Recent surveys suggest that 80% - 90% of North American companies use spreadsheet based systems to manage sales compensation. An October 2007 survey revealed that while 80% of the executives view sales compensation management as a "strategic" function, fewer than 25% claim their spreadsheet based system provided measurable sales performance value.

So why continue using spreadsheets if they are not effective in driving sales performance? A majority of those surveyed indicated cost as the primary reason; most indicated they had no budgetary cost associated with licensing the spreadsheet software. But in a study by David Fritz from Growth Solutions, the direct and indirect costs associated with spreadsheet-based sales compensation management are real....and substantial.

Each participant provided cost data in regard to program administration. Data was collected on annual direct costs (fully loaded cost of those spending time in admin, systems development, etc.) and indirect costs (cost of sales force time reviewing/fixing incentive payments, etc.). These costs were compared to each participant's annualized sales revenue, incentive payout, and number of payees (sales reps + sales managers + other staff eligible for sales incentives).

On average the (annual) indirect costs related to program administration ($1,319/payee) exceeded the direct costs ($1,140/payee). In some cases, indirect costs were substantially greater than the direct; as one participant put it: "Reps spend 5% of their time in checking/fixing commission statements and managers as much as 10% - we have an issue of the sales force turning into accountants."

This study indicates that companies are spending on average approximately $2,459/payee each year; that's just over $200/rep per month!

As the leading on-demand sales compensation / sales performance management solution, Compel significantly reduces direct costs. At a maximum of $50/user per month, Compel provides efficient automation that eliminates the inaccuracies and manual processes common to spreadsheet based systems. Better yet, Compel virtually eliminates the indirect costs associated with lost selling time, dispute resolution and the like. Compel's dashboards provide sales representatives and their managers transparency into the commission process and visibility into real-time earnings and performance data to keep them aligned, motivated and focused on selling.

To learn how Compel can help you achieve your financial compliance needs in sales compensation management, follow the links below.

Sales compensation plans are one of the most powerful tools organizations have to affect sales performance. Properly designed and deployed, sales compensation plans drive superior sales performance and result in achieving and exceeding sales and revenue targets - without exceeding compensation budgets.

Unfortunately, most companies fail to adequately test and model sales compensation plan variables and attainment scenarios. This failure is largely due to the inability of their current spreadsheet-based sales compensation management systems to easily create and effectively run models.

Best practice sales compensation management calls for sales and finance executives to work with sales operations to build and model sales compensation plans, analyze and forecast related commission earnings at both a macro (plan) and micro (individual) level, then choose those sets of plans that best fit corporate parameters for sales performance, revenue and associated commission costs.

Multiple models are needed because executives need to evaluate a myriad of changes and options - for example changes to quotas, commission rates, territories and organizational structures. Attainment levels also need to be modeled - for example a company may expect sales and the revenues associated with those sales to increase in some areas or with certain product lines, and decrease in other areas or with other product lines. By modeling both plans and data, executives are empowered to evaluate results and implement the plans that best fit their organization's business model.

Centive Compel provides a secure "virtual sandbox" for modeling plans at both the macro and micro level. With Compel Modeling, sales and finance executives have confidence that their sales plans will drive superior performance at a reasonable cost.

To learn more about the advantages of modeling sales compensation plans with Centive Compel, follow the links below.

Aberdeen Group's benchmark report "Sales Compensation Management: Coin-Operated Productivity" proves the business value companies gain by automating the design and administration processes involved in sales compensation management. In December 2007, Aberdeen Group surveyed over 130 companies to identify the strategies, capabilities and enablers that "best-in-class" firms are using to improve sales productivity and effectively manage compensation plan design and administration. The benchmark report indicates that "best-in-class" companies deploy automated solutions for sales compensation and recognize tangible benefits related to:

• Improving alignment of performance targets with business objectives;
• Establishing a formal, centralized process for plan design and administration;
• Providing accurate, actionable reporting to all constituents, from field sales to executive management.

Learn from Aberdeen how best-in-class companies chose automated solutions like Centive Compel to better manage sales compensation as a tool to steer their sales organization and drive sales performance.