How to effectively estimate the cost of an inefficient / manual incentive management system?
Many small and medium sized pharmaceutical companies still rely on excel spreadsheets or home-grown script based solutions to manage sales incentive calculations for their salesforce. These solutions are generally preferred because of in-house resources’ familiarity with these applications, internal cost pressures and perception of control without giving enough consideration to quality, lost value and overall efficiency. There are many limitations with excel spreadsheet / home grown script based solutions. To highlight a few:
- Error prone due to complex formulae and ongoing manual intervention
- Difficult to control and audit changes
- Making changes can be a cumbersome and time consuming process
- Hard to implement access constraints
- Data is generally transferred over insecure networks and possibility of version clashes in case of multiple stakeholders working on the file
- Cumbersome to automate end-to-end process
- Limited reporting options. Requires complex VBA scripts for field level reporting
- Difficult to implement plans that cascade data from other hierarchical levels
- Relies more on Quality Control than Quality Assurance
It is important for any sales organization to review their existing incentive compensation management capability and look for ways to improve the same. The sales operations group needs to evaluate multiple options and needs a business case to justify investment into implementation of a newer system and process. The return on investment (ROI) of an incentive compensation management system continues to be a debatable topic with various objective and subjective parameters that require consideration before building a business case. Superficially, an incentive compensation solution seems like a software that would just be 'good to have' for an organization but scratching under the surface reveals several opportunities for cost savings and increased revenue.
Several factors need consideration when justifying investment into an incentive compensation solution as they may have an impact on the selling time, motivation etc.
Aurochs has created a standard model for calculating the cost of using an ineffective incentive compensation management system which you can tweak to your business situation. Use it to estimate the cost impact of using an inefficient IC system and build your business case for implementing an industry-standard solution around it.
Implementing an automated ICM solution results in reduced operating expenses and increased net selling time which boosts top-line revenue. A good ICM solution provides clear and transparent progress reporting which reduces ambiguity in incentive compensation calculations resulting in lesser field disputes and improves the reliability of your plans. More importantly, an ICM solution creates an environment of trust which boosts salesperson morale and results in reduced attrition rate. It also provides flexibility to implement desired changes in a timely manner to stay up to date with the dynamic business environment.
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