No Pain, No Gain
Unfortunately, there are many things we attempt for the first time that don't always go the way we want or expect them to -- like the first time we ride a bike with the training wheels off or try to eat with chopsticks. An incentive compensation system can be viewed in much the same way. The promise is great and the company often views implementing this system as an easy win. However, because a culture develops around a process -- the how and what people do to make things happen -- introducing a sales performance management (SPM) project can hit a brick wall very quickly.
Companies often underestimate the amount of investment that needs to go into such an endeavor, thinking This will be easy! Everyone will love it! or Our people don't really care about any changes. This sense of false confidence often leads a project astray.
Change is not always easy, and can be particularly difficult for some. Actually, in all the years I've been implementing incentive compensation management systems, I have yet to do one that could be described as "easy." Given the highly decentralized and manual process, there are always little things that trip us up. Personal interpretations can go a long way to complicate the processing and calculation of commissions. Oh, and people do care, especially if their familiar world and, most of all, their paycheck is tampered with.
Expect resistance. The reality is, companies need to plan for complexity and understand that there may be exceptions to make, as there will inevitably be data issues to confront. Business processes are developed over time and even the slightest change can create cultural shockwaves. Anticipate an SPM project to take anywhere from six months to two years before employees fully welcome the new system into their routine. If companies currently have a highly intensive manual system that is easy to manipulate, then the resistance they face will be much greater. There will be an initial time investment as salespeople engage in "shadow accounting" until they trust the system, and the administrative staff gets acclimated and works through the data issues.
Plan on having data issues that won't necessarily be fixed the day the system goes live. A system can only do what it is programmed and configured to do and, unfortunately, there are some things that can't be programmed or configured. It cannot sense moods, or compensate based on this factor. It needs objective data. Companies need to commit time and energy into the implementation of a new SPM system and process.
Companies must think carefully before diving into an SPM initiative. Depending on your existing process and business environment, it can take up to two years to get every necessary component aligned. There will be a push back from all those involved to make exceptions, keep exceptions, and finally ease onto the new plan. From a cultural perspective, collaboration and compromise will play a huge role, unless, of course, there are strict legal or compliance issues that need to be addressed immediately.
Change will run far smoother if you can turn your sales executives into system advocates who, in turn, can win over the sales organization. "Cultural sticklers" may put up a hard fight at first but once they're on board, they can potentially become the system's biggest fans. Better yet, they may help sell it to the rest of the organization. Transparency will be critical to the success of this process. It's important to always be upfront and honest about what is expectated from employees and from the system. The staff will be more accepting of change if they understand that management is working in their favor, and for the overall benefit of the organization.
Let me clarify one misconception: Implementing an SPM system does not guarantee that you will be able to immediately downsize your compensation group -- especially if you currently have a decentralized process in place and the groups have different interpretations of the plan. There is often a learning curve involved when starting on a new system and understanding its procedures or processes. If an organization is decentralized and struggling to learn the multiple interpretations of the plan, the learning curve becomes even steeper for those attempting to manage this system.
In summary, bringing on board a new SPM system is bound to create cultural impact and change. Consequently, the project needs to be treated as every bit as monumental as removing an organization's training wheels.
About the Author
Susan Major is a management consultant with Revelwood, which provides sales performance management (SPM) solutions for Fortune 1000 companies. With extensive experience focused on implementing incentive compensation and performance management systems, Susan has client-side and consulting experience in such industries as commercial real estate, mortgage banking, pharmaceuticals, telecommunications, consumer goods, and healthcare. She can be reached at firstname.lastname@example.org.
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For the rest of the August 2009 issue of CRM magazine please click here.
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