Achieving Sales Performance Optimization Through Automated Incentive Compensation Management


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presented at TrueConnection: Sales Performance Management Conference 2007 by Jeff Staley, CRM Center of Excellence at SAP, and Jim Thomas, Senior Sales Engineer at Callidus Software

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  • Achieving Sales Performance Optimization Through Automated Incentive Compensation Management

    1. 1. Achieving Sales Performance Optimization Through Automated ICM Jeff Staley Director, CRM Center of Excellence SAP Americas, Inc.
    2. 2. Agenda <ul><li>Business Drivers for Automated ICM </li></ul><ul><li>SAP – Callidus Partnership </li></ul><ul><li>The SAP/Callidus Solution for Automated ICM </li></ul><ul><li>Joint Value Proposition for Achieving Sales Performance Optimization </li></ul>
    3. 3. Business Drivers for Automated ICM
    4. 4. Incentives Drive Financial Performance ¹ Accenture CRM Research Potential Dollar Impact in $M on Pre-tax Profit of Moving from Average to High Performance for $1Bn Business Unit - Accenture CRM research Brand Management Motivating and Rewarding People Customer Service Turning Customer Info into Insight Attracting and Retaining People Building Selling and Service Skills Strong Value Propositions Partner and Alliance Management eCRM Sales Planning Key Account Management Advertising Customer Retention and Acquisition Managing Product and Service Mix Promotion Ability to Change the organization New Products and Services Segmentation Building Service Culture Channel Management 1.5 13.0 13.0 12.0 10.0 9.5 9.0 9.0 8.0 7.5 6.0 5.5 5.5 5.0 5.0 5.0 3.5 2.5 2.0 3.0
    5. 5. Incentive Specific Pain Points Commission management is challenged with low quality data input, inflexible tools, and long cycle times. Currently, the Commissions Operations team meets these challenges through manual processes and labor intensive audits. Limited Speed And Agility To Adjust Managerial Visibility & Effectiveness Quality of Commission Calculation Inputs Labor Intensive Processes Pain Points <ul><li>Complex technology & application portfolio hinders responsiveness to business needs </li></ul><ul><li>Multiple, disparate, and redundant systems from numerous acquisitions </li></ul><ul><li>Limited system feedback through statements and reporting, thereby impeding decision making </li></ul><ul><li>Long turnaround time for comp plan (weeks to months) and comp system changes (months to years) reduces ability to quickly drive results through levered compensation </li></ul><ul><li>Inability to do ‘what-if’ modeling and dynamically deliver incentives to drive business results </li></ul><ul><li>Inaccurate sales, billing, & quota data creates issues that need to be investigated and reconciled </li></ul><ul><li>Manual audits of sales, billing, & quota data require are required to ensure calculation accuracy </li></ul><ul><li>Payouts over $X are subject to mandatory audits, but smaller amounts are less scrutinized </li></ul><ul><li>Recalculations consume a lot of resources and are the only systemic way of reducing and compensating for data quality issues </li></ul><ul><li>End-to-end process is highly dependent on labor intensive sub-processes </li></ul><ul><li>Process is highly dependent on IT </li></ul><ul><li>Lack of visibility into end-to-end process requires significant manual intervention and verification </li></ul>Comments
