Before embarking on an ICM initiative, companies should consider the factors that spell the difference between success and failure. Here, we’ll outline five key considerations when evaluating whether to invest in an ICM solution.
Lay The Essential Groundwork
The first essential step is ensuring that they're ready to evaluate and implement an ICM solution. This means looking at whether:
- They have the internal resources to evaluate an ICM. A proper ICM evaluation involves an internal commitment from several stakeholders, and it takes time to do it right to ensure that they have the core source data systems and comp plan structure identified and approved.
- They have the budget identified. They should determine whether they're ready to allocate funds for both license fees and implementation costs.
- They have the demo data. They'll have to provide data sets and sample comp plans to enable vendors to build relevant demos and support the development of a proof-of-concept.
When the resources and people are lined up, companies can move through the implementation quickly and avoid delays that kill their momentum or worse, the project.
Start With The End In Mind
When companies begin to evaluate alternatives, it's vital that they have clearly defined comp plans, including quotas, performance measures, and incentive plans structures. Considering these, they can determine if they’re looking for a fully automated end-to-end solution or a lighter tool that requires some manual management and interaction.
In simple terms, they should clearly identify what their end goals for the initiative are.
A vendor can then work with them to understand these goals and consult their team on incentive compensation best practices and how best to achieve them.
6 Key Areas To Consider When Evaluating Vendors
When it comes to choosing a vendor, there are many players that offer a compelling user experience. Yet, many lack the power and flexibility to grow with sales and blend complexity. Others come with considerable tradeoffs in terms of ease of use, their ongoing cost of management, and poor ROI. It's therefore vital that companies consider the right solution for their needs.
Here are six important areas to consider:
- How to ensure data flows and transformations don't jeopardize comp automation.
- What to look for in a compensation plan builder so they don't run out of runway.
- Which comp and payee workflows are essential- and common mistakes to avoid.
- The key questions to ask around reporting and analytics.
- Why many ICM solutions are so hard to use.
- How to ensure they won't be left high and dry with service and support.
Identify the Internal Evaluation And Start Plan
Given its strategic importance, the challenge of implementing an incentive compensation system is not one to be taken lightly. In fact, as many as one-third of all major enterprise software deployments fail, but the better the planning and pre-work, the better the chances of success.
For this reason, companies will need an internal project manager who’ll need to dedicate time to manage and lead the project. They’ll also want subject matter experts who can help gather requirements and design comp plans. In addition, a company’s IT team may play a pivotal role by supplying data extracts and assisting with application integration.
Make The Business Case By Developing The Strongest ROI
Ultimately, the evaluation of business applications centers on the financial benefit and return on investment that it can deliver to the company.
Some costs that the company should consider when evaluating vendors are:
- License fees. Here it's important to ask vendors to provide firm quotes for the annual costs to license the software. Companies should also look at how long the agreement runs before renewal, whether they can add users at the same price as their needs change, whether the price covers backups and security, and who owns the data when the agreement terminates.
- Implementation costs. This is a vital consideration and one that is often overlooked. Feature-rich ICM systems will benefit from expert assistance by a vendor that brings a long-term payoff in usability, customization, and automation. This, however, comes at a higher cost compared to low-end systems that provide guided implementations.
The savings of an ICM system far outweighs the upfront expense to implement it. Some of these savings include:
- Savings on overpayments because the company still uses out-of-date solutions to track their incentive compensation plans and payments.
- Making the comp team more productive because they don't have to manually process and manage sales comp.
- Making the sales team more productive and, as a result, produce meaningful revenue increases and improve sales team retention. This is simply because the sales team no longer spends inordinate amounts of time verifying their comp calculations and payments.
- Savings on audit costs because the automated processes in the ICM are governed by best practices and CFOs get greater visibility and greater predictability while, at the same time, adhering to regulatory frameworks.
With a compelling return on investment, ICM solutions are quickly climbing to the top of the corporate agenda. They eliminate overpayments, improve productivity, and enable companies to concentrate on higher-value activities. By following these important steps set out above, companies can ensure that they have a successful project and do not risk a failed implementation. This sets the stage for future growth.
If you'd like to learn about these best practices in more detail or about our platform, download the full eBook to learn what it can mean for your company.