The Complete Introduction to Incentive Compensation Management

Palak Mazumdar

Introduction to the Incentive Compensation

Incentive compensation is a kind of variable gain in which a salesperson’s or other employee’s earnings are directly attached to the amount of product they sell, the completion of their team, or the success of the organization as a whole. Incentive compensation management is the vital use of incentives to drive better business outcomes and more tightly regulate sales representative behavior with the goals of the organization.

Incentives in an incentive compensation system can take several forms and may include bonuses, commissions, prizes, SPIFs, and recognition. Incentive compensation programs are ideally designed so that salespeople can optimize their rewards as the company maximizes revenue.

Preferably, a company’s incentive compensation plans should be designed so that the company’s salespeople can make the most money when they help accomplish the company’s most prestigious sales goals. Going to this point can be challenging.

Incentive Compensation Management Certification Exams

1. IBM Incentive Compensation Management V10 Specialist

IBM Incentive Compensation Management V10 Specialist exam will certify that the thriving candidate has the fundamental knowledge necessary to implement IBM Incentive Compensation Management as of v10 according to design terms that give changeable incentive compensation processes.

The candidate has a general perception of IBM Incentive Compensation Management as of v10 software, implementation, troubleshooting techniques, public administration, and security. This candidate can support variable incentive compensation solutions by deploying and implementing IBM Incentive Compensation Management in enterprise circumstances with supervision and has contended in at least one implementation project.

C1000–028 Exam Details

2. Oracle Incentive Compensation 2018 Certified Implementation Specialist Certification

An Oracle Incentive Compensation Cloud 2018 Certified Implementation Specialist obtain a strong foundation and expertise in selling and implementing Oracle Incentive Compensation solutions.

1Z0–1015 Exam Details

  • Exam Name: Oracle Incentive Compensation Cloud 2018 Implementation Essentials
  • Exam Number: 1Z0–1015
  • Exam Price: $245
  • Format: Multiple Choice
  • Duration: 120 Minutes
  • Number of Questions: 75
  • Passing Score: 66%
  • Validated Against: This exam has been approved against 18B.

An Oracle Incentive Compensation Cloud 2018 Certified Implementation Specialist possess a strong foundation and expertise in selling and implementing Oracle Incentive Compensation solutions.

This certification includes topics such as Model and Configure Incentive Plans, Payment, Assign and Credit Participants, Transactions & Compensation Calculations, Reporting, Common Applications Configuration for Incentive Compensation. Up-to-date training and field experience are recommended.

Who Owns Incentive Compensation?

According to research from the SMA, sales leadership and sales operations are the parts that most possible create and manage an organization’s compensation plans.

Other functions, such as marketing, finance, human resources, and IT, may also be possibly concerned in managing sales compensation plans.

These various functions may play distinct roles in creating and maintaining a company’s incentive compensation plans. Ownership of compensation plan design and management can also differ by industry or company policy.

According to SMA, in almost 50 percent of organizations, sales operations is useful for designing the incentive plan, changing the plan, assessing program effectiveness, assigning salespeople, and resolving conflicts. In 44 percent of organizations, sales leadership is responsible for communicating the plan structure to the field. In 49 percent of organizations, finance carries responsibility for budgeting and performing cost impact analyses of various plan changes.

Key Incentive Compensation Software Features

To effectively handle incentive plans to drive sales behavior, technological solutions should include these key features:

1. “What-if” Scenario Modeling:

Sales incentive technology should allow scenario planning skills to keep the incentive plans flexible, helping the business shift suddenly to expected market changes and business needs. “What if” modeling lets plan creators’ measure the effects of potential changes before rolling them out to the sales team.

2. Rapid Calculation Time:

Best-of-breed technology can calculate incentive pay-outs in minutes — not days or weeks. Your incentive software should let you automate complicated computations, enhance the speed and accuracy of compensation data, and reclaiming time for value-added activities. It should also secure data is reliable, which prevents disputes at a minimum and lets you pay out incentives promptly.

3. Real-Time Insights That Drive Performance:

When sales leaders and frontline sales representatives have access to real-time performance data, plans can fast be adjusted to meet the business goals better. An incentive management platform should provide this and other business intelligence, comprising summary reports and historical audits.

Managing an Incentive Compensation Program

According to Principal for Sales Compensation Practice, the following steps are necessary for keeping an incentive compensation plan healthy throughout the year:

1. Ongoing Communication:

In most cases, excellent communication for a fair project is better than poor communication for a fantastic program. Significantly, plan communication shouldn’t stop after rollout, nor should it be one-directional. Excellent communication should come in many formats, including live presentations, FAQ documents, and online resources like training or how-to videos. Communication also means seeing salespeople after plan rollout to see what works and what doesn’t, so that each deployment becomes smoother.

2. Reporting:

To ensure that plans continue effective, companies should produce reports throughout the year. Reports for various stakeholders should offer different levels of granularity and should include different metrics. It is also crucial that stakeholders during the organization all work with the same data, as this helps maintain alignment throughout the organization.

3. Examination:

After the plan has been operational for a few months and jerked to accommodate feedback, it is essential to assemble relevant stakeholders to review what went well in the design and roll-out process and what didn’t. For example, common problems may comprise the absence of a useful governance model, outdated operational systems, and gaps in the end-to-end process.

