Top 3 Tips for Choosing an ICM Tool

So, what is an ICM tool?  An ICM tool is an incentive compensation management software.  With the rise of AI, technology and automation, you will find countless options online.  Each of these vendors have their pros and cons, but their bottom-line functionality is processing incentive or commission payments based on your sales compensation program.  They take the burden off of the sales compensation administration team for a price.  Depending on the size of your sales team, and the complexity of your plans, an ICM tool may be a good option.  Let’s explore some of the key tips when evaluating these ICM vendors.

• Integration with systems
• Cost & Administration
• Reporting & Analysis

INTEGRATION WITH SYSTEMS

Most ICM vendors will state they can do it all, which is expected.  But you want to do a more thorough assessment, get into the details.  One of the key items to look into is integration.  If the tool is a standalone product or does not integrate with your CRM, or payroll processor, then you will need to factor in the workload surrounding the ICM into your decision making.  As an example, how will data be added to the tool?  How frequent do these uploads happen?  How does that affect sales teams & leadership visibility?  For payroll, is the data export of payments per employee in a format to directly upload into the payroll processor?  Or does it take some manipulation?  The more manipulation, the higher chance of payment errors.  What about the target variable, how will that be added to the ICM? If there is no link to your employee data you will have to manually update data as promotions or role changes happen.  Many tools connect with the most popular CRMs (e.g., Salesforce) and payroll processors (e.g., ADP), but not many connect with the smaller companies.  Also, along with integration comes security, because the system will be holding confidential information (e.g., earnings) make sure the security in the software is up to par with your organizations’ requirements. 

COST & ADMINISTRATION

When evaluating vendors, you want to consider the cost of using the tool - both in actual yearly expense and time used to manage the tool.  The initial setup of the tool is not the only time-consuming part, it could be the ongoing management of the software.  The time spent used to manage the ICM tool may be at the expense of other important items, such as analyzing your sales comp program.  Lack of understanding of how your plans are working could cost the company in sales.  Administration, which should be easier with an ICM software, sometimes is more challenging.  There are times in my history, working in corporate, that I have found that basic excel functionality was easier to use than an ICM.  The number of steps needed to make changes in some tools were just cumbersome.  As a result, the ROI on the ICM was very low. 

Year after year you will likely have to make comp plan changes, so the administration and management of the software should be a key factor in picking an ICM.  To discover the usability of the software, some of the questions you should consider asking are…

• Target customer size: What is their target customer size? (some ICM tools are not built for larger size organizations, and will give you challenges if your company has a large number of payees)
• Record keeping & history: Does the ICM tool offer a calendar lock? (so that if you make a change now it doesn’t break all prior periods, you will need history for proper analysis)
• Fixing mistakes: Does the tool offer an audit trail with time stamps? Can you revert back to the time period before you made a change?  (incase you make a mistake, and want to “undo” – it happens).  Also, if your company paid someone incorrectly, and then corrects it later there should be a clear audit trail in the software for auditors.
• Delays in processing times: What is the average processing time after a change is made? How often and how long are the system down times? (I have been in situations where the ICM was down for hours and I had to submit payments to payroll)
• Ease of plan changes: Can I duplicate plans and modify? Or do I need to recreate a new plan every time? How does the system handle plan changes? Do I need to contact support and is there a cost for support? (this will affect how quickly you deliver comp plans to your sales teams and your overall cost)
• Plan periods: Can I customize plan periods? Or are they set? (some ICMs only have calendar year periods, which may not be aligned with your fiscal year or shorter plan periods)
• SPIFFs and exceptions: How does the system handle SPIFFs and exceptions? Is there a workflow for exceptions and the approval of them? (some ICMs are better at SPIFF management than others and may or may not have an exception workflow)
• Payment accuracy matters: If something changes in the CRM how quickly is the payment updated in the ICM?  (this may generate questions from the field if they see a payment that doesn’t correspond to their sale in the CRM)

Now there are some companies who have overly complex plans, and cannot find an appropriate ICM tool.  However, this is not the fault of the ICM vendors.  Most ICM vendors create software built around best practices in sales comp.  If you cannot find an ICM tool because your plans are very customized, then its best to reevaluate your plans or hire sales compensation administrators or sales comp analysts.

