5 min read

Why It's Not Enough To Put Incentive Compensation Management In The Cloud

Tom Jones

Tom Jones is a Strategic Account Executive at Anaplan, working out of the Minneapolis office. He has been with Anaplan since 2012, and has over 12 years of experience creating, delivering, leveraging, and selling complex technical solutions to challenges spanning the finance, healthcare, logistics, and retail industries.

On their own, credit and incentive compensation management software represents large, but necessary, costs to the business. Each organization has different requirements around how they incentivize their teams to deliver.

On their own, credit and incentive compensation management software represents large, but necessary, costs to the business. Each organization has different requirements around how they incentivize their teams to deliver on pre-defined goals for the upcoming month, quarter, and year. In order to track performance against these goals a huge number of systems have been developed to reconcile incentive rules against sales transactions on an ongoing basis. Measuring performance against these goals is what actively incents the behaviors these goals are designed for in the first place. Most organizations build out specialized compensation teams with their own layers of management, and spread them globally just to manage the challenges with operational compensation practices on a weekly basis. On top of this responsibility, these teams are expected to collaborate with finance to construct annual plans, and re-forecast on a quarterly basis one of the most significant (and controllable) costs an organization with variable incentive compensation incurs.

In order to address the growing need for collaboration across functional areas of a global organization (read sales operations, finance, and supply chain logistics) these legacy tools that have struggled in the marketplace for years have been given new wings! They are being re-implemented in the cloud, often on client infrastructure but almost as often on vendor or third party hosted “private” clouds. While this definitely aids in the collaboration needs of an organization, it does nothing to really enable the business user to leverage the new power they’ve been given the opportunity to harness.
This new power is the most significant benefit of moving to the cloud in the first place, and that power is the commoditization of computing resources. What this should mean to the user is that they can now employ the muscle of hardware that is typically far out of reach, and orders of magnitude beyond what they would normally be able to budget for relatively simple tasks (like multiplying a commission rate by a sales amount). The problem with re-implementing legacy tools on cloud infrastructure is that it will never fully realize the benefits that a natively cloud-designed application set can. Anaplan is an example of one of these tools, and due to this cloud-native architecture the entire environment can itself be changed on the fly, giving huge power (that has traditionally been held under lock and key by IT) to the business user. This kind of power includes changing the fundamental planning dimensions that entire systems of complex forecasts have been built on, in mere seconds.

Imagine re-constructing sales hierarchies from a continent level all the way down to an account level, without any coding, compiling, or even consulting services. Consider scaling out a set of compensation plans across an acquisition in seconds with nothing more than an insert, or an import of a new entity structure. Functionality that used to take months or years to implement now becomes possible in days to weeks. The platform was written for a fully in-memory, 64-bit architecture, managed via a proprietary data structure that is designed to significantly reduce overhead whenever complex hierarchical or calculation logic changes are made. This means unimaginable performance at scales impossible with any other solution on the market (or coming to market in the next 2-3 years). In an organization that is actively planning and re-planning, the most common changes across the board are in the hierarchies and planning dimensions. Moving people, accounts, territories, and products around should be a basic tenet of any software that claims to solve these problems, but is nearly impossible for most planning systems to allow in real-time. Anaplan lets the user make these changes instantly across sales teams in the tens of thousands, with plans at an account/product level. They can review the results, keep the changes or undo them, all from a standard browser. Gone is the need to wait hours, or even overnight, for calc scripts and batch process to run.

What this performance really means is that a company can now actively model their compensation plans. They can do scenario planning and run what-if scenarios literally on-the-fly in management meetings to understand the impacts changes would have had, or will have, on the plans. This allows the plans to be much more aligned with business interests, and allows for real-time reactions to a changing business environment. No longer is the Incentive Compensation Management tool a cost to the business. Instead, it is now an active colleague in reducing spend, aligning the business’ interests toward growth in key targeted areas and marketing opportunities.

Taken a step further, this new scenario modeling can be combined with Territory and Quota planning and Sales Pipeline Forecasting to revolutionize the Sales Operations practice. No other compensation tool on the market allows for direct, single-platform integration with Quota and Sales Pipeline Management. Due entirely to the fact that each of these Sales Performance Management tools is implemented on the Anaplan platform, with a fully native Business Intelligence component included, it eliminates the headaches around data integration. Combining these gives the Sales Operations team the ability to see end-to-end the impacts of decisions and changes, be they organizationally or at the most granular sales rep/account/month/product level. This unprecedented visibility into the planning and active management of the sales operations lifecycle reduces confusion by ensuring all teams are “on the same page” and looking at the current version of the plan at all times, aids in collaboration by eliminating the hand-offs between functional areas, and allows sales team members to actively manage their own performance on a real-time basis.

So, at the end of the day it isn’t enough to simply move yesterday’s best-in-class point-solution products to the cloud. Businesses need to be able to actively model their compensation plans, tie them directly to their quota and territory planning activities, and bump them up against their sales pipeline forecasts (typically fed from their CRM tools) to truly drive compensation optimization annually, as well as on a day-to-day basis.