    6. 6. Incentive Compensation is Difficult Hard to Calculate Hard to Manage Hard to Apply Vertical Knowledge Plan Complexity Volume Data Feeds <ul><li>Insurance </li></ul><ul><li>Banking </li></ul><ul><li>Telecom </li></ul><ul><li>Manufacturing </li></ul><ul><li>Pay on Profit </li></ul><ul><li>Pay on Market Share </li></ul><ul><li>Multiple Payees Per Transaction </li></ul><ul><li>Millions of Transactions </li></ul><ul><li>Thousands of Payees </li></ul><ul><li>Millions of Dollars Paid </li></ul><ul><li>Many External Data Sources </li></ul>Rate of Change Visibility Integration People <ul><li>Sales Is Dynamic </li></ul><ul><li>Millions of Report Pages Weekly </li></ul><ul><li>Sales, Customer and Comp Data </li></ul><ul><li>Divisions, Legacy Systems, Upstream and Downstream Connections </li></ul><ul><li>Disputes, Self-Services, Approvals, Reorgs </li></ul>Sales Channel Employees <ul><li>Field Sales </li></ul><ul><li>Sales Managers </li></ul><ul><li>Sales Engineers </li></ul><ul><li>Inside Sales </li></ul><ul><li>Channel Partners </li></ul><ul><li>Independent Agents </li></ul><ul><li>Retail Stores </li></ul><ul><li>Resellers & Distributors </li></ul><ul><li>Employees </li></ul><ul><li>Managers </li></ul><ul><li>Executives </li></ul>
    7. 7. Best Practices for a Performance Based Culture <ul><ul><li>1. Enterprise Goal Driven Sales Process </li></ul></ul><ul><ul><ul><li>Analyze prior performance and trends </li></ul></ul></ul><ul><ul><ul><li>Regional/Channel, product revenue and profit goals </li></ul></ul></ul><ul><ul><ul><li>Plan new product introductions </li></ul></ul></ul><ul><ul><ul><li>Strategic Business Planning </li></ul></ul></ul><ul><ul><li>2. Structure/Align Organization for Success </li></ul></ul><ul><ul><ul><li>Territory and account planning </li></ul></ul></ul><ul><ul><ul><li>Assign product and customer overlays </li></ul></ul></ul><ul><ul><ul><li>Compare and model scenarios </li></ul></ul></ul><ul><ul><ul><li>Establish supporting sales comp strategies </li></ul></ul></ul><ul><ul><li>3. Deliver a Timely, Relevant, Aligned Sales Plan </li></ul></ul><ul><ul><ul><li>Establish timely sales incentives </li></ul></ul></ul><ul><ul><ul><li>Regional and product quotas and incentives </li></ul></ul></ul><ul><ul><ul><li>Cross-sell, upsell & SPIF’s </li></ul></ul></ul><ul><ul><ul><li>Ensure SOX auditability and traceability </li></ul></ul></ul><ul><ul><li>5. Make Fact Based Sales Performance Decisions </li></ul></ul><ul><ul><ul><li>Monitor performance against plan </li></ul></ul></ul><ul><ul><ul><li>Introduce new incentives on-demand </li></ul></ul></ul><ul><ul><ul><li>Ad-hoc adjustments based on results </li></ul></ul></ul><ul><ul><li>Enterprise Alignment </li></ul></ul><ul><ul><ul><li>Sales channel behavior fully aligned with enterprise goals </li></ul></ul></ul><ul><ul><li>4. Field Execution with Transparency </li></ul></ul><ul><ul><ul><li>Execute Marketing Campaigns </li></ul></ul></ul><ul><ul><ul><li>Field visibility against incentives </li></ul></ul></ul><ul><ul><ul><li>Eliminate shadow accounting </li></ul></ul></ul><ul><ul><ul><li>Reduce sales disputes </li></ul></ul></ul><ul><ul><ul><li>Plan approval </li></ul></ul></ul><ul><ul><ul><li>Improve sales productivity </li></ul></ul></ul>
    8. 8. SAP – Callidus Partnership
    9. 9. The Market is Open for Co-Innovation SAP 22% ORCL (Incl.SEBL&PSFT) 12% $30.5 billion Enterprise Applications Market Sources: Company data, market reports, analyst estaimtes, preliminary for 2004; based on product revenue spending for application vendors (including license and maintenance revenue) MSFT 4% OPPORTUNITY <ul><li>Enterprise Applications </li></ul><ul><li>Enterprise Services Architecture </li></ul><ul><li>Platform for customers and ISVs </li></ul><ul><li>Win-Win </li></ul><ul><li>SAP as Honest Broker </li></ul><ul><li>SAP: clear, open, fair and efficient </li></ul>LEADERSHIP
    10. 10. SAP’s Ecosystem Strategy Profitable Ecosystem Growth Enable Adoption of NetWeaver and the Business Process Platform Foster Co-Innovation among customers and partners to create high-value solutions and services Create Value for all ecosystem stakeholders Enabling Goals Customers Partners Developers Fuel collective, self-sustaining growth
    11. 11. SAP – Callidus Partnership SELECT SAP/CALLIDUS SHARED CUSTOMERS Why SAP chose Callidus <ul><li>Demand driven by SAP customers for robust comprehensive, flexible and user-friendly ICM solution </li></ul><ul><li>Callidus delivers world-class ICM solutions – ranked #1 by Gartner </li></ul><ul><li>Proven technology solution across multiple industries </li></ul><ul><li>Market leading ICM solution combined with robust SAP NetWeaver platform and ESA – maximizing value to SAP customers </li></ul><ul><li>Over 30% of Callidus’ current customers run SAP </li></ul>
    12. 12. The SAP/Callidus Solution for Automated ICM
    13. 13. SAP with Callidus ICM: Closed Loop Business Scenario Sales Ops or Comp Analyst Sales Rep Reviews historical impact of sales performance vs. comp plans Determines appropriate changes to comp plans for products and territories Sells new product, receives comp statements. Initiates dispute for any discrepancies Reviews YTD performance of regions and current products performance Updates comp plan Receives notice of new plan and accepts it Reviews and settles dispute VP Sales Reviews success of program and compensation effect Comp Analyst VP Sales VP Sales VP Sales / VP Finance Sales Rep SAP Callidus
    14. 14. Integrated Business Process Flow: SAP/Callidus ICM Compensation 1. Review effect of past comp plans and performance 2. Model plans, set rules, release plans 3. Place Orders 4. Process compensation Sales Ops or Comp Analyst Sales Rep / Channel Partner Sales Force Automation / Channel Mgmt Model plans, create rules, release plans SFA & SD - Quote to Cash SAP ICM XI Process compensation based upon plans SD transactions 5. Analyze Effectiveness Sales Manage dispute process BI, SFA, Verify payments, Enter disputes SFA, HR Payroll, AP HR Payroll / AP Analyze plans and performance VP Sales, Finance SD transactions & Business Partner Biz Partner, Prods, Price, Territory
    15. 15. TrueComp Suite Analyze (TrueAnalytics) Target Audience: Executives, Bus. Analysts Build (TrueComp Manager) Communicate (TrueInformation) Target Audience: Field Sales, Field Mgmt. Resolve (TrueResolution) Target Audience: Field Sales, Field Mgmt. SAP Data Actionable Insight Plans, Rules, People Flexible Workflow Self-Service Target Audience: Comp Analysts, Comp Mgrs.
    16. 16. How Integration is Done Today CRM SAP Enterprise Business Suite Callidus FI Accounts Receivable SD Order Management Materials Management Business Intelligence Service Management FI Accounts Payable General Ledger HR Payroll SAP Enterprise Business Suite Business Intelligence Master & Transactional Data Source Systems Settlement & Reporting Systems Compensation Processing Business Partner
    17. 17. Integration Scenario and Roadmap Partner Contract will only include Powered by NetWeaver Certification for the Callidus TrueComp Incentive Compensation Management application Initial integration will focus on CRM and ERP Business Partner Master Data for employees or partners who will be awarded incentives via Callidus TrueComp SAP Business Intelligence SAP Enterprise Business Suite Settlement Systems Standard SAP Analytics Content SAP NetWeaver Business Process Platform (BPP) <ul><li>CALLIDUS </li></ul><ul><li>TrueComp </li></ul><ul><li>Incentive Compensation Management </li></ul>ERP Transactional Data Master Data ERP CRM Master Data Transactional Data
    18. 18. Joint Value Proposition for Achieving Sales Performance Optimization
    19. 19. Drive Revenue and Profitability with Proven ROI
    20. 20. Strategic Benefits of an Automated ICM Solution *Source:SAP customer experiences Callidus ROI Whitepaper 2-5% 50-99% <ul><li>Productivity gain from reduced ‘shadow accounting’ </li></ul><ul><li>Reduction in compensation disputes </li></ul>Improved Quality Sales Productivity 60-100% <ul><li>Reduced payments errors </li></ul>Revenue 10-20% 10-20% 40-60% 2-5% <ul><li>Savings from reduced reporting costs </li></ul><ul><li>Compensation management staff savings </li></ul><ul><li>Overall reduction in cost versus existing solution </li></ul><ul><li>Incentive budget savings from reduced errors </li></ul>Operating cost 4-6% 10-20% 4-7% 8-10% <ul><li>Increased revenue from product and channel growth </li></ul><ul><li>Increase in cross sell/up sell rate </li></ul><ul><li>Increase in indirect sales </li></ul><ul><li>Increase in close rate </li></ul>Impact Tangible Benefits *
