Good incentive compensation plans are complex. There is no way around it. Incentive compensation management has several components, and managing each, as well as harmonizing them, creates a complex ecosystem. ICM goes beyond plan design and roll out. It includes motivating salespeople and empowering businesses to make data-driven decisions, based on analytics and reports. Organizations must deal with big data sets and elaborate processes.
Simplifying wherever possible is helpful, but when it comes to incentive compensation, escaping complexity means sacrificing effectiveness. Companies must accept that a certain degree of complexity is necessary and even beneficial. The good news is that managing complexity is a potential competitive weapon that benefits organizations in terms of flexibility and agility*.
How can your organization transform ICM into a competitive advantage? First, understand incentive compensation management and how its components work together. Second, identify what’s keeping you from effectively managing incentive compensation. Complex data sets, slow and unreliable processes, and inadequate technology are a few of the typical barriers to managing ICM successfully.
Turning ICM complexity from foe to friend requires changes that are more or less easy to implement. One of the best strategies is to design an incentive compensation plan that truly motivates salespeople while accounting for your company’s strategic goals. Aligning sales comp with strategy and behaviors makes complexity easier to understand and manage. Reps will be less likely to feel overwhelmed by tasks and targets if the compensation plan motivates them to perform.
A necessary step in managing complexity is automating and eliminating manual processes as much as possible. Automation makes complex tasks simpler and faster to perform and frees up sales reps’ time so they can focus on what really matters: selling. Also, automation gives reps the information they need quickly and accurately. This allows them to focus on the right prospects, at the right time, increasing overall team performance.
Adopting agile management is another approach that leads to increased ICM efficiency. Agile management enables rapid change within the organization and allows for more flexibility to fix issues. Agile companies prioritize goals and constantly analyze results. Instead of letting problems pile up, the agile approach calls for shorter, more manageable cycles.
Some strategies, such as process automation or improved motivation, are easier to plan and implement. Others, such as adopting agile management, require more long-term planning and a change in vision. Whatever strategy you adopt, embrace complexity because it is the surest path to incentivizing your sales force fairly and accurately, and to achieving sales goals.
You can find more details about what strategies to implement to be successful in managing incentive compensation in our eguide Make Complexity Work: How to Turn ICM into a Competitive Advantage.
Let me know if you have any thoughts on this topic. Is complexity a challenge in your organization? What strategies have you come up with to deal with it?
* Harvard Business Review, 2015, The Business Case for Complexity