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The Onus of Bonus

Getting a handle on incentive compensation is no small task. Software can help. Also: Annual reports via video.

That’s complex enough. But four years ago, company management decided it needed to reward salespeople for selling specific instruments. Until then, team members had been compensated based on the dollar volume of sales alone. Not surprisingly, that setup had sales staffers hawking the most expensive products and disregarding smaller-ticket items.

Philip Gottlieb, vice president of finance at Carl Zeiss MicroImaging, says it would have been impossible to rework the company’s sales strategy without better compensation software. Zeiss’s existing program was a proprietary mainframe application that required a programmer to make even the simplest adjustment, such as adding a new hire. “If the market changed or our strategy changed midyear, we’d find ourselves sitting around a table saying, ‘We can’t implement that in a comp plan,’” recalls Gottlieb. “It was trying to turn an elephant with a flyswatter.”

The company’s new ICM program, from Synygy, has sped up commission reporting. In addition, the finance department can make an ad hoc change — for instance, adding a promotional incentive — in a day or two. Errors are also way down. Equally important to Gottlieb, the system now rewards salespeople for instruments sold as well as dollar volume. In fact, sales staffers can use the software to run what-if scenarios that forecast commissions on specific deals. “The behavior [of the sales force] has changed,” says Gottlieb. “They understand now what they need to do to optimize their commissions.”

Long Time Loading

Success stories have not galvanized the market, however. A recent survey conducted by Aberdeen did reveal that best-in-class companies are three times more likely to be using ICM software than “normal” or “laggard” companies. But Aberdeen also found that less than 10 percent of the surveyed companies have actually installed ICM systems. Moreover, only about one in four reported that they planned to do so.

The hang-up? Mostly the considerable time and effort it takes to change a corporate compensation plan. The prospect of a lengthy software rollout only adds to the fear factor. Beyond the actual loading of software and scrubbing of data, it takes time for employees to get comfortable with new applications and new ways of doing things. Network Appliance purchased an ICM system some seven years ago. Gerry Rice, worldwide field-operations controller and vice president of finance at NetApp, says it was a difficult transition — one that, in fact, is still ongoing. “The usage of the tool has evolved from basics to a more sophisticated [approach] in applying variables and measurements,” notes Rice. “We continue to make improvements in our usage of the full functionality of the program,” she adds.

To ease customer concerns about endless deployments, some ICM vendors deliver the software as a service. Xactly, Centive, Varicent, and Halogen host their applications on their own servers, providing customers with Web-based access for a monthly charge. That fee ranges from $10 to $50 per month per user (in some cases, volume discounts shrink the price). More-established vendors, including Callidus, also offer software-as-a-service models.

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