  They were concerned that cloud solutions:

·     Would not scale to their volumes

· Would take away the ability to control upgrade timings

·   Would fail strict security and audit requirements

·  Could not offer the flexibility to meet specific and demanding requirements of large enterprises

There are compelling arguments for why cloud based solutions do provide significant benefit.  These include:

·      Reduced burden on existing, overburdened IT staff

·      Faster project start times (avoiding hardware procurement process)

·      Reduced initial investment and shared risk pricing model

·      Improved vendor support  - as they manage the entire hardware/software environment

The good news is that cloud computing has matured; the early adopters have paved the way, and software vendors have expanded their capabilities, offerings and platforms.  There are more options available to meet the specific needs of today’s complex organization.  For organizations that don’t want to co-mingle their data, there is a single-tenant cloud solution.  For those with security and firewall concerns, there is a new movement towards private cloud deployment. With this flexibility and configurability in deployment options, most organizations are now choosing cloud-based options for new Sales Performance Management implementations.

With the increasing array of options and flexibility in SPM offerings, it’s not simply an on-premise versus cloud decision facing organizations.  It’s much more complex.  Project teams are well advised to make sure that they consider both their requirements, and the specific options offered by their short-listed vendors.

 

 

6 New SPM Trends - Trend 2 - Sales Adoption of Mobile Devices

Last week I blogged about the 6 new trends I see in Sales Performance Management. The first trend was about the need to handle increased business complexity.  This week's blog is about mobile devices for sales teams.

It’s no surprise that Ipads, smartphones and other mobile devices are being adopted by sales forces everywhere. Smart devices are now outselling laptops[1].   It seems almost every week there is a new entrant into the tablet wars.  The market is expected to grow from 26 million to over 80 million tablet users in the US^[2] alone. 

Many questions are now being considered by sales organizations everywhere. What is the appropriate mobile device for the sales team?  What is the right set of functionality that needs to be delivered to the mobile device?    There is no universal right answer, and the adoption of mobile technology for sales teams is a broader issue than SPM.  There are three key things that organizations have to look at when it comes to mobile adoption - Device Support, Functionality, and Culture.

Device Support – What platform do you need to support?  On the tablet side, Apple has gone out to an early lead with about 68%[3] market share of all tablets sold.  The market however is still young and there is lots of room for technology advances.  Organizations must consider whether they want to take a device specific approach, or an agnostic approach.  Looking for vendors who support standards like HTML5 and browser agnostic support gives an organization the most flexibility in tablet support.  Applications coded specifically for a platform may have tighter integration with that platform, but will be more limiting in terms of device support as the market matures and shifts.

Functionality -   Once the platform is decided, and then you must decide what functionality you want to deliver on the mobile device.  In most SPM scenarios simply replicating a full desktop or web experience on a smartphone doesn’t work.  Have a look at your current commission statement and imagine how much would be viewable on a Blackberry, Android or Iphone window.  Typically commission reports are multi-page statements with lots of columns and in order to comprehend the entire statement you would have to be able to look at more than one or two columns at a time.  Organizations are well advised to design reports and outputs specifically for the mobile device, and not settle for delivering full reporting onto mobile devices – just because you can.

Culture - this is often overlooked when considering mobile device support.  Some Sales Leaders want to ‘get everything on the smartphone and tablet’ to avoid all the wasted time lugging around laptops, trying to figure out VPN or other connecting activities.  The idea of ‘right here right now’ information delivery has a huge value over waiting for the sales reps to connect when they are back home, in a hotel or office.    There is another train-of-thought where sales leaders are concerned about everything that takes away from their sales teams ability to have customer facing time during the day.  The idea of delivering commissions, quota and territory update information constantly throughout the day is a distraction.  Their belief is that this kind of information should be delivered to the laptop/desktop when the reps are not out in the field.

The overriding trend we are seeing in mobile device support is that the adoption of mobile technology for sales is directly proportional to the frequency of data updates.  Organizations that report on sales and commissions daily are much more likely to want to drive this information out to mobile devices than organizations who update their data monthly or quarterly. 

