Incentive and Compensation Management (ICM) Evaluation Center

What Are Incentive and Compensation Management?

Incentive Management

Incentive management, also referred to as sales compensation management, is used by sales compensation executives to model and forecast commission spending, and align pay-for-performance strategy with organizational goals.

This evaluation center accommodates a vendor landscape which includes dedicated incentive management applications (for sales), and vendors who provide both incentive management and compensation management for broader use with salaried employees. Key criteria include commission management, analytics, payee management, channel management, and regulatory compliance.

Compensation Management

Compensation management and related employee performance management (EPM) are key components in a broader suite of talent management applications. These applications are used by HR professionals to gauge workforce performance, and improve their ability to assess and deploy talent. Compensation management software provides the modeling to allow fair compensation for employee competencies and performance, and is used as a strategic tool for retaining critical talent.

This Evaluation Center describes compensation management within the scope of talent management, including employee performance management (EPM). Key criteria include performance planning and appraisal, pay structure, workforce planning, training and development, and career and succession planning.

What Is the Difference between Incentive Management and Compensation Management?

Incentive management shares certain functional elements with compensation management. However, incentive management is usually integrated with a customer relationship management (CRM) application to budget and execute compensation strategies affecting sales personnel, distribution and channel partners, and call center employees. It tracks and rewards attainment of revenue goals and customer satisfaction objectives.

Compensation management software, on the other hand, is generally used by human resources (HR) and compensation managers to model and implement compensation plans for salaried or hourly employees.

The market for these applications is experiencing dynamic growth, with new vendors and deeper solutions vying to accommodate broadening demand. Vendors in this space tend to defy clear categorization, as the scope of integrated solutions is still evolving.

Business Drivers and Benefits

Incentive Management Business Drivers and Benefits

An effective incentive management solution accomplishes a variety of key objectives:

• Align employee and partner behavior with corporate strategy
• Set quotas and goals that focus sales on outcomes that support changing corporate objectives.
• Support corporate objectives
• Reward profitable sales behaviors with "pay for performance" results
• Improve channel compensation processes to drive revenue and partner loyalty
• Give partners real-time visibility to performance and compensation
• Adjust compensation programs to support changing corporate objectives
• Link pay with performance to improve sales and allows sales reps and partners to instantly view their performance and compensation results.
• Management to develop sales territories, hierarchies, and compensation plans that optimize sales coverage and execution.

Compensation Management Business Drivers and Benefits

An effective compensation management solution addresses a range of organizational drivers:

• Motivate and retain organizational talent.
• Manage reward strategies such as performance- and competency-based pay, variable pay plans, and long-term incentives.
• Align strategy with compensation plans by reducing implementation and management constraints.
• Simplify the comparative analysis of compensation packages.
• Adapt compensation policies easily in response to changes in corporate objectives.
• Improve decision-making by sharpening visibility into plan performance
• Accommodate different compensation plans for employees, departments, and business units through fixed and variable compensation components.
• Develop talent and reduce risk through career development and succession planning.
• Provide efficient flexible budgeting and payee accounting reflecting hierarchical requirements.

Incentive and Compensation Management Risks

• In many cases, incentive management is defined by organizations as firing or warning employees, which has nothing to do with aligning people to the goals of the organization, coaching them about doing things well, or rewarding them.
• Poor incentive and compensation plans not only hit a company's top and bottom line; they also affect worker retention, particularly in times of strong global economic performance.
• Customarily, manual incentive and compensation systems take three or more months after the target date to reward employees, which can lead to the costly problem of overpayment.
• Underpayment is also problematic, as it leads to frustration, dissatisfaction, and disloyalty, and is a major impediment to productivity.

Why Use the Incentive and Compensation Management Evaluation Center?

• Compare which products support the right mix of reporting, analytics, business performance management, modeling and strategic analysis, payee management, and workflow requirements for your company.
• Evaluate predictive analytics and forecasting support for your industry.
• Shortlist vendors based on appropriate data integration capabilities and technical fit.

Most Requested Research Related to Incentive and Compensation Management (ICM)

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Vendor White Papers Related to Incentive and Compensation Management (ICM)
(on whitepapers.technologyevaluation.com)

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