INSIGHTS

Compensation Is the Window on Business

The continuing rollout of platform technology is bringing many applications together to support better, and in many cases new, business processes. Not long ago, it was nearly impossible for back-office people to know about what the front office was doing. In fact, it was hard for marketing and sales to know how they were affecting each other.

With platform technology bringing attention to and fostering better interfaces between front and back offices, and even between departments, it’s now easy for different areas of the business to gain a better understanding of operations as a whole.

Improving the linkage between sales and marketing is a long-term quest that has not yet been fully met, but we can see the outlines of a future that’s more integrated and informed. More exotic combinations are beginning to present themselves.

For instance, compensation management is coming into focus as a system that can bring together and influence both front- and back-office business in ways that few people could have predicted. Compensation is becoming a crossroads of sorts between HR, accounting, sales, marketing, and even service areas.

Rewards and Predictions

This should be no surprise. Compensation management systems are the heart — and record keepers — of how we motivate and reward people. The number of potential interfaces between compensation and the rest of the business suite is big and includes much of the rest of the business.

Since compensation is the natural reward for good business behavior, it is also an accurate predictor of all kinds of activity within a business. For example, integrating CPQ (configuration, pricing, and quotation) with compensation provides the finance group a window into the pipeline that did not exist before.

While the aggregate pipeline numbers can be developed from more traditional sales reports, linking CPQ with compensation provides an easy way to peer into the revenue mix in time to make any needed adjustments.

This approach could open a window to show product marketers if the sales department is penetrating the market with specific offerings — such as a new product line that replaces an older one. This information would be useful to the supply chain, as well as to the sales and finance teams.

Of course, deals in the pipeline cannot be counted as revenue — but taking a big data approach, businesses can develop organizational metrics for things like close rates, and make fairly accurate projections about revenue and future supply demands.

Greater Insights, Better Operations

At the same time, data integration gives sales people and their managers better insights into their own forecasts. A pipeline deal without a proposal or one with a proposal that is aging without customer activity should provide more insight into forecast quality than a more generic pipeline report.

Compensation management certainly will help the finance department to close the books faster and to accurately pay the sales team. Both are valuable to any business, but considering compensation management this way only accounts for limiting a liability.

This may include the cost of making a compensation error or the time required to tabulate all of the commissions, bonuses, spiffs and other incentives, as well as wear and tear on the finance group that has the responsibility for running the numbers.

A more integrated approach to compensation and integration across departments suddenly gives business leaders greater insight so they can improve operations.

That’s a significant development, and one that likely will be emulated across many businesses in the year ahead as platform technology makes it easier to consider whole business processes that span departments, and not just the transactions that those processes result in.

Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant's research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and website. He is the author of Hello, Ladies! Dispatches from the Social CRM Frontier and can be reached at denis.pombriant@beagleresearch.com. You can also connect with him on Google+.

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