---

[1]  IDC Worldwide Quarterly Phone Tracker, January, 2011

[2]  Forrester Research eReader Forecast 2010 – 2015 (US)

[3] IDC Worldwide Quarterly Media Tablet and eReader Tracker, September 2011

Six Trends in Sales Performance Management

Sales Performance Management (SPM) solutions are proving to be incredibly valuable for organizations that adopt them.  According to research firm Gartner, organizations that implement compensation management solutions can expect to reduce errors by more than 90%, reduce processing times by more than 40% and reduce IT/Admin staffing by more than 50%.^[1] 

SPM solutions are becoming attractive not only because early adopters are achieving success but also because there is increasing pressure on compensation teams to deliver more.  Organizations are demanding more than just accurate commission statements that are delivered on time.   They need visibility, analysis and oversight into the entire variable compensation process as they want to understand better what is working and what isn’t.   

While the majority of organizations still manage incentive compensation with home-grown solutions, or lots of Excel spreadsheets, more organizations are retiring these solutions in favor of a more complete packaged incentive compensation and sales performance management system. With this rapid SPM adoption new trends are starting to emerge.  This paper discusses the top six trends that are influencing organizations who are considering implementing new software solutions to help them improve sales performance and incentive compensation practices.

Over the next few weeks I will discuss each of the 6 trends.     

The first...

Trend 1:  Increasing Business Complexity 

In a recent study conducted by the Economist^[2] an overwhelming majority of survey respondents (86%) think that business has become more complex in the past three years, many describing their businesses as chaotic.  This increasing complexity is often driven by the reality that organizations produce more products, sell in more markets, through more channels with more complex workflow processes.  These organizations also have an increased need for speed when it comes to getting results.  Adding to this challenge is that many organizations are struggling just to keep up with an ever-increasing volume of data.  Over the past couple of years organizations increased the amount of data stored by a staggering 62%[3].  With this hectic pace of change it is easy to see why existing technologies, plans and processes in sales compensation cannot keep up with new requirements.

Most organizations do not expect the rate of change nor the ability to capture data to decrease in the coming years.   Most home-grown and spreadsheet based systems were implemented years ago and were never designed to handle the volume of data, rate of change, expanding product lines and desire for increased analytics, modeling and reporting.  It is not uncommon to see that today’s compensation systems need to be able to efficiently handle millions of transactions a day in order to manage sales reporting and incentive compensation calculations.  

When considering SPM technology, evaluation teams must consider their requirements to quickly load data, calculate commissions and produce the necessary outputs.  They should also estimate, to the best of their ability, data volumes and complexity for the next few years to ensure that the application is capable of handling those volumes.  Organizations looking to implement new systems are well advised to try and determine their performance requirements and conduct a scalability and performance test when looking at acquiring new software.

---

[1] Gartner Marketscope for Sales Incentive Compensation Management Software, Michael Dunne, March 2010

[2] The Complexity Challenge, How businesses are bearing Up,  Economist Intelligence Unit, 2011

[3] EMC annual shareholders meeting presentation.

My perspective on CSO INSIGHTS 2011 Sales Compensation and Performance Management – Key Trends Survey

 

Jim Dickie and Barry Trailer of CSO INSIGHTS do a great job every year of taking the pulse of sales leaders and sharing their survey results and opinions.  The 2011 Sales Compensation and Performance Management – Key Trends survey is another good read from Jim and Barry, and as we have come to expect, their insights and observations add a lot of value to the raw results.  

A copy of the survey results is available at   http://bit.ly/pbvNHG

As I was preparing for a conference presentation next month, I was re-reading the results and I was struck by one chart in particular.  When the question was asked – What aspects of your comp plan would you change, and in what order?   

