SalesCompensationManagement4CommonHeadaches with

LaborIntensive#1

Many firms still rely on a patchwork of spreadsheets,email, manual processes and outdated legacy systemsto manage and administer variable compensation plans.

4

Source: CSO Insights

Approach for calculating andmanaging commission

Spreadsheets51.6%

Do not know3.4%

Manual calculations10.8%

Commercially developedincentive managementsystem 15.2%

Internally developedincentive managementsystem 19.0%

51.6%

19.0%

15.2%

10.8%

3.4%

Legacy approaches are a drain on the company

Manual stepsWorkaroundsErrors

Is it hard to imagine why?

=(IF(A7<='Flags(mth)'!$D$21;0;IF(A7<=Inputs!$E$19;IF(A7<In-puts!$E$19;( (A7-MIN(A6;inputs!$C$13))/Inputs!$D$55-Inputd!$C$13))*-LOOKUP( Inputs!$D$55;Notes!$E$8:$CB$8;Notes!$E$553:$C-B$553)+C6;IF(A7= Inputs!$E$19;((A7-MAX(A6;Inputs!$C$13))/In-puts!$D$55-Inputd!$C$13)) *LOOKUP(Inputs!$D$55;Notes!$E$8:$C-B$8;Notes!$E$553:$CB$553);IF( Repayment!A7=Inputs!$E$19;OFF-SET(Notes!$I$553;0;Repayment!REF!); IF(A7=Inputs!$D$61;OFF-SET(Notes!$I$553;0;Repayment!REF!);IF(A7> Inputs!$D$61;OFF-SET(Notes!$I$553;0;Repayment!REF!)/2))))))))*1000000

Is it hard to imagine why?

Analytics can help sales leaders improve decisions about issues such as sales strategy, sales-force size and structure, and the recruiting of sales talent.

Legacy approaches can blindside sales forces with undesired consequences in terms of sales-force effort allocation and financial risk.

Costly#2

Cost of errors andcommission overpaymentsestimated at greater than $1 million per year.

- An IBM customer in financial services

“Enterprises will miss the equivalentof 5% to 10% of annual sales aslost opportunities, which couldhave been captured by improvingthe management of overall SPM.”

Complexity#3

Rules for compensation calculationscan get complex

An example from anIBM insurance customer

Has been in force for 8 years (TAC and SIA products) and 10 years for SC+ products

And its amount increases from 1 year to the nextbeginning in the 8th year (TAC and SIA products) and in the 10th year for SC+ products

And its increase is 75% or greater

If a policy...

...then a persistent bonus based on the current policy is paid to the agent on the policy at a rate determined from a table of potential rates.

When to pay the sales reps is tiedto your business dynamics

@ DeliveryIf rep needs to be involved at point of installation

@ BookingIf little likelihood of order cancellation or need for follow-up

@ PaymentWhere customerpayment is problematic

@ ShipmentIf high rate (over 5%) of order cancellationbetween booking and shipment

Sales incentive compensationcan be transaction intensive

One of our Incentive CompensationManagement customers processes over

transactions in a month

ShadowAccounting#4

— David O’Connell, Aite Group

“Many plan participants maintain their own compensation tracking documents that they use to double-check their compensation departments’ calculations.”

Not only does this lead to more disputes between the sales rep and compensation manager around payment accuracy; it also means sales reps are wasting potential “selling time.”

In fact, only 1/3 of a sales rep’stime is devoted to selling

Selling (face to face, phone, web)35.0%

Other (travel, training)11.6%

Post-sales tasks andaccount management 16.2%

Lead generation and account research 23.5%

Meetings and administration tasks13.8%

Source: CSO Insights

35.0%

23.5%

16.2%

13.8%

11.6

%

Salesperson time allocation

How can aSales Performance

Managementsolution help?

IBM Sales Performance Management solutions streamline and automate the process of compensation planning.

Administrators organize their business logic visually togain efficiencies, reduce errors and facilitate collaboration.

Sales rep dashboards provide instant visibility intocompensation payments and help reps understand howthey’re doing and how to target their future efforts.

— Huntington Bank

“Previously, they only received compensation reports on a monthly basis;” now, they have daily insight.

“By checking their own performance regularly, they can keep themselves on track to hit their targets.”

“By having transparency into the system, we don’t have to worry about them saying, ‘Wait—I don’t get this.’”

“…spend more time selling”— An IBM customer in mobile e-commerce

According to Gartner, Sales Performance Management solutions...

Imagine the cost-savings!

Reduce IT andadministration

staffingby more than

40%

FACT #2

Reduce errorsby more than

90%

FACT #1

Learn more about SalesPerformance Management

ibm.com/spm