Building Effective Compensation Plans

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presented at TrueConnection: Sales Performance Management Conference 2007 by Joe DeHaven, Solutions Architect at Callidus Software Inc.

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  • Building Effective Compensation Plans

    1. 1. Building Effective Compensation Plans Joseph E. (Joe) DeHaven, CLU, ChFC, FLMI Principal Solutions Architect Callidus Software
    2. 2. Presenter Joe DeHaven – At Callidus <ul><li>Eight Years Service </li></ul><ul><ul><li>Principal Solutions Architect </li></ul></ul><ul><ul><li>Project Manager </li></ul></ul><ul><ul><li>Principal Consultant </li></ul></ul><ul><ul><li>Compensation Consultant </li></ul></ul><ul><li>Worldwide Clients Supported </li></ul><ul><ul><li>Insurance and Financial Services – 20+ Clients </li></ul></ul><ul><ul><li>Computer Hardware and Software – 10+ Clients </li></ul></ul><ul><ul><li>Telecommunications – 5+ Clients </li></ul></ul><ul><ul><li>Other Verticals – 5+ Clients </li></ul></ul>
    3. 3. Presenter Joe DeHaven – Before Callidus <ul><li> </li></ul><ul><ul><li>Field Sales Administration and Payroll </li></ul></ul><ul><ul><li>Compensation Plan and Component Design </li></ul></ul><ul><ul><li>Compensation Plan Pricing </li></ul></ul><ul><ul><li>Plan Modeling (Macro and Micro) </li></ul></ul><ul><ul><li>Plan Introductions to Sales Force </li></ul></ul><ul><ul><li>♦♦♦ </li></ul></ul><ul><ul><li>Planning and Analysis </li></ul></ul><ul><ul><li>Accounting </li></ul></ul><ul><ul><li>Field Office - Business Management </li></ul></ul>
    4. 4. Agenda <ul><li>Design Considerations </li></ul><ul><ul><li>“ Get the Big Rocks First” </li></ul></ul><ul><ul><ul><li> Stephen R. Covey </li></ul></ul></ul><ul><li>Consider Plan Changes Early </li></ul><ul><ul><li>Design and Implement Feeds </li></ul></ul><ul><ul><li>Publish Reports </li></ul></ul><ul><ul><li>Introduce Change to Sales Force </li></ul></ul><ul><li>Review TrueComp Rule Writing Techniques </li></ul><ul><ul><li>Processing Speed </li></ul></ul><ul><ul><li>Overall Efficiency </li></ul></ul>
    5. 5. Design Considerations <ul><li>Effective Design applies equally to: </li></ul><ul><ul><li>TrueComp Configuration and </li></ul></ul><ul><ul><li>Compensation Plan Design. </li></ul></ul><ul><li>Get the “BIG ROCKS” First </li></ul><ul><ul><li>Concentrate on taking care of the important areas first. </li></ul></ul>
    6. 6. Plan Design Considerations <ul><li>Effective Compensation Plans </li></ul><ul><ul><li>Simple </li></ul></ul><ul><ul><li>Direct </li></ul></ul><ul><ul><li>Readily Understood </li></ul></ul><ul><ul><li>Aligned with Organizational Goals </li></ul></ul><ul><ul><li>Create a “win-win” with plan changes </li></ul></ul><ul><ul><li>Maintain Focus (few components) </li></ul></ul>
    7. 7. Plan Communications <ul><li>GET THE MESSAGE OUT EARLY! </li></ul><ul><ul><li>Make Upcoming Change a “Worst Kept Secret” </li></ul></ul><ul><ul><li>Produce Reports with new KPMs before pay is impacted! </li></ul></ul><ul><ul><li>Sales Reps will “own” a new component if </li></ul></ul><ul><ul><li>they feel that they can influence it. </li></ul></ul>
    8. 8. Plan Communications <ul><li>The “DOs” for Plan Change Communications </li></ul><ul><li>DO COMMUNICATE Early </li></ul><ul><li>DO COMMUNICATE Often </li></ul><ul><li>DO Avoid Surprises </li></ul><ul><li>DO Ensure Feedback </li></ul>
