Spreadsheets for Sales Performance Management and Incentive Compensation Management is a bad idea. I have talked to many prospects and clients over the years on this topic. This – more than anything else – stands out as the most manageable problem to solve, yet we keep falling into the same trap.
There are several examples. My favorite, while not specifically about variable compensation, shows how problematic spreadsheets are for business. It's a story called "The London Whale." In April and May of 2012, JPMorgan's Chief Investment Office based in London made a series of transactional errors through poor recordkeeping. This loose level of controls allowed them to place the company at extremely high risk. Spreadsheets lack the visibility and controls needed for management and tracking of transactions. The London Whale event resulted in roughly $6.2 billion trading loss and $920 million in fines.
In 2011, AstraZeneca accidentally released confidential information that included sensitive details when sharing a spreadsheet template as part of the financial guidance. Barclays' Capital spent millions mistakenly by a duplicate spreadsheet row error in 2008.
It's no secret that spreadsheets are manually intensive and error-prone. We see news stories about millions and billions in errors thinking, ‘that would never happen where I work.’ You may recognize studies that have shown 88% of all spreadsheets contain errors. You may be suffering from spreadsheet errors without realizing.
Given the fact that today, there is still a significant segment in the market that continues to use spreadsheets, or some form "homegrown" incentive compensation solution, hear stories regularly about a failure to pay, lost overpayments, and court cases over compensation payments.
Imagine for a moment that you did not get paid accurately, or at all. Missing Christmas, a daughter's graduation, or a house payment after all the time lost with the family and invested in work seems more than unfair. It's criminal. Business errors impact human lives.
Successful businesses find ways to repeat success and scale. Spreadsheets limit an organization in both. It's tough for someone to sit down at a spreadsheet or with a spreadsheet that someone else has developed and try to decipher their calculations. A salesperson will spend more time making sure they will get paid right, rather than generate more business. It limits the ability to expand.
Today there's new technology, and there's no reason why you should continue to rely on spreadsheets for Sales Performance Management and Incentive Compensation. With the latest technologies out today, like Varicent’s comprehensive Sales Performance Management solution, there are advanced methods for calculating incentive compensation and gathering the information that can drive a more strategic incentive compensation strategy.
Varicent allows you to have similar capabilities as spreadsheets but is much more powerful and advanced. Designed specifically as a Sales Performance Management solution, Varicent assists in overcoming incentive compensation challenges and addressing sales performance management issues that arise with using spreadsheets.
There are fewer errors, continuity of data, the views for audit, and provide high data resiliency. It provides a shared experience. There's not just one person driving a spreadsheet. Instead, several team members with the right authority provide overview and backup make sure the numbers are correct. Where in the earlier examples, they're error-prone and they don't catch those errors, Varicent has the ability to capture those errors and correct for those errors. People get paid accurately, on-time, and want to focus on earning more.