    21. 21. Strategic Benefits of an Automated ICM Solution <ul><ul><li>Flexible system allows for rapid changes in compensation models driven by changing business conditions </li></ul></ul><ul><ul><li>Individual goals always aligned with corporate goals and strategic objectives </li></ul></ul><ul><ul><li>Highly motivated sales force </li></ul></ul><ul><ul><li>Competitive advantage for attracting and retaining talent </li></ul></ul><ul><ul><li>High data integrity </li></ul></ul><ul><ul><li>Lower cost of ownership due to easier integration with other systems </li></ul></ul><ul><ul><li>Improved analysis capabilities to enhance decision making </li></ul></ul><ul><ul><li>Improved visibility and control </li></ul></ul><ul><ul><li>Enhanced management of end-to-end business processes </li></ul></ul><ul><ul><li>Increased business flexibility, efficiency and margin impact due to a flexible platform </li></ul></ul>Higher Revenue Potential Lower Costs Increased Managerial Effectiveness
    22. 22. Tangible Benefits of an Automated ICM Solution* (1/2) <ul><li>Revenue </li></ul><ul><li>4-6% Top-line revenue increase from product and channel growth </li></ul><ul><li>10-20% Increase in cross sell/up sell rate </li></ul><ul><li>4-7% Increase in indirect sales </li></ul><ul><li>8-10% Increase in close rate </li></ul><ul><li>Sales Productivity </li></ul><ul><li>50-99% Reduction in compensation disputes2 </li></ul><ul><li>2-5% Productivity gain from reduced ‘shadow accounting’ </li></ul>*Source:SAP customer experiences Callidus ROI Whitepaper
    23. 23. Tangible Benefits of an Automated ICM Solution* (2/2) <ul><li>Operating Cost </li></ul><ul><li>10-20% Savings from reduced reporting costs </li></ul><ul><li>10-20% Compensation management staff savings </li></ul><ul><li>40-60% Overall reduction in cost over existing disparate solution </li></ul><ul><li>2-5% Incentive budget savings from reduced errors </li></ul><ul><li>Improved Quality </li></ul><ul><li>60-100% Reduction in payment errors </li></ul>*Source:SAP customer experiences Callidus ROI Whitepaper
    24. 24. Why Companies Choose SAP/Callidus Solutions <ul><li>Increase average transaction size 6-8% </li></ul><ul><li>Decrease average sales cycle time 10-20% </li></ul><ul><li>Reduce compensation error rate by 60-100% </li></ul><ul><li>Increase Salesforce productivity by 2-5% </li></ul>Tangible Business Benefits: ROI Business Agility Lower Risk Enterprise Alignment <ul><li>Address changing market conditions via effective mid-year adjustments </li></ul><ul><li>Align sales performance with enterprise strategy </li></ul><ul><li>Integrate demand, sales and supply chains </li></ul><ul><li>Accelerate new product introductions, territory and channel realignments, and compensation revisions </li></ul><ul><li>Deploy proven, NetWeaver-certified solutions </li></ul><ul><li>Benefit from SAP’s resources and commitment </li></ul><ul><li>Leverage joint investment and vision </li></ul><ul><li>Leverage benefits of market leading ICM solution integrated with robust SAP NetWeaver Platform </li></ul><ul><li>Gain actionable insight based on current results </li></ul><ul><li>Align behavior with enterprise goals </li></ul><ul><li>Adjust plans and actions in real-time </li></ul>
    25. 25. Analyst View on Benefits …. <ul><li>Organizations are achieving tangible benefits from sales ICM software, including increasing accuracy (reducing errors to less than 1% per payout), reducing resource requirements in administrative and IT departments (by 50% or more in some instances), fulfilling deadlines and saving money. </li></ul><ul><li>Success in acquiring operational efficiencies and tactical benefits could create complacency and sap any commitment to pursue strategic benefits. </li></ul><ul><li>Sales ICM — in conjunction with territory management, quota management and analytics — can help organizations increase sales performance via improved organization, guidance and influence on sales behaviors. </li></ul><ul><li>Gartner 2007 </li></ul>What Analysts Say About the Benefits of Automated ICM
