ICM systems deliver business bonuses

Incentive compensation management (ICM) systems, software for managing sales bonuses, are becoming increasingly popular worldwide, as they ease the management of often complex bonus plans while also boosting accuracy.

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By  Neil Denslow Published  July 1, 2003

|~||~||~|Incentive compensation management (ICM) systems, software for managing sales bonuses, are becoming increasingly popular worldwide, as they ease the management of often complex bonus plans while also boosting accuracy. However, the Middle East is lagging behind in this field, as few companies have even begun to look at such systems.

AMR Research predicts that the market for ICM in the US alone will hit US$2 billion in 2005, up from US$420 million in 2002. Gartner Group also reports a high level of satisfaction with packaged ICM software, with 65% of users in a recent survey giving their application at least eight out of a possible 10.

“For the processing and payment of commissions to salespeople, packaged sales ICM applications have become the solution of choice to replace mainframe-based commission systems or spreadsheet-based commission and performance tracking," says Joe Galvin, group vice president for Gartner.

“During the next two years, successful ICM system deployments will produce tangible ROI through increasing the efficiency and effectiveness of sales performance management," he adds.

The main advantage of such systems is that they process bonus payments more efficiently than traditional methods, which usually rely on administration staff using spreadsheets and databases. An ICM application instead pulls in the necessary data from whether it is stored, be it in the CRM system, the supply chain management system elsewhere, performs the necessary bonus calculations and then sends the results to the staff payment system.

Automating the bonus management process is both quicker and less labour intensive, and ICM systems are also more accurate than people. Gartner says that companies that don’t use automated systems to track bonuses overpay their staff between 3% and 8%. A problem that is compounded by the fact that while few salesmen will admit to about being overpaid, all of them will complain about being overpaid.

Aside from ensuring greater accuracy, ICM systems also enable salesmen to better predict what their commissions for the month will be. “They enable a salesman to sign in in real time and to do forecast on his prospects to see what he would get depending on the different prospects he has. They are very interactive tools,” notes Stephen Dando, general manager of PeopleSoft’s local partner, MCS Arabia.

However, few companies worldwide or in the region have implemented such systems. PeopleSoft reports that 80% of Global 500 companies are still using traditional methods for tracking bonuses, and the local picture is even bleaker. Dando says that MCS Arabia has only proposed such a system to one company in the region. “Right now, most people in the region are doing this [calculating bonuses] manually,” agrees Chirag Patel, partner & director, products & strategies, Vertscape.

The fact that the Middle East has yet to embrace ICM systems is further proof of its lack of investment in HR in general. “If they have an IT budget, companies will first look at how can they sell more… and that comes into the CRM space. Only once they have implemented that do they look at how can they automate their internal operations and HR,” says Patel.

Furthermore, many companies in the region tend not to have very advanced bonus plans in place for their sales staff. “People are on commissions and bonuses, but perhaps there is a less sophisticated approach to remuneration in a lot of companies at the moment,” says Dando. “[Staff] are on a basic salary and that’s it. Quotas may be set but they don’t necessary link into a benefit and rewards system,” he explains.

However, the region’s companies may be forced into treating and rewarding sales staff on a more individualised basis, as CRM systems start to show who are the most effective reps. “As companies start going down the road towards sales force automation using CRM, this will highlight the need to be able to reward the best staff,” says Dando. “If you have a good CRM system, you do need to reward good performance,” he adds.||**||

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