- Collecting the right data. When managing incentive compensation, it can be challenging to use data that resides in numerous systems and is owned by multiple parties.
- Collaboration is key. Data teams should collaborate and share ownership of the data that feed calculations. Sales compensation teams should ask questions about the data and work together to understand the answers.
- Finding the best results. When compensation administrators collaborate with data teams, the results are more likely to be system outputs that are trustworthy.
When creating new incentive plans or changing existing ones, compensation and total rewards professionals can draw from a wealth of data and analytical tools. This abundance of resources can seem like a benefit, one that makes it easier to gain insights and make better informed decisions. But in practice, this data can be challenging to use if it resides in numerous systems and is owned by multiple parties.
This is frequently the case. Sales compensation administration teams — which crunch numbers to calculate incentive payouts — often are separated from the teams that provide the data behind those calculations. That leaves the potentially confusing possibility that output from the incentive compensation management (ICM) system may not match the output from other reporting systems. In this situation, which data should we trust and rely on?
To manage this challenge, it helps to ask questions about the sources of the data. These questions should be asked frequently, for several reasons. First, data sources can change over time. Second, updates may affect the fields and logic used in existing sources, creating a downstream impact on the data used for final calculations and reporting.
It is best if these impacts are spotted quickly, and that is most likely to happen when sales compensation administration teams ask the right questions.
What are the right questions? Below are several that I learned from my time managing sales compensation plans.
Data Related Questions to Ask
These are the questions the sales compensation team should be able to answer to ensure trust in the output and to minimize confusion when designing and assessing incentive plans.
What are the data sources used in sales performance management (SPM) reporting and commission calculation, as well as accrual reporting? It’s important to have visibility into and to understand the source of the raw data used in calculations and reports. For example, what business objects, tables or fields are used to report on the main components used in the calculations? This would be crucial for understanding what numbers are being used when we model plan changes and assess plan performance.
What is the source of the manual and automated adjustments? Quite often, we find that adjustments are done based on data pulled from various systems and compiled in ad-hoc reports. Understanding the data sources and detailed logic behind the reports can help validate adjustments and ensure there is no contradiction with the primary data used in calculations and reporting.
How is your ICM system calculating commissions? This is a question often asked in an audit. If you are participating in internal or external audits, you must be prepared to show the proof of controls in place validating your systematic calculations and reports.
When using the ICM system, it is wise to establish procedures and create templates outside the system to regularly test data inputs and outputs. While systems are there to automate and help ensure accuracy of calculations, most errors would come from data anomalies that may slip with the data inputs. Catching those early will provide time to resolve these anomalies and to plan for adjustments, if needed.
What reporting systems are used by the sales force, management, finance and compensation teams? If we rely on different reports and data sources to view the same metrics, we are more likely to stumble on discrepancies. If there is an opportunity to consolidate reports or limit the number of reporting systems for sales performance reports, that would be ideal. Doing so would ensure all stakeholders are looking at the same numbers when reviewing plan performance.
Trusting the Results
The questions offered above are interconnected. The main point is that data management and sales performance reporting should be included in the planning process and kept in check regularly. After all, what we feed into the system produces the outputs that our organizations rely on for important decisions. When compensation administrators collaborate with data teams — including asking some salient questions — the results are more likely to be system outputs that are trustworthy.
Editor’s Note: Additional Content
For more information and resources related to this article see the pages below, which offer quick access to all WorldatWork content on these topics:
