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Sales Compensation Management

How to Conduct a Compensation Analysis

By April 5, 2017January 16th, 2023No Comments

Guide: Conducting a Thorough Compensation Analysis

Leverage your existing investment in data integration in real-time calculation power of Iconixx to drive actionable compensation intelligence across the enterprise.

Compensation Analytics that Drive Results

Descriptive Analytics: Perspective in the Rearview Mirror

Business intelligence, trend analysis and reporting – each of these functions is an example of Descriptive Analytics. These functions take a retrospective look at where the business has been and how the strategies turned into action. Descriptive Analytics approach the business strategy by looking in the rearview mirror. Companies rely on business intelligence and Descriptive Analytics to answer common questions such as:

  • What happened last quarter?
  • What were our sales and revenues for that reporting period?
  • Where did we miss our targets?
  • What shortfalls caused us to fall short?

Companies dive into these questions by leveraging historical and current datasets, then use dashboards, reporting, alerts and queries to identify trends. When areas of strength or weakness are identified, companies drill-down into the datasets to better understand the factors behind the underperformance and/or over-performance. These types of historical performance or root cause analysis are essential to evaluating the effectiveness of various strategies and informing the strategy going forward.

Moving Forward with Predictive Analytics

Descriptive Analytics are useful for assessing the effectiveness of your strategy and tactics. However, Descriptive Analytics offer a rear view mirror perspective – they show an organization where they have been – but they do not precisely analyze what will happen in the future.

Successful companies move forward. They look to the future. That’s why Predictive Analytics are essential to setting business strategy and leveraging data to look ahead and predict how those potential strategies will meet corporate goals. For example, Predictive Analytics can consider:

  • What are the projected revenue trends within a particular territory or group of territories?
  • What is the quota attainment potential, broken out by individual sales professional or teams, for the next reporting period?
  • What is my projected costs of sales as a percentage of revenue based upon the projected performance of my sales team?
  • Will my existing customers leave? If so, why? And when?
  • Which of my existing customers will turn to the competition?

Leverage Predictive Analysis for Effective Sales Compensation

Predictive Analytics can also have a significant organizational impact on sales compensation planning.

Sales compensation planning has traditionally relied upon a combination of historical business intelligence and Excel spreadsheets. These approaches are cumbersome and error-prone. Even small errors can create significant problems that will move you off target. Overpayments are costly. They are never reported and rarely recovered. Those resources are lost forever.

In 2012, WorldatWork and Mercer conducted a benchmark survey of over 560 North American organizations and asked what they would like to explore through analytics that they were unable to do today. More than half of respondents (57%) said they would most like to gain greater insights into the effectiveness of their overall rewards strategy and its specific elements.

Working Beyond the Traditional Assumptions

There’s an old adage that the person who asks a question frames the answer. In many ways, that’s what an organization does when it employs Descriptive Analytics. The areas for analysis are based on the organization’s traditional assumptions about strategic priorities.

More importantly, the outcomes are entirely determined by the strategic framework within which those actions were implemented, and the results pertain only to those courses of action. As such, Descriptive Analysis tells you what has occurred, but it does little to consider the potential effectiveness of other strategies.

Predictive Analytics allows a company to step outside the traditional assumptions. Predictive Analytics offer an opportunity to consider a range of potential strategies, tactics and resource allocations. By giving organizations the ability to conduct “What If” Analysis, Predictive Analytics allows companies to consider these different factors and predict the potential outcomes of various decisions.

Realizing the Full Benefits of Predictive Analytics

Predictive Analytics also yield significant benefits for key areas for business strategy. Leveraging Predictive Analytics, companies will find benefits it some areas that will lead to success.

  • Enhanced Strategic Planning: Predictive Analytics opens the decision-making discussions with more than just ideas; it offers data-supported figures to forecast the outcomes of potential courses of action. Trend analysis is helpful to show where a company has been. But where do you go in the future? Predictive Analytics makes those discussions effective, and offers evidence based answers to what was before just speculation.
  • Price Optimization:  Drawing on customer behavior, past strategies and performance, Predictive Analytics can help companies pinpoint the price that will maximize the customer’s willingness to pay while maximizing revenues and profits.
  • Better Customer Relationships: It’s the core of all business activities – the customer relationships and meeting the customer’s business needs. Predictive Analytics can help in this regard. Looking ahead, Predictive Analytics can enhance these relationships by telling a company when a particular customer is likely to require more product, or a replacement, and provide them with what they need before they even ask for it. Those forward-looking perspectives go a long way to enhancing those relationships.
  • More Targeted Marketing Campaigns:  Marketing campaigns are an exercise in properly choosing targets and employing the best route to reaching them. Predictive Analytics are essential in determining whether your campaign will reach the targets. For example, companies that practicing Predictive Targeting – developing a target audience with a solid expectation of which customers are likely to become return customers and which will remain one-time clients – will find that Predictive Analytics are essential tools in this planning. Ultimately, these efforts lead to higher ROI, as it’s a well-known business principle that servicing a repeat customer is less costly than securing a new customer.

Leveraging Technology for Predictive Analytics

Predictive Analytics may offer business benefits, but the underlying datasets must be accurate, timely and automated. Furthermore, the technology solution must integrate both the strategic and tactical levels of the organization – bringing in data from the company’s overall goals, and connecting those strategic factors with the objectives and performance metrics of individual team members, sales representatives and executives.

Technology such as Sales Performance Management (SPM) and Incentive Compensation Management (ICM) solutions provide sophisticated software for creating these datasets. As automated solutions, these products evolve and change as the company grows, ensuring accuracy and relevance in its compensation analysis at all times.

Iconixx Analytics Grids: 3 Types of Analysis

Transaction Crediting Analytics Grid

The Transaction Crediting Grid makes it easy to see who gets what credit for transactions based on your crediting rules- for instance splits, overrides, territories, hierarchy rollups, overlays, etc. Analyze up to ten crediting variables, slicing & dicing with pre-built functions, charts & graphs, and adding the analysis to the Dashboard for quick access. Simple analysis, auditing, and quick reference to Transaction Credit is easy.

Transaction Compensation Analytics Grid

The Compensation by Transactions Grid provides easy access to transactions and the calculated compensation amount based on real-time calculation of your compensation plans, components, formulas, and rules. Analyze up to ten transaction variables simultaneously to gain insight into transaction margins and compensation efficiency, adding graphs and charts to the Iconixx Dashboard for easy reference.

Payee Compensation Analytics Grid

The Payee Compensation Grid makes it easy to analyze real-time compensation based on the payee and their corresponding hierarchies and groups- for instance, compensation amount, margins, and plan efficiency by each payee and the payee’s management, region, division, business unit, or any other hierarchical grouping. Analytics Grids use real-time calculation based on your companies plans, components, rules and the payee hierarchies.

Iconixx Analytics Grids give Iconixx users across your organization the ability to easily analyze their most important compensation metrics and KPIs, create custom charts and graphs, and add them to their Iconixx Dashboard.

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