The top three results were

• Management’s ability to judge plan effectiveness
• Management's visibility into sales performance
• Ability to model plan revisions

The bottom three, in terms of priorities were

• Managing credits, exceptions and adjustments
• Minimize inquiries and disputes
• Support compliance requirements

The complete list is good, and I am sure that anybody reviewing it could not disagree with it as a whole.  This list however, represents the perspective of sales leaders as it relates to compensation.  I wonder, if we asked CFOs, Compensation Teams, and HR leaders how they feel, would we get the same list and the same priorities.  My hunch is that while other groups wouldn’t disagree with any of the requested changes, they believe that the fast and accurate payment of commissions, and minimizing inquiries and disputes will increase sales job satisfaction and give the sales team more time to sell by reducing their administrative effort and shadow accounting efforts.  This could be argued as one of the biggest benefits of automating the commissions management process and therefore made the top priority for the compensation team.

I have often talked about the need for cross-functional organization alignment, around goals and priorities when implementing a Sales Performance Management System.  If the cross-functional team isn’t aligned as to what the short and long term goals and objectives are, then the projects are in risk of cost and time overruns and missing expectations of some group when it is delivered.   What this chart got me thinking is that it’s not enough to make sure that the list of goals is correct, but also that they are prioritized and agreed upon by the whole team.   Getting alignment from the start will save everyone a lot of time and effort in the long run.

Isn’t Sales Performance Management software just part of CRM, HR or ERP systems?

I am often asked why Sales Performance Management isn’t just a part of some other enterprise application.  Based on the background of the individual asking, ‘some other application’ is generally the organization’s CRM, ERP or HR system.    

The truth is that while SPM touches all of these areas it is not well served by any of them.  The design point of each of these applications is not Sales Incentives. Adding a few columns and a few reports doesn’t solve the problem of accurate, timely and efficient payment of variable compensation.  Nor does it start to solve the challenges around modeling, reporting and analysis of sales performance.

Let’s look at each of them.  Some would say that Salesforce.com, Microsoft Dynamics CRM or other CRM solutions are the obvious choice of where sales commissions should be handled.  For many organizations the CRM is the place to capture customer centric information and related activities.  It stores what the customers purchase, it may capture what they order, but very rarely does it capture who gets credit for the sales of those items, how commissions were handled, hire and termination dates of potential recipients of commissions, and what attainment towards Quota the credited sales rep was at in order to determine accelerators.   This is just a short list of the things that are needed in a modern sales compensation system.  Without that relevant data it is impossible to calculate commissions simply by looking at the CRM.  Loading all of the data and building the calculation logic that is required is also not possible or not in scope for most CRM solutions.

Many say Success Factors, PeopleFluent, Taleo, Workday or some other HR or Talent Management solution is the place for compensation and benefits information and therefore the place to capture information about variable pay.  The challenge is that HR systems do not track detail about what customers purchase what products.  This is critical to a sales compensation system.  HR systems do not capture the components of the plan in order to run complex calculations needed to determine specific payouts.  In fact, most HR systems are generally good at data collection and reporting, but do not have the concept of a calculator or modeling engine as part of their solution set and therefore should not be used for sales compensation.

Let’s have a look at ERP solutions.  ERPs are assumed to be the place that houses all the transaction data needed for calculating commissions.  While the transactions are a key ingredient to a compensation system, ERPs were not designed to manage commission exceptions, overrides, splits and plan adjustments that are the course of business in incentive compensation.  The concept of prior period adjustments, claw backs, holds, spifs and draws are not common to the process efficiency mindset of ERP solutions.

None of these systems were designed for sales commission’s calculations purposes, and while they all have some of the data needed, none have all the data nor  the dispute resolution, plan modeling and other necessary functionality.  These systems are not well suited for your sales performance and commission management needs. 

So how are organizations managing this critical process? According to Gartner, nearly 90% of organizations with over 100 sales people are still managing commissions with home-grown solutions, Access databases, Excel and manual effort.   Outside of North America there is even less automation.   A number of organizations have come to realize than in order to deliver timely, accurate commissions, and in order to design and implement plans that drive the sales behavior they want, they must look to specialized software for this task. Software that can accept data from a myriad  of data sources,  determine the proper crediting for all the incoming transactions,  calculate commissions, and then produce commission statements, reports and analysis.   Modern SPM systems also allow compensation teams to model different scenarios, analyze plan effectiveness, manage the territory and quota processes as well as calculating commissions.    

