In today’s fast-paced environment, companies must be able to attain and retain quality talent. There seems to have been a paradigm shift in compensation practices – from simple, quantitative metrics to a more dynamic incentive process that is aligning the goals of employees/employers.
This has led to some challenges in the way companies create their compensation plans. I recently spoke with a CFO of a growing tech company that sells receivables management software. He mentioned that he and a colleague spend ~ 2 business days every month collecting all of the transactional data, and calculating the compensation for his reps. Imagine the opportunity cost of his time. This is a CFO of an accelerated growth startup, and he is spending 48 hours a month manually calculating his compensation plan…
Your Employees
Whether it be finance, sales-ops, HR or compensation who is calculating commissions, you’re losing valuable time from highly skilled individuals. That time is going towards a manual system, that will have to continue perpetually (assuming you don’t go out of business). Imagine how much time could be redirected to higher ROI activities.
In addition to intelligent employees spending time crunching numbers, your sales reps are also affected. With the spreadsheet-based compensation plans being used today, there is a significant lack of visibility. I remember my first commission-based job, where I could guess how much my commission would be each month – but I always seemed to be at the mercy of that end of the month excel file. If you didn’t know already – You are being exposed to significant risk of increased turnover, if your reps cannot visualize their real earning potential.
When to look
To be clear, implementing a 3rd party system for company with 2 sales reps is a bit overkill. However, high-growth companies, who are rapidly growing their sales team, should be aware of the scalability issues that exists in manually calculating (even on the simplest plans). The bigger you get, the more time your valuable sales-ops/finance/comp folks sacrifice.
Value-adds from automating
- Lower administration costs (Ability to focus your professionals on critical ROI activities)
- Reduce Turnover (Reps like getting paid correctly – too obvious?)
- Leverage transparency to motive your reps and align their goals with the company
- It’s not an expense, it’s an investment with ROI (Why else would you pay for it?)
- Institutional Knowledge (No more nightmares about your comp wizard leaving, and taking his process with him)