4. Program Updates:

The information gathered from the post-mortem should be used to reassess the elements that drive your year-in, ongoing plan design, and management processes. These may contain, for example, better specifying the roles of different stakeholders or more clearly describing the governance arrangement for incentive plan management and design.

5. Ongoing Plan Changes:

Incentive plans are always vulnerable to changes: new company strategies, new acquisitions, product launches, and changes to the customer base. Best-in-class companies manage these by convening steering committees year-round, assessing these potential changes and modifying the incentive plans accordingly.

6. Education:

Once their compensation plans are rolled out, best-in-class companies don’t spend their down season overlooking it.

Attain Sample Questions: IBM Incentive Compensation Management Specialist (C1000–028) Certification

Instead, they move their time educating themselves about how to improve their policies: making those plans more effective; achieving better results; increasing buy-in or decreasing undesirable administrative work.

There are plenty of potential educational resources; popular ones include conferences, books, webinars, and certification training.

7. System and Tool Upgrades:

Most important to achieving success in compensation management is making sure that your software supports your endeavors.

In particular, tools required to be able to handle the following data-intensive processes:

  • Revenue Segments: Incentive payouts are often a company’s most significant expenditure, which is why it’s crucial to forecast them correctly.
  • Sizing and Deployment: Assuring proper headcount in all areas involves a significant amount of data processing.
  • Productivity Quotas and Metrics: CRM systems are seldom able to model the wastes and flows of revenue over time or create specific revenue forecasts.
  • Performance Management and Rewards: This should cover but is not limited to incentive compensation, accruals, crediting, and a range of incentivizing strategies.

Incentive Compensation Reporting

Committing to regular reporting is an excellent technique for keeping an organization’s sales compensation plans functioning correctly. It’s equally essential that the organization develops protocols for creating different reports for different stakeholders. For example, these five types of stories may be necessary:

  • Rep reports. These help reps understand where they stand related to shares and helps them sell more efficiently.
  • Manager reports. These show how a sales team is working across multiple dimensions.
  • Leadership dashboards. These should involve high-level metrics about overall performance, pay performance, and cost-to-sales data.
  • Plan effectiveness reports. These should be created at the end of any fiscal period, and show in quantified terms how each compensation plan is performing.
  • Admin reports. These should contain all the information in the above statements, as well as operational metrics.

What Are Some Ways of Optimizing an Incentive Compensation Plan?

If an organization’s incentive compensation programs are not driving the typical behaviors, three strategies can often aid.

Review incentive plans to make sure that they drive broader business objectives. Many organizations establish incentives on a one-off basis to address individual problems. A more useful approach is to begin by clarifying more general business objectives, then developing plans that drive those behaviors across the sales force. Organizations can then compare the comp plans as those objectives shift.

Pay for improvement. Plans that pay people solely for hitting their numbers miss out on the opportunity to pay salespeople and managers for improving. Paying them for other improvements — preparing new reps productive sooner, minimizing no-decisions, decreasing rep turnover, and so on promotes them to focus on these behaviors, which in turn make the sales team more productive.

Suggested Online Practice Exam: C1000–028: IBM Certified Specialist — Incentive Compensation Management V10

Use software to extend the capabilities of your compensation plan. Today, advanced technology can give many more options for compensation management, which should help companies to develop more robust compensation programs. Compensation plans can motivate different behaviors in different regions, for various products, or varying levels of sales performance. The metrics on which salespeople are included can become much more complicated. Because it can perform difficult calculations in real-time, advanced technology can make all of these possible. It is imagination that limits the capabilities of compensation plans, not technology.

Why Should Your Compensation Plans Be Compared to Other Functional Areas Across the Business?

At many companies, leading the compensation plan is an exercise in working fires: so many issues appear that merely putting up with resolving them is a challenge. The best compensation plan manager’s side-step many of these concerns by planning for them from the start, cutting their time between running the current plan and modeling out future situations. By using data from other divisions in the company finance, HR, supply chain, and marketing. Doing this puts your plan prepared for changes coming down the pike.

In an ideal state, your compensation plan should feel like a living, breathing object. The way you get there is into active “what-if” scenario planning, created from real-time information from other departments in your organization. Doing this may need you to set specific time aside that is loyal to planning for the future. The more you begin incorporating information about the future into your day-to-day compensation plan management, the more responsive your plan becomes.

How Does Connected Planning Software Maintenance Companies Develop and Handle Their Incentive Compensation Plans More Forcefully?

To be developed and managed in a way that both optimizes individual salespeople’s earnings and pays the sales goals of a company. Incentive compensation plans necessary to be developed using data from beyond the organization and managed in a way that values the influence of potential changes on the rest of the business.

Connected Planning software is valuable for both of these activities. By combining the different parts of your organization and making sure all stakeholders have access to the same real-time data. Connected Planning software enables your incentive compensation plans to wait responsive to changes as they occur.

Similarly, advanced scenario planning offers plan creators and plan managers to view all the results of potential variations to the incentive plans before those changes are rolled out to the sales team. This provides plan creators and managers to improve those plans and try out new, innovative ideas.

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