Aligning finance + sales = more profits: effective sales compensation management drives both top- and bottom-line growth. Automation can help align sales behavior directly to corporate financial objectives for enhanced sales performance and increased profits.

• Author: Cabrera, Christopher W.
• Position: STRATEGY

It's a conundrum. Businesses today need every competitive advantage they can muster, including the ability to leverage compensation to drive profitable sales behaviors. But, as finance departments around the world can attest, even as sales compensation is becoming increasingly strategic, it is also becoming considerably more complex--and therefore increasingly difficult to leverage strategically.

Most finance organizations are challenged when it comes to effectively managing the sales compensation process. The specter of Sarbanes-Oxley non-compliance and insufficient internal controls looms large over the manual processes typically employed for the purpose, and there's an enormously high probability that money is being left on the table because sales representatives are not as strategically motivated as they could be.

But it doesn't have to be this way.

Time to Connect the Dots

For most companies, sales compensation management is fraught with disconnects. At the highest level, there's frequently a disconnect between finance and sales, and between their respective processes. These processes are often fragmented and "stove-piped," with each organization addressing its own tasks rather than aligning on a common goal and common set of performance indicators. Hence, it's difficult for finance to measure how well the sales team is marching towards corporate financial objectives, and it's equally difficult for sales to design plans that maximally support these objectives.

There is also often a disconnect between sales representatives and their compensation plans. Reps are frequently in the dark, as they typically lack real-time visibility into where they stand versus plan and where to most profitably put their efforts. This impacts their compensation, and the company's bottom line.

Finally, there is the fundamental disconnect resulting from the almost universal use of stand-alone spreadsheets to manually manage sales compensation. As a medium for administering compensation plans, spreadsheets are cumbersome, time-consuming, error-prone and difficult to integrate into planning, analysis and audit processes and workflows. The inaccuracies they breed result in finger-pointing between sales and finance, and productivity-draining, shadow accounting on the part of sales reps as confidence in the system erodes.

Reliance on spreadsheets also breeds inflexibility, as it is extremely onerous to change plans or introduce new elements in mid-stream. And it...