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Automate Your Sales Compensation Program
On-demand systems eliminate sticker shock.
Posted Sep 1, 2006
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You wouldn't dream of wearing a blindfold while trying to pass Al Unser going 180 mph at the Indianapolis 500--and for good reason. Using spreadsheets to manage your company's sales compensation activities is equivalent to providing your sales team the same driving-blind experience. Spreadsheets are fine for sorting tables of data, but they aren't designed to provide the kind of sophisticated transparency that businesses need to support and manage a large sales force.

Despite the fact that spreadsheets aren't an adequate tool to manage sales compensation, many companies still use spreadsheets to manage their sales compensation. Not only is this an inconvenience for the folks with the green eye shades, it's also a potential source of lost income and productivity for the company as a whole.

Calculating sales compensation seems like a fairly straightforward proposition. After all, most field professionals earn a combination of salary and commission, so it should be fairly easy to tally exactly how much they should take home each pay cycle. Unfortunately, however, the reality of managing compensation is a complex process that demands a tool designed specifically to handle the intricacies of compensating a sales team.

Excel isn't the right tool for the job for several reasons. For starters, it's not scalable. It's rare for organizations to have uniform compensation programs for their sales teams, and juggling the specific needs of each individual can get overly complex in a hurry. For example, incentive programs can calculate compensation based on factors such as margin, product mix, discounts or accounts receivable. Excel may work for a small office, but adding, changing, and working with large amounts of data in a spreadsheet can turn into a nightmare. And it can get especially ugly for companies trying to stay on the right side of the Sarbanes-Oxley Act, Basel II, or other regulatory statutes.

The biggest problem with using Excel is that it provides no visibility. That means that if your guy on the ground in Chicago calls the VP of sales to ask how much money he'll be putting in his pocket at the end of the quarter, Excel provides no practical way to access that information instantly. It's no wonder that so many sales professionals have antagonistic relationships with their employers!

If Excel is so bad (which it is), why do so many organizations still use it to manage their sales compensation? As with most things in life, it usually boils down to price. Most systems on the market today cost so much to purchase, install, integrate, deploy, and maintain that senior managers often decide that it's just not worth switching from spreadsheets to a dedicated system. After all, it's hard to justify spending hundreds of thousands of dollars on a software system, dropping another few hundred grand to integrate it, and then dedicating months of IT resources to get it up and running. Even when that stage is completed, the costs keep piling up, as expensive consultants are required to keep the system performing the way it should. After all is said and done, it can cost several million dollars to implement a sales compensation system. With a price tag like that, it's no surprise that Excel is the industry standard, even if it doesn't work especially well.

Help is on the way, however, in the form of on-demand systems that allow companies to bypass the enormous costs associated with enterprise solutions. Many of the Web-based tools on the market today offer full functionality--and all of the benefits--of the expensive systems without the need for any of the costs related to installation and integration. That's because the software is housed remotely and can be accessed through a regular Web browser. As a result, it can take days, rather than months, to get a sales compensation management tool working properly. As an added bonus, there's no need for IT people to get involved, because there is no new software or hardware.

The availability of cost-effective on-demand compensation management systems should be the last nail in the Excel-for-sales-compensation-management coffin. Spreadsheets are awful to use, but in most cases, sad to say, they're better than spending millions of dollars to fix the problem. Today's Web-based solutions eliminate the major barrier to making the switch.


About the Author
Christopher Cabrera is the founder, president, and CEO of Xactly Corporation. He is a noted industry expert in sales compensation issues and is the co-author of the upcoming Sales Compensation for Dummies. He is also an accomplished painter. He can be reached at 866-469-2285. Please visit www.xactlycorp.com.


Please note that the Viewpoints listed in CRM magazine and appearing on destinationCRM.com represent the perspective of the authors, and not necessarily those of the magazine or its editors. If you would like to submit a Viewpoint for consideration, please email viewpoints@destinationCRM.com.  

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