Unity and simplicity are generally good things, and compensation is no exception to that rule.
In our Understanding Compensation Management series we have covered the main forms of compensation, including broad-based “HR comp” like salaries, bonuses, and long-term incentives, and “sales comp,” meaning the very specialized processes for commissions and similar sales incentive compensation.
Unfortunately, in too many companies, multiple systems are required to manage these reward processes. In an age of increasing automation and HR digitization, often the elephant in the room that no one talks about is the fact that HR comp and Sales comp are managed in silos, in systems that have nothing to do with each other.
In our last article in this series, we want to look at the questions of if, why, and how, HR and Sales compensation should be managed together, or at least on the same platform. We have some compelling case studies that show it can be done.
Should HR and Sales comp be managed together?
There are reasons that sales incentives require special technology, mostly due to their transaction-based nature, as we described in previous blogs on the split world of compensation and sales comp. And, sales management most often wants to retain control over incentives as they are in the best position to know what will be effective in motivating their teams and meeting department goals. That being said, there is a strong case to be made for unifying compensation.
The beqom philosophy is that all compensation and rewards should be managed on one platform, so that leaders have a comprehensive view of spending and can make more informed decisions about how to allocate resources. This increases operational efficiency, simplifies infrastructure, and eliminates silos so that the company can move forward in a coordinated way.
Happiness Starts at the Top
A unified compensation platform is highly valuable at the CFO, CEO, and Board levels, because of the ability to provide comprehensive reporting and analytics on total compensation spending and effectiveness. It allows compensation to be viewed and analyzed in a holistic manner. Issues like gender pay equity and pay competitiveness are difficult to assess when information is fragmented and housed in different systems. A unified compensation system allows for visibility, analysis, and control, and provides the best platform for regulatory compliance.
A company driven to transform all compensation processes
One example is a large volume automotive dealer in the US that is one of America's largest private companies. The company sought to replace an in-house developed compensation solution based on Excel, Access, and SQL, with one they could personalize and maintain themselves, to manage both their Total Compensation and Sales Compensation processes.
They chose beqom as the solution to provide one unified platform for all forms of compensation, including the merit increase process, scorecard annual bonus, and monthly and annual sales & service commissions for more than 4,000 employees, plus dealer sales incentives for some 20,000 payees.
One challenge for the company: complex organization structures with a matrix of associates, roles, territories, and dealers. Another challenge was that plans and rules required flexibility and had to be easy to change. The dealer sales incentives system had to handle more than 12 million contracts, 10,000 pools/agreement combinations, and 14,000+ dealers in 177 dealerships, with multiple different commission programs.
The benefits of unifying compensation on the beqom platform turned out to be many:
- Risk was lowered by eliminating spreadsheet errors and version control issues, while providing the security and transparency needed for compliance.
- Operational efficiency was increased because dealer executives now have self-service visibility into total compensation.
- The company can adapt to change quickly because business users can maintain the system and change plans as needed.
- Strategic gains were realized by linking pay to performance so that comp was aligned to business goals.
- More accurate forecasts and accruals, and insights from analytics, meant better business decisions.
Unified comp to drive global sales and performance
In another example of the benefits of unified compensation, one of the world’s leading food and beverage companies sought a configurable solution to manage total compensation for more than 70,000 employees across 80+ countries, including a merit and ratings process for salaried employees, bonus plans, and long-term incentives. At the same time, it was looking for a flexible solution for worldwide sales incentive compensation to address the variable nature of sales plans across regions and business lines.
As a global marketing-centric organization, the company relies on strategic compensation packages to attract and retain top talent. But its existing systems strained to accommodate more than 1,000 salary plans globally, let alone its hundreds of different bonus plans.
On the sales side, each country had unique and often complex sales incentive requirements. The in-house solution used in some countries did not provide the necessary flexibility, while teams in other countries had no automated solution at all.
The company chose to use the beqom platform for both Sales and HR comp to ensure consistency in compensation philosophy and practice globally while respecting local norms and enabling GDPR compliance. The solution allows both HR and Sales to leverage the same centralized HR data.
The company’s HR Operations team now is able to automatically produce and distribute polished total rewards statements, providing employees with professionally formatted statements in their local language and currency, regularly or on-demand. HR Ops is able to configure and update plans, processes, and reports as needed to meet all of the company’s global requirements, enabling the company to be agile and nimble.
For Sales operations, the company has a flexible platform that automates and improves accuracy of sales compensation, simplifies system maintenance, and enables employees to self-serve their sales targets and incentive payment information via beqom’s mobile app.
Benefits of unifying compensation
The benefits of unified compensation reported by these and other customers prove that while it may require some investment, the benefits are plentiful, including:
- Fair and competitive pay to attract top talent
- Improved employee engagement
- Time and cost savings
- Simplified IT & security
- Reduced risk, improved compliance
- Visibility and control over global practices
- Better decision making
- Linkage of pay to performance
- All in all: Future-proof rewards management
Perhaps the best reason to implement a dedicated total compensation platform is the last one: to ensure your solution is agile enough to adapt to change and to meet both current and future needs.
Finding the right approach for your company
The roadmap to unified compensation is unique to each company. Some companies start with just one or two processes like salary and bonus, then add sales compensation later. For global companies, sales systems often differ from country to country, so a staged rollout of the sales platform may make sense. The right approach depends on priorities and sometimes on where the low-hanging fruit is.
Another consideration is, who owns and controls the compensation system? It is important that ownership of the compensation processes can be distributed so that, for example, Sales can control Sales comp and HR can control broad-based comp. You may even want to delegate aspects of compensation management to local administration. But most importantly, the ownership of the compensation system should lie with the business, wherein business users have the ability to create, manage, and change compensation plans, without heavy IT involvement.
Getting started with compensation transformation
We hope that this series on Understanding Compensation Management has given you a well-rounded view of what it takes to deliver compensation programs that are:
- Legally compliant
It takes a lot of thought and hard work, but to get it right also requires the right software. Wondering if a dedicated compensation platform might work for you? To talk to an expert in compensation digital transformation, contact beqom and schedule an initial consultation.