Incentive Management's Slow Rise

Novell began using incentive-management software from best-of-breed vendor Callidus in November to create incentive plans aimed at motivating sales staff to meet "the vision of the company's senior management," says Jim Parker, manager of worldwide commissions at Novell. The network-software vendor had used spreadsheets and incentive-management software from Trilogy Software Inc. but decided that approach wasn't flexible enough to handle the growing complexity of Novell's compensation plans or changes related to the reorganization of its sales force last year, Parker says.

The Callidus software helps Novell handle complex, fast-changing compensation and incentive plans, as well as manage changes in sales territory, hierarchical relationships, and account assignments, Parker says. Up to 1,000 Novell sales personnel use the software--along with just 60 nonsalespeople, who include consultants and product managers that get paid through variable incentive plans.

The software also can provide daily reports to salespeople so they can track how they're doing selling particular Novell products or services and compare those to targets, forecasts, and historical data. It's all meant to drive behavior that meets the goals of the company's leadership, such as selling more services and consulting. Novell is evaluating Callidus for use in compensating third parties, such as resellers, and creating incentive programs for nonsales staff. There are hopeful signs that incentives are translating into changed sales behavior, but Parker isn't willing to declare victory with little more than six months' experience. "The jury's still out," he says.

Beyond internal sales staff, some companies use incentive-management software to work with outside reps and partners. That's particularly valuable in industries with extensive third-party networks such as financial services and pharmaceuticals, says Bob Conlin, VP of marketing for Centive, formerly Incentive Systems.

One of the United Kingdom's largest insurance companies, Norwich Union, part of Aviva plc, recently chose Centive/EIM to automate, centralize, and manage the complex incentive calculation and payments for the 32,000 independent and direct distributors of its products. Norwich Union says the deployment of the incentive-management software replaces legacy software and will let the company comply with changes expected in government regulations, as well as improve customer service and more quickly pay distributors according to varied commission plans.

For Northwest Farm Credit Services, the value of incentive management boils down to lower costs and happier salespeople. The provider of loans to the agriculture sector, with assets of $4.5 billion, recently deployed Centive/EIM to manage the compensation plans of 300 salespeople, loan officers, and appraisers. The software replaces a collection of legacy applications and spreadsheets used by those employees and administered by a staff of four. Since moving the management of those compensation programs to Centive in January, Northwest needs the equivalent of 1.75 administrators' time to oversee the plans, says Fred DePell, Northwest's executive VP of financial services. That's because much of the manual work has been eliminated, as has the need for IT to support the mish-mash of applications used to support those plans.

"Hundreds of hours of administration have been eliminated," DePell says. Centive has also freed salespeople and loan officers to spend more time selling, rather than figuring out their compensation. Before the installation, Northwest employees spent eight to 12 hours per month calculating their compensation. That's been cut in half, making staffers more productive, DePell says.

Plus, the software helps Northwest pay its commissions and incentives monthly, instead of quarterly or semiannually. It also lets Northwest evaluate more creative incentive plans based on the feedback and suggestions of employees. "We're continually trying to improve our programs to motivate people to do things that are fun and make the company money," DePell says.

Northwest spent "in the low seven digits" to implement the Centive software, DePell says. But the company is already getting returns through the reduction of administrators overseeing the compensation plans, as well as the increased productivity of staff. "A huge factor in the success of formal performance programs is to reward staff as quickly as possible," DePell says. "We've greatly improved that."

Illustration by Serge Bloch