The key to encouraging peak sales performance is to align the company’s sales strategy with its incentive compensation plan. Incentive compensation is cash or non-cash earnings paid in addition to a cash base that is linked to individual or team performance.
Unfortunately, that is harder than it sounds. Mark Stiffler, CEO of Synygy, The Incentive Compensation Company (TM), says companies come to him and say, “Our incentive compensation plan is a mess. We have a bunch of people hunched over spread sheets. We can’t keep up with the pace of change.”
Most companies are hamstrung by their ability to implement these constantly evolving programs. Since resulting sales compensation plans don’t reflect the corporate goals, neither do the results.
Too many companies fix their focus on a quota plan. To make life easy, they add up a salesperson’s total sales, measure it against the assigned quota and then pay accordingly. However, Stiffler says most companies focus their corporate strategies on bottom line profitability. That means selling more of the most profitable products. Most executives are clueless when faced with the prospect of constructing a sales compensation plan based on profitability. “They just know how to add, subtract and divide sales numbers,” says Stiffler.
Speeding Up Paycheck Delivery
Set procedures act like a strait jacket. But outsourcing to Synygy unties the stifling straps and allows Stiffler’s staff to redesign the sales compensation plan to mirror the profit goals of the executive suite.
The formulaic incentive sales plan unfortunately has another problem: more often than not, the numbers don’t add up correctly. Synygy’s software automates the validation process to minimize errors.
The third problem with standard sales incentive compensation programs is their tardiness. Stiffler says companies routinely pay sales bonuses two to 12 weeks after the pay period ends. Synygy’s benchmark is payment in five business days.
Speed of payment is important for more than keeping the sales force happy. Dollars are a strong motivator for a salesperson. Speed links behavior to reward more closely. “It’s too late to change people’s behavior after they’ve been paid. You have to do that before they get a check,” says Stiffler.
Finally, the company must clearly communicate its sales goals and compensation policies to its sales force. Synygy’s research shows only 40 percent of salespeople understand the arcane rules about how they will be paid for top performance. Synygy specializes in teaching a sales staff the fine print of their plans. When its staff is through, Stiffler says as much as 90 percent of the staff understand their compensation plan.
“Sales people really appreciate what we do,” says the CEO. For the first time, the sales force can suggest an incentive plan and the company can implement it.
Correctly and accurately calculated sales incentives is a complex and constant problem. Although Synygy will license its IC Expert software, Stiffler will be the first to say that’s just the first step needed to correctly address the situation. “You can’t solve this problem with software alone,” he says.
Paychecks Are A ‘Process Problem’
The reason is the parameters tend to change every month. Unlike an accounting system, where users just have to input this month’s numbers, incentive compensation programs can change everything. “This is a process problem, which makes it perfect for outsourcing,” he says.
Companies share their payment parameters with Synygy, which then designs and implements the incentive program on an on-going basis. The company’s program manages 13 different processes; clients can select which ones they want to keep in-house and which they chose to outsource. Companies that are managing some of their own processes can access Synygy’s software on the Web, making the company an Application Service Provider (ASP).
Stiffler literally started the company in his basement in Philadelphia in 1991.(Actually it was a one bedroom condo.) He had received an assignment from INS America, a pharmaceutical company, to analyze sales data. The company was sending one and a half inch thick reports to each of its salespeople. INS America thought it might be more efficient to develop a multimedia presentation to teach salespeople how to analyze their own sales data.
Stiffler believed this approach was a mistake. He felt salespeople should be selling and not trying to figure out what their data meant. He said so, but the managers didn’t listen. He completed the project, but decided to start his own company. His goal was “to create a new market for incentive management solutions by outsourcing.”
He created the technology to automate the analysis of performance and sales data. At the outset, he specialized in the pharmaceutical industry because he was familiar with it. He soon became an expert in incentive compensation, because these programs use the same sales data he had become an expert at analyzing. He believed there “was a huge need” for incentive compensation outsourcing and he was right. Synygy has grown 75 percent a year every year since 1991.
Today Synygy works with companies with over 100 plan participants. Currently Synygy has 40 clients, all large corporations. The company has a data center which its clients access through virtual private networks.
About 260 employees are on the payroll, but Stiffler expects to have 400 on the roster by the end of the year. Stiffler has built a $20 million a year business without debt or outside investors. This year Ernst & Young named Stiffler its Software Services Entrepreneur of the Year.
Lessons from the Outsourcing Primer:
- Companies have difficulty revamping their incentive compensation plans internally. Outsourcing the process allows them to make needed changes.
- Companies must communicate their incentive compensation plans to their sales forces so all employees are clear about the goals of the program.
- Outsourcing can speed up the payment process from 12 weeks to 5 business days and produce checks with fewer errors.
- Software alone won’t solve the problem. It’s a process and needs a BPO supplier.