Organizations that implement SPM systems are more likely to drive down administrative costs significantly reduce errors and put more selling time back into the hands of the sales team

New Presentation for Spotlight on Sales Compensation in Chicago

I have been asked to present on Keys to Success when implementing a Sales Performance Management System at the upcoming WorldatWork Spotlight on Sales Compensation in Chicago (August 24-26).  I have been fortunate that over the years I have met a lot of very successful people who have done just that.  I have collected a lot of their advice and rolled it into a top 10 list.   For WorldatWork’s conference this year I will be joined by Vivian Adashek who will be talking about their implementation at Manpower.  She is a joy to work with, and brings some great experiences and practical advice for any new project manager.  Anyone starting on the SPM journey will be well served by listening to what Vivian has to say.

Specifically, we’ll be covering issues such as:

• Ensuring all functional areas are aligned to the same goals
• Key considerations for reporting
• Things to consider for testing, history tracking and data integration
• Role of Information Technology groups

Please comment or share this post. If you have advice for new project managers please share them, and I will continue to add to the list and make it available.  If you have questions feel free to post them as well and we will try to help.

If you’re attending WorldatWork’s Spotlight on Sales Compensation conference, please visit us at exhibit #7 and attend our workshop (Workshop Code: C15TH4) on Thursday, August 25^that 4:15pm.

Contact Paul Peters at 647.260.1556 or ppeters@varicent.com to set up a meeting while we’re there. We value your feedback and insights.

SPM Keys to Success - Advice from Hertz

It’s always great when someone who has gone through the trials and tribulations of implementing an enterprise software application are willing to share their experiences.   I had the great pleasure of talking with, and then presenting with Lynn Ferrara, Senior Director of Global Compensation for Hertz at WorldatWork's annual TotalRewards conference in San Diego this week.  Lynn has just come through a roll-out of a new SPM solution across multiple business units for Hertz.  

Today's session  focused on providing some guidance for organizations who are just starting out on the Sales Performance Management journey.  As is often the case when I have these conversations I found her insight invaluable.  

 Lynn's advice can be summed up in four key points:

Reduce and Improve Reporting – I blogged about this earlier, but Lynn echoes the need to create mock-ups of the reports that you plan to produce and run them by your end-users.  Her advice to project managers is to do this early, at the very outset of the project.   In the end, it’s the reports that contain the value for management – you must make sure that the reports you design provide the value desired.  Lynn also advises that just automating the reports you have today, will often not meet the requirements of management.  If this is done early in the project, any mis-alignments are identified while there is time to adjust the project plan.  Agreeing on reports creates alignment, avoids disappointment, delays and cost-overruns later in the project. 

Allow Enough Time for Data Integration - different reporting systems can provide data on different time tables (i.e. Weekly versus monthly), in different currencies, converted at different rates, and from disparate manual systems.  Working to get a common, reliable set of input data often takes going back to source providers and working creating new or different extracts, schedules and formats.   This activity usually takes longer than most team allow.  

Consider Testing Requirements Early – when implementing a new system, you have to consider that a lot of things can change in the compensation system that will make testing a challenge.  One common example is that the source data has been updated since the compensation data was calculated.  This happens as people make corrections and adjustments to source data when errors are discovered downstream.  For most organizations it is nearly impossible to track all of the data changes to the source data.  This means that that data that was used to calculate sales compensation in the old system is different than the source data for the new system.   Add, manual overrides, currency fluctuation, errors in the current systems and processes and other data inconsistencies, and it is virtually impossible to come up with exact the same commission results for from the old and new system.  At the outset of the project, teams are well advised to think through a testing plan thoroughly, and setting realistic expectations.

Communicate, Communicate, Communicate – there are many interested parties when a new incentive compensation management system is implemented.  Constant communication with the payees, Information Technology groups, the executive team, Sales Management and the plan administrators are all key to ensure success in a Sales Performance Management system.  Lynn advises that project managers should allot more time to communications across the groups in order to both train them on the new system, but also sell the solution that you are building.

  

Again I want to thank Lynn for taking the time to share her thoughts with the SPM community.