    9. 9. “ Future Proof ” Your TrueComp System <ul><li>Analyze Potential New Data Elements </li></ul><ul><li>Include on transactions </li></ul><ul><li>DO this early </li></ul><ul><ul><li>Have new data available for analysis </li></ul></ul><ul><li>After analysis and design </li></ul><ul><ul><li>Communicate new factors through new reports </li></ul></ul><ul><ul><li>DO this BEFORE it impacts compensation </li></ul></ul>
    10. 10. Advanced Rule Writing Techniques <ul><li>ALLOCATE Phase </li></ul><ul><li>Transactions  Credit  Measurements </li></ul><ul><li>DO Use ECA for Direct Credits </li></ul><ul><ul><li>Fastest means of Credit Allocation </li></ul></ul><ul><li>DO Use Roll Structures for Indirect Credits </li></ul>
    11. 11. Advanced Rule Writing Techniques <ul><li>ALLOCATE Phase </li></ul><ul><li>Use Generic Attributes vs. Extended Attributes </li></ul><ul><ul><li>DO Use GAs for most used rule evaluations </li></ul></ul><ul><ul><li>DO Use EAs for least used rule evaluations </li></ul></ul><ul><ul><li>DO Use EAs for Reporting </li></ul></ul>
    12. 12. Advanced Rule Writing Techniques <ul><li>ALLOCATE Phase </li></ul><ul><li>Consider alternatives to OLP (2 nd Pass) </li></ul><ul><ul><li>Integration Pre-Process (Accumulator) </li></ul></ul><ul><ul><ul><li>Allows Regular Transaction processing </li></ul></ul></ul><ul><ul><ul><li>Period-to-date </li></ul></ul></ul><ul><ul><li>Generic OLP Plug-In developed ( Requires configuration ) </li></ul></ul>
    13. 13. Advanced Rule Writing Techniques <ul><li>ALLOCATE Phase </li></ul><ul><li>TrueComp 5.2 introduces GAs on ECA. </li></ul><ul><ul><li>Can process unlimited splits with a single transaction. </li></ul></ul><ul><ul><li>More efficient than prior releases </li></ul></ul><ul><ul><li>Easier for Integration </li></ul></ul><ul><ul><li>Easier for Compensation Rule coding </li></ul></ul>
    14. 14. Advanced Rule Writing Techniques <ul><li>ALLOCATE Phase </li></ul><ul><li>Limit number of Primary Measures </li></ul><ul><ul><li>Where possible avoid “sub-total” Measurements. </li></ul></ul><ul><ul><li>DO Use Credit GAs to allow grouping for reports. </li></ul></ul><ul><ul><li>Ideal  Less than 10 Primary Measures per participant. </li></ul></ul><ul><ul><li>Excessive  Look to reduce at 50 PMs per participant. </li></ul></ul><ul><ul><li>DO Use Credit GNs for passing multiple values to Measurement rules. </li></ul></ul>
    15. 15. Advanced Rule Writing Techniques <ul><li>REWARD Phase </li></ul><ul><li>Secondary Measurements  Incentives  Deposits </li></ul><ul><li>DO use GAs on Secondary Measure and Incentive </li></ul><ul><ul><li>Group multiple values on a single database object </li></ul></ul><ul><ul><li>More efficient – logical groupings of values </li></ul></ul><ul><li>Avoid Commission Processing in Incentive Rules – (expensive). </li></ul><ul><ul><li>(Potential 2 nd or 3 rd pass) </li></ul></ul><ul><ul><li>Consider use of Fixed Values with Credit Rules </li></ul></ul>
    16. 16. Advanced Rule Writing Techniques <ul><li>Rolling Credits vs. Rolling Measurements </li></ul><ul><li>Balance between: </li></ul><ul><ul><li>cost of credit creation (volume) </li></ul></ul><ul><ul><li>potential large “islands” from rolling measures </li></ul></ul><ul><li>A large island is created when </li></ul><ul><ul><li>a position at the top of an org chart receives roll-ups </li></ul></ul><ul><li>If you can avoid large islands, </li></ul><ul><ul><li>rolling measures generally is more efficient </li></ul></ul>
    17. 17. Closing Thought <ul><li>“ The future belongs to those who prepare for it today.” </li></ul><ul><li>Malcolm X </li></ul>
    18. 18. Building Effective Compensation Plans QUESTIONS?

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