Why Top Businesses Automate Variable Compensation

Picture of Paul Peters
Product Marketing Director

Many people are still getting by with legacy systems to calculate variable compensation or, worse, relying on spreadsheets. They, for the most part, make payroll, they pay sellers, and the channel partners and agents get what’s due. Some even get paid accurately, or so you think. These processes are painful, but there are other more pressing things to fix, right? WRONG. Here are four reasons why leading sales organizations globally have switched to modern Sales Performance Management (SPM) systems.

  1. Time and Money

    Spreadsheets and manual systems leak money. Preparing, scrubbing, calculating, checking, recalculating, rechecking, distributing results, dealing with queries – it all takes time, a lot of time. If you’re lucky, you’ve got multiple hands on deck and people to help, but is that scalable and is the mad dash every month or every quarter to get the payroll done sustainably? That’s a question that’s personal to you and your company, but many say no, and they implement a repeatable process powered by a system, and it pays for itself.

    Errors are hard, if not impossible, to detect, yet easy to make. We have heard the horror stories of the decimal being in the wrong spot and not discovered until far too late. These are big, costly mistakes, but the smaller errors are as expensive as they add up. One company had a team of 25 people whose sole job was to deal with disputes from their dealers. That’s a lot of time and money spent because their systems lacked the proper tools to have the repeatable, accurate process of calculating data.

    A modern SPM solution should not only eradicate most of these disputes because the errors become fewer and farther between, but they also will provide tools to answer those disputes, so you don’t have to. The most advanced offerings will employ AI techniques and chatbots to deal with the bulk of queries immediately and surface potential anomalies before they even hit the payroll.

    The payback here is two-fold as you not only get fewer errors, but you also catch more of unexpected results before it’s too late and has a massive reduction in errors and overpayments. Often clients will build the business case on this alone, but as you’ll see, there is even more to it than that! Your goal isn’t to stop the leaks; It’s to right the ship.

  2. Talent

    How you treat people impacts the reputation of your brand. There was a recently-settled lawsuit between a tech-company and a number of its sellers. At dispute was if payments were made accurately, or in some cases at all. The settlement cost many millions of dollars, which is a drop in the bucket for a global 500 leader, but the costs are much more profound.

    They are in a competitive market. The tech-company plays against other large established global 500 players as well as next-generation newcomers that are devouring market share like shoppers clearing shelves of toilet roll. If you’re looking to attract top sales talent, do you think this kind of brand reputation will help? Shall I join these folks where I have to sue them to get my commission check? Or partner with the team where I get to see my comp weekly on a beautiful dashboard, get paid on time and accurately? The choice is simple. The little things matter as much as the raw compensation itself. It’s one thing offering on paper a moderately larger package, but if I’m going to have to fight you to get it, it’s probably not worth that extra 5%, versus what the other company is offering.

    It is something that is overlooked by many and is often a topic only relegated to the annual sales satisfaction survey if it’s lucky. But sales compensation and the process around it is a massive driver of sales churn. If you’re stuck dealing with errors and not solving the source problems, then you are creating a significant pipeline of talent for your competitors. Sellers want to win – make it easy for them to focus on selling.

  3. Revenue

    Automation isn’t just about eliminating mistakes; it’s also an opportunity to drive additional revenue. This is an often-overlooked benefit of SPM, partly because the error elimination case is so strong, but also partly because few are good at extracting the full potential of their compensation dollars at work.

    Your SPM data set is one of the most valuable in your company, as it will contain a detailed record of exactly who sold what, when, how much, and for what price. When you have a clean, accurate set like this, there is real insight to be derived which, with the right context, can be irrefutable evidence to guide you to a higher, more consistent level of performance.

    The evidence sitting in a sound SPM system can give you a significant advantage when you are setting quotas, goals, and defining territories. All are critical when planning your company budgets and determining corporate goals. But it can also be a source of excellent coaching and guidance in the field. Being able to see in real-time how well people are selling specific products, where there are pockets of outperformance and making sense of the why behind those pockets, enables you to apply these learnings to lift performance across the board more quickly.

  4. Financial

    Legacy systems, as well as spreadsheets, lack controls, audit trails, and offer little to help you uncover hidden errors and detect potential risks, leaving you exposed. SPM solutions have all the necessary controls to keep the compensation process protected against bad actors and audit reports so you can ensure compliance. More importantly, you need robust simulation capabilities to help forecast results and model the impact of any changes before they are implemented.

    Leading SPM solutions also have advanced AI capabilities that will help to not only surface and detect potential fraud, but also give you the tightest possible expense forecasts and accruals. These capabilities are particularly critical when it comes to staying compliant with financial reporting standards.

Summary

Sales Performance Management is a deep topic with many advantages over a manual sales incentive compensation process. This just scratches the surface on the many benefits a leading platform will provide you only by automating a manual process and providing better controls, accuracy, and insight. There are many more equally powerful benefits you will derive as you dig deeper. We are here to help answer your questions and help you understand why so many leading sales organizations are prioritizing investments in SPM.

Watch our webinar to learn how one client saved three months of time and attracted the best performers by choosing Varicent.

For a demonstration of how Varicent operates, you can book your demo online now

Picture of Paul Peters
Product Marketing Director

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