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The Compensation Conversation | Challenges In Manually Calculating | Opportunities to Automate

By February 14, 2017January 16th, 2023No Comments

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)

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Ballast Point Ventures

Ballast Point Ventures is a later-stage venture capital fund established to provide expansion capital for rapidly growing, privately owned companies in diverse industries, with a particular emphasis on companies located in Florida, the Southeast, and Texas. The BPV partners have more than 70 years of combined experience investing in and building high-growth companies in a number of industries, including healthcare, business services, communications, technology, financial services, and consumer goods. BPV has $200 million under management and seeks to make equity investments ranging from $3 million to $10 million.

Harbert Management Corporation

Harbert Management Corporation seeks to generate superior returns for their investors by identifying and investing in the most promising early growth stage companies in the Southeastern U.S. HMC seeks to capitalize on what it believes are compelling regional dynamics, such as a strong and fast-growing economy, significant research and development activities, and an established entrepreneurial community. The HMC team combines substantial investment, advisory, and operating experience with capital and networking contacts to support great entrepreneurial teams in successfully executing their growth plans. With offices in Birmingham, Alabama; Richmond, Virginia; and Gainesville, Florida, it’s well positioned to partner with entrepreneurs throughout the Southeast.

KBH Ventures

KBH Ventures was an early investor in Iconixx Software. KBH's investment philosophy plays a significant role in the firm's successful track record. KBH believes in running businesses to be cashflow positive and profitable every month. Startups and companies in a startup mode, such as one that has been purchased in distress, are expected to generate revenue within the first six months and reach profitability within the first 12 to 18 months. KBH also only invests in or acquires companies that are in the startup phase or have less than $20 million in revenues. KBH targets technology companies that offer business-to-business services.

S3 Ventures

S3 Ventures is an early expansion and growth stage venture firm with $200 million under management. It’s focused on information technology solutions that solve large business problems. S3 also invests in medical devices that improve the human condition. S3 invests in category-defining opportunities. It partners with the team and help focus methodically on what it takes to build a successful company. S3 today helps talented entrepreneurs take their technology and market knowledge and form valuable businesses in a repeatable fashion. Investment sizes start at several million or more for Series A, B, and C financing.