Generally, as your company grows so will your sales team - and the number of payments to process.  However, you have a choice, you can choose to hire more employees to process payments or pay for an ICM tool.  In the end, you need to decide whether your company is at a stage where you need an ICM software or maybe another compensation administrator or analyst is better suited for where you are today.  You just want to make sure you can scale with the resources you have today.  I recommend you weigh the cost and benefits to both options, compare hiring vs. the cost of the tool.  Now your first thought maybe it’s always cheaper to get an ICM versus pay 1 or more employee’s salaries.  And this maybe the case if you find an ICM that can manage your sales comp plans for the most part.  However, keep in mind there are costs that go beyond the straight cost of the ICM tool – e.g., you may need an employee to manage administration in the tool, a technical employee for system changes, support fees from the vendor for plan changes, an analyst to do sales comp reporting if the tool doesn’t have the capability (most ICMs lack in this area), etc.  You don’t want to end up having an ICM plus 5 other analysts for a small company because the ICM lacks functionality (it has happened).  Look at the whole picture, make a checklist. 

Depending on the size of your sales organization, you will likely need an ICM tool eventually (unless you have an in-house tool built).  When you are at that stage, and in the market, you want to pick the tool that can scale with your company and delivers the most value to your sales team.  There are tools out there that are good for administration, but terrible for the sales team.  The end users is the sales team, and it should be valuable for them as well.

REPORTING & ANALYSIS

The goal with compensation administration, or an ICM tool, is always to pay accurately and timely, giving as much visibility into payment details for the individual sales team members.  However, there is other functionality in an ICM that is useful when running a sales compensation program, such as reporting and analysis.  For the plan participants and the sales leaders, there should be a good user interface where they can see sales dashboards.  Sales dashboards are useful to the salesforce because then they can see how their performance links to their pay and how their direct reports are performing.  Some ICM tools even offer a “payment estimator” which shows an employee how much they will be paid if they close a deal that is currently in pipeline, this has proven to be valuable to the salesforce if the ICM offers it. 

For sales comp plan administrators, some tools offer basic sales comp reporting out of the box (i.e., payments to date per employee, attainment per employee, incentive payments as it relates to attainment, etc.).  However, some do not, or charge extra, so be sure you have the basics in sales comp reporting.  In addition, there are other teams usually within an organization that need sales comp reporting, such as finance and accounting.  Finance typically needs a commissions forecast and accounting needs accruals, check to see the functionality here as well.  Also, one of the key items in ICMs, which is useful but rare, is plan modeling.  Plan modeling is a good tool for comp plan building & costing, if it works as intended. 

I have found that most ICMs lack in the reporting and analysis area, so if this is a focus area for your company make sure you get into the details. 

CONCLUSION

These are my top 3 tips, but each company and their needs are different.  Therefore, when evaluating an ICM software list your requirements and desires.  Based on this list, and the resources you have, some ICM functionality may not be a priority for your company.  For example, if you have a sales compensation analyst that does the reporting and analysis then reporting may not be a priority.  As you compare incentive compensation management vendors, rate them in the areas that you have identified in your list.  As you go through your assessment, you will discover there is no perfect ICM, so if you are in the market just pick the one that best suits your needs based on your list of requirements for the cost.

Don’t hesitate to ask the vendors to walk through a more detailed demo of the product functionality, I would suggest even allowing them to have access to your data (with legals approval) to do a demo of the entire process (including the administration process, flexibility of sales dashboards, how the user interface looks and reporting).  Include key stakeholders in the meeting to get a comprehensive assessment of the product, such as sales leaders, finance and accounting.

As a last suggestion, I have found the best way to evaluate an ICM is to confirm what the company is saying with their current customers.  Many times, they will give you an option to speak to 1 of their customers – take it, and also speak to others who they have not recommended.  Thereby getting a well-rounded view of the ICMs capabilities.   

On a side note - I do not work for, nor endorse, any ICM.  I am simply giving you my point of view as a sales comp practitioner. 

Do you have other questions related to sales incentive management?  If so, you can discuss it in community, join the conversation here.