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Incentive Compensation | Sales Commission

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Incentive Compensation | Sales Commission

Comp plans are a strategic investment- therefore, maximizing ROI on compensation is imperative for any business. Comp plans are also incredibly complicated. Defining incentives is a collaborative process involving multiple departments like HR, Sales, and Finance. There is also the added pressure to make your ICM automated and data-centered. 

With automation taking hold, there is no doubt among sales leaders that technology-led approaches to sales comp are the way to go. 

While it is established that automation is the only way to go, organizations have two options to maintain their competitive advantage-

  1. Invest in a purpose-build ICM system 
  2. Build a custom in-house ICM solution

Most companies need help to make this choice

If you’re a leader, you may want to opt for a custom in-house solution. This is understandable. In-house solutions give the organization more control over the key. 

While this may seem lucrative, you may want to reconsider if SPM is not your company’s core expertise.

Many companies may feel that their employees are equipped with the knowledge to spearhead an in-house solution, and therefore fail to properly consider the costs and challenges associated with building a custom solution. 

Thinking of building your own custom ICM solution? Here are some factors to consider before going down that road- 

Organizational goals/priorities

Jot down your company’s high-level objectives. Is developing and selling an IC or an SPM solution from the ground up one of these priorities? 

If you are a retail company or you’re in life sciences, chances are that this is not one of your top priorities. In that case, it makes more sense to invest in a ready-to-use solution from a trusted vendor.

Resource availability 

Let’s face it- resources are limited! So, it is no wonder that as a growth leader, you have to think twice before allotting this very limited pool of resources. Before you go ahead and route resources to developing an in-house ICM solution, ask yourself if there are other priority areas where more revenue can be generated with the help of these resources? 

If you identify such priority areas, it makes more sense to allocate revenue there instead of building a custom solution. 

Maintenance and support 

Contrary to what you may think, building your own solution is not a one-time cost. With time, your internal solution will demand a lion’s share into your resources for maintenance. 

Therefore, while you may feel that the one-time cost of a custom solution is less, the Total Cost of Ownership is much higher. 

Quality Compromise

Most companies will not have the required expertise to build their own ICM platform. While you may feel that your existing employees have the skills to get the task done, you risk building an inferior product that simply does not hit the mark. 

Moreover, cumbersome in-house systems mean that only a few individuals who were involved in the building process understand them. If they happen to leave the company, the whole solution collapses. 

Scalability 

Is your homegrown system built in a way that it is capable of reflecting growth? Most homegrown IC systems- especially those built by business/financial analysts rely heavily on spreadsheets. While spreadsheets may seem convenient at first, the truth is that constant changes in your incentive compensation plan will most likely break this traditional system. 

Spreadsheet-based systems usually hit a wall when growth demands scalability. This could happen when -

  • There is an increase in the amount of data flow when the company is rethinking strategy or simply analyzing trends
  • The sales force is growing which means there are more reps to manag

For most systems, this is only sustainable in the short run.

Our advice? Partner with the right vendor to maintain your competitive edge!

Kennect’s fully automated ICM solution leverages a data-driven approach to build, run and automate your incentive compensation plans to create transparency and achieve operational efficiency. Kennect helps you break the silos of your comp system by seamlessly integrating across CRM, ERP and HRIS and is designed to work with new models. 

Book a demo with us today to learn more about how we can help you with automating your sales comp!

To Build or Not To Build: In-House ICM Solutions

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