When an employee sits down with his or her boss for an annual evaluation, it’s not unlikely that two different — sometimes drastically so — definitions of “fair compensation” are about to square off.

A distributor salesperson might feel that he has brought a significant amount of new business to the company. The sales manager, however, might only see shrinking accounts that were once robust. With so many varying factors to consider in evaluating job performance, it’s no wonder that more distributors are turning to incentive compensation software (ICS) in order to make the concept of fair compensation more than just lip service.

A variety of ICS options are available. In fact, the incentive-planning industry has grown by leaps and bounds in the past five years, says John Bremen, a Chicago-based executive with Watson Wyatt Worldwide, a global incentive-planning consultant. “If the number of people that show up at incentive technology conferences is any indication, there are significantly more companies using these systems,” he says. “Virtually all of our clients are Fortune 500 companies, and they’re all using incentive compensation software now.”

Real Benefits For Business
The overall benefit of using ICS is that the guesswork is taken out of the equation when developing payrolls and planning when to hand out bonuses. As part of a distributor’s enterprise resource planning (ERP) software (the company-wide software package used by a company), ICS simply allows HR departments to set concrete parameters on employee payrolls. According to Bremen, however, there are specific ICS benefits that distributors should consider before making an investment that could cost as much as six figures:

    Cost of Administration — The initial cost of ICS could be $100,000 or more, but that should be compared with a distributor’s current cost of salary compensation planning. “If you have someone who is fully dedicated — or even 50 percent dedicated — to compensation planning, then you’re spending a lot of money over five years,” says Bremen. “The initial cost of implementing the technology might be a lot, but it will probably save you money over time.”

    Fewer Payroll Errors — “Every time you’re doing something manually, you’re increasing your chances of error,” says Bremen. “We see an astronomical number of accounts that have accounting errors.” ICS packages allow distributors to record the accomplishments of employees — new sales accounts or increased sales productivity for most jan/san distributors — and automatically accrue salary advancements wherever they’re appropriate.

    Legal Records — “Many companies have found that it’s easier to follow the law with an automated system,” says Bremen. “It’s better to allocate taxes automatically into the account than to rely on employees in the HR department to remember.” With ICS, specific guidelines can be automated in addition to scaling salaries: health insurance, retirement contributions and taxes are just a few. Each employee’s salary can be broken down by category and analyzed as a legal record.

    Cohesiveness of ERP — According to Bremen, if a distributor has automated warehousing, sales, and internal communications software, why neglect to include employee compensation? As long as compensation is being automated, the same software can often be used to leverage incentive planning. “It doesn’t make any sense to have a fully automated system, except for incentives,” he says.

    Speed and Responsiveness — “Most incentive planning takes weeks or months, but the technology exists for company owners to instantly record and adjust payroll plans in a way that responds to that company’s particular market,” says Bremen.

It Won’t Think For You
Although ICS appears to be a godsend for efficiency-starved distributors, it won’t actually do the thinking, planning and strategizing for HR departments. That is where distributors need to be making the tough decisions, rather than relying on an automated software package, says Michael Marks, president of Indian River Consulting Group, Melbourne, Fla.

“Honestly, I think they can be thumb-sucking devices for lazy distributors,” says Marks, who recently wrote What’s Your Plan? Smart Sales Force Compensation in Wholesale Distribution, published by the National Association of Wholesaler-Distributors (NAW). “Software programs can be an attractive nuisance. They might look good, but you still have to take the time to put in the spreadsheets and specify plans for your own corporate objectives.”

Incentive Options Abound
For distributors who are hesitant to commit to the long-term cost of an ICS package, there are dozens of incentive technology companies that specialize in short-term incentive compensation promotions, says Mike Arkes, CEO of Hinda Inc., Chicago, and past president of the Online Incentive Council (OIC).

“The online technology that’s available makes a fairly sophisticated program available to smaller companies at a reasonable price,” says Arkes. “Typically, incentive sales programs measure sales creation, but that can vary from company to company. We built a software platform that allows sales managers to develop their own criteria and determine how to weight each of those criteria.”

Rather than making ICS part of a company’s internal ERP, companies like Hinda make it possible for distributors to outsource incentive compensation. Sales managers log on to a secure site and see which accounts salespeople have sold, and how many credits they’ve earned for their sales. Of course, each salesperson also needs to have access to certain portals of the website in order to enter information about each sale.

Whether it’s internal or outsourced, ICS gives distributors new options for crafting payrolls to fit their own needs.

ON SITE

Online Employee Incentives
www.useonlineincentives.org was launched by the Online Incentive Council (OIC) in 1996 in order to help businesses outsource incentive planning at a low cost. The site states that “Council members are seasoned industry professionals whose expertise includes helping you identify your company’s performance goals, setting up strategies to achieve those goals, tracking and reporting employee performance, and administering awards fulfillment.”
Currently, 20 online corporate incentive companies comprise the OIC. Each company offers unique incentive packages that can be accessed by company owners and and their employees.

Concrete Tech Comparisons
BSW Consulting, St. Louis, has published its 2003 Distribution Solutions Guide. The resource provides a single reference to help distributors find and compare software packages “on a level playing field,” according to the volume’s introduction. Visit www.software4distributors.com.

Wireless Phone Portability
The Federal Communications Commission (FCC) has mandated that all wireless service providers must implement Local Number Portability (LNP) by November 24 as a way to further increase consumer choice in a competitive wireless industry.
LNP will allow consumers to keep their phone numbers when they switch from one wireless provider to another. According to Tracy Nolan of Verizon Wireless, only the top 100 Metropolitan Statistical Areas (as defined by the FCC) will initially be able to keep their phone numbers if they stay in the same geographic location — not when moving from region to region, such as from Boston to Philadelphia.




POSTED ON: 11/1/2003