You have probably heard the phrase, “The Devil is in the details.” In the case of incentive management, the solution is in the details; transaction details, which reflect actual revenue-related activity. These are usually captured in a billing, or other auditable revenue management system. Details entered by the sales force (as is the case with SPM tools), or other manual entry processes, are too prone to error or unauthorized data manipulation. Calculating accurate commissions and capturing meaningful sales information can only be accomplished if the tool doing it processes the right data. Since sales transactions will often contain a variety of factors that determine the value of a sale, overlooking any of those factors could redefine the perceived and actual value of that sale.
Another case in point: A large cable services provider pays its commercial accounts sales force based upon activities collected at the account level. The contract value for each account is totaled and a percentage of the revenue is paid to the sales person. Over time, however, additional services or products become provided to the account. Commissions are paid based on the initial services sold, and any subsequent products and services that are added or removed from the account’s contract.
After deciding to automate the commission process, the company realized that the summarized data it used for each account did not capture enough detail to determine on a monthly basis what changes to the account were actually impacting sales revenues. In some cases, products were simply being switched with other products. This “artificial activity” was not captured at the account level. It was contained in the detailed work order data. Since the detailed data was not the basis for the commissions, and only the new product being activated appeared at the account level, commissions were paid on non-revenue generating activities. Worse yet, the company was unable to verify effective dates on changes to the account at the work order level; so it was quite common for one change to appear as multiple changes at the account level. The result was that a sales person might be paid multiple times for the same sales activity.
It would be fair to ask why so many alleged SCM solutions don’t account for this very real and important challenge. The answer is simple. If you don’t set out to create a true SCM solution, but simply want to track sales performance, you will likely build it on the wrong foundation. In many cases, Glocent was required to accept very diverse data from several data sources. In one instance, over 24 million records were fed into the system each day. This was recently highlighted when a CEO of an SPM application acknowledged that his industry faced a “Big data problem.” A true SCM solution, by necessity, must handle a limitless amount of data.
If a solution is not designed with data in mind, its limitations will be obvious. If you ever hear a compensation management software vendor express that “Data is a Big Problem,” BUYER BEWARE! It means that the solution was not designed to process and store the data required to generate meaningful incentives. Data is key. The more you have to evaluate, the more effective your incentives will be. The ability to drill down to the transactional details, and assign a real value to each transaction, the greater the likelihood that you will uncover valuable Business Profitability Intelligence.