    26. 26. <ul><li>Market leading ICM solution combined with robust SAP NetWeaver Platform and ESA </li></ul><ul><li>Maximum Flexibility and Adaptability : Compensation plans can quickly be aligned with product innovation, updates to corporate strategy, and changes in business environment </li></ul><ul><li>Reduced risk and Total Cost of Ownership to SAP customers </li></ul><ul><li>Additional leverage from your investment in the SAP platform </li></ul>Summary: Value of Joint SAP/Callidus Solutions
    27. 27. Distribution Industry Leaders Choose Callidus ICM Insurance Telecom Retail Banking Manufacturing & Technology
    28. 28. Customer Case Study: DIRECTV DIRECTV delivers satellite-based services to US customers in homes and businesses. DIRECTV’s complex operations include some of the world's most advanced technologies in the delivery of a seamless viewing experience. DIRECTV has more than 15 million customers, we're the industry leader in satellite service. <ul><li>CUSTOMER PAIN POINTS </li></ul><ul><ul><li>Comp system breaking under weight of its four-terabyte database and 25,000 plus payees </li></ul></ul><ul><ul><li>Payments made daily, weekly, monthly, and anytime in between; system buckled under this pressure </li></ul></ul><ul><ul><li>Payee base outgrowing their 30 homegrown applications, including Microsoft Excel and Access </li></ul></ul><ul><ul><li>Needed to address over/under payments, inability to provide an audit trail, difficulties disseminating reports, and future growth </li></ul></ul><ul><li>PROJECT OBJECTIVE </li></ul><ul><ul><li>Need for a robust ICM system to use sales compensation as a strategic differentiator when incenting its distributors, dealers, suppliers, and manufacturers (Fry’s Electronics, Best Buy, and Circuit City) </li></ul></ul><ul><ul><li>Need to resolve compensation related disputes </li></ul></ul><ul><ul><li>Need to build trust and confidence with its sales channel when paying and providing visibility associated with variable compensation </li></ul></ul>
    29. 29. Nortel Selects SAP/Callidus for Enterprise ICM Nortel is a worldwide provider of communications technology with 33,760 employees in over 150 countries. Nortel has a global sales force of approximately 3100 sales people who are paid incentive compensation via a labor intensive legacy compensation application and spreadsheets . <ul><li>Why Enterprise Incentive Compensation Management (ICM)? </li></ul><ul><li>Failing legacy comp system with high IT maintenance & compensation staffing costs </li></ul><ul><li>High volume of dispute resolution calls with slow response turnaround from large team using manual process resulting in (from 6 Sigma analysis) “shadow accounting” consuming 7% of sellers time and accounting for 23% of attrition rate. </li></ul><ul><li>Requirement for a flexible global compensation and reporting environment that is responsive to and supports sales leadership revenue generation goals </li></ul><ul><li>Need for compensation plan modeling tools for development of more focused and appropriate sales plans for different lines of business and regions. </li></ul>
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    31. 31. Additional Slides
    32. 32. Incentive Compensation Value Proposition Achieve Superior Business Value Operational <ul><li>Increase Profitable Sales </li></ul><ul><li>Penetrate New Markets Increase Market Share </li></ul><ul><li>Gain Competitive Advantage </li></ul>Strategic Goals Key Benefits Foundation <ul><li>Reduced Overpayments/Errors </li></ul><ul><li>Reduced Admin & IT Resources </li></ul><ul><li>Improved Auditing and Tracking </li></ul><ul><li>User self service for reports and disputes </li></ul><ul><li>Understand linkage between plans and results </li></ul><ul><li>Deliver New Plans Quickly </li></ul><ul><li>Handle Complexity and Change </li></ul>10+% of spend 2 – 5% of spend Revenue Growth