(263995840) Iconixx White Paper ROI

8/9/2019 (263995840) Iconixx White Paper ROI

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The ROI of IncentiveCompensation

Management – Makingthe Business Case

The ROI of Incentive Compensation Management – Making the Business Case


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Any organization looking to increase the accuracy, improve the efficiencies, an increase the

analytic capa!ilities of its compensation system may !e a caniate for a ne" incentive

compensation management #ICM$ system%

But ho" o you make the !usiness case&

'ithout a clearer unerstaning of the ROI elivere !y such solutions, it is ifficult for organizationsto (ustify the )spen*%

'ith thoughtful planning to outline !oth the associate costs an the

e+pecte !enefits of a ne" incentive

compensation management system,

the !usiness case "ill !e gr eatlystrengthene, there!y increasing

the chance that the initiative "illr eceive funing%

This ocument has !een "ritten to

uantify the ROI of Incentive

Compensation Management solutionsan to help !usiness leaers tounerstan the efinitive value so that

they can em!race ICM technology "ith

confience, kno"ing that it "ill supporttheir corporate goals% It "ill also takereaers through a systematic pr ocessof self-assessment so they can ientify

gaps an opportunities an make acompelling case a!out anticipateROI%

ROI

.urvey the ICM /anscape

If you are consiering a ne" ICM solution, you pro!a!ly recognize the limitations of yourcompany*s e+isting system%


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As you anticipate the value a of a ne" solution, you shoul !e very clear regaring the opportunitiesfor gro"th% 0se the checklist !elo" to make note of those areas "ithin your organization that are

!eing impacte !y a limite an infle+i!le ICM infrastructur e%

Operations, Marketing, and Sales

1elays of ne" prouct rollouts ue to infle+i!le compensationsystem%

Avoie potentially !eneficial compensation structure changes !ecause the current system cannot easily accommoate change%

1ifficulty getting timely sales incentive analytical ata%

.ales personnel attrition rate is higher than inustry average%

.ales personnel an compensation aministrators spen a lot of time isputing payment amounts%

2ayment isputes are ifficult to research an r esolve%

Finance and Accounting

Current system often results in overpayments%

Commission payments are sometimes late ue to thecurr ent pr ocess%

The last auit of the commission process "as time consumingan e+pensive%

IT Support

Changes to the compensation structure emans consiera!lesupport !y the IT epartment%

3+pensive har"are an soft"are costs%


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.T32 4 - Monetize the ICM Cost 5 1eficiencies

3+perts estimate that sales personnel spen from 6 to 78 hours per month ensuring that theircommission payments are accurate ue to a istrust of the commission calculation% This activity isoften referre to as .hao" Accounting% The cost of .hao" Accounting can !e measure in "aste

sales rep salary or in unrealize revenue ue to a loss of time spent selling%

Shadow Accounting (Sales Rep Salary)

= (avg_rep_salary) x (8 - 24hr

s x 12mo)

2000hrs

x (no_of_sales_r eps)

5 - 15% of total_r ep_salary

Shadow Accounting (Unrealied Re!enue)

(8 - 24hr s

x 12mo)=

2000hrs

x (total r evenue) 5 - 15% of total_r evenue

Commision Overpayment

9artner estimates an average :; - 6; error rate in overpayment relate to incentivecompensation pay is!urse using manual systems such as spr easheets%

O!erpay"ent cost = overpayment_rate x total_commssons_pa!

mo

yr

mo

yr


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2lan Aministration Costs

A!ereen 9roup research foun that the average company spens > a year per plan

participant to aminister these plans% This inclues year over year plan changes an the time neeefor IT an support resources to make these changes%

Ad"in istrati!e #osts = ("1500 - "1#00) x no_of_sales_r eps

3+cessive .ales 2ersonnel Turnover ?R e+perts estimate the cost of replacing a sales person at 4%= times their !ase salary% Inaccurate or

late commission payments from your spreasheets or legacy commission system can cause

frustration an e+cessive sales personnel attrition% The effect can !e calculate !y summing e+cessive

tur nover costs "ith the follo"ing for mula@

$%cessi!e Attrition #ost = attrton_rate x no_of_sales_reps x

1$5 x avg_sales_rep_salary

Increase .ale Revenue 5 9ross Mar gin

This metric can sometimes !e ifficult to calculate, !ut the real-time information use !y .alesManagement an Organizational staff rives the evelopment an implementation of plans that

ar e tie to higher gross margin proucts an services%

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133/O2M3T OBCOM23.ATIO2/A.

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9RO.. MAR9I

2RO10CT. 5

.3RIC3.


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2ayment 1isputes

Inaccurate payments of a spreasheet-!ase or legacy 3IM system cause payment isputes an the

Annual &ispute #ost (Sales Rep Salary)

= (avg_rep_salary) x(avg_tme_!sputng

hr

s x 12mo)

2000hrs


Annual &ispute #ost ('ost Re!enue)

= (avg_revenue_per_rep) x(avg_tme_!sputng mo x 12mo)

2000hrs


Regarless of the size of the organization, the !enefits of replacing an inaccurate or

inefficient compensation system can inee !e uantifie%

By taking the first step of conucting an honest evaluation of your company*s current state, you "ill

!e !etter prepare to unerstan the ROI case%

1on*t Borget to Consier 1eployment Options

Before you can calculate the ROI, you nee to consier the ICM eployment options%

cost can !e measure in "aste sales rep salary or unrealize revenue ue to loss of selling time%

yr

hrs

mo

yr


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Sotware as a Ser!ice (SaaS)

A1ATA93.

1I.A1ATA93.

Initial eployment time reuce, minimal

customer IT support r euir ements,reuce customer har"are an

aministration costs #lo"er capital

e+peniture$, maintenance an upgraes

hanle !y the venor, preicta!le coststructur e

Customization limite to the

configura!le features of the soft"ar e,company ata resies outsie theirnet"ork an fir e"all

osted

A1ATA93

.1I.A1ATA93.

Reuce customer IT supportreuirements, upgraes controlle !ycustomer, functionality compara!le to

on- premise solutions

Company ata outsie their

net"ork an fire"all, generallyhigher su!scription costs or upfront

license fees compare to .aa.solutions

On*pre"ise

A1ATA93

.1I.A1ATA93.

9reatest fle+i!ility an functionality an

ata security of availa!le options?ighest internal IT support

reuirements, highest har"arean licensing costs


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.T32 7 - 3stimate the Total Cost of O"nership #TCO$

In orer to create a ROI case, the total cost of o"nership #TCO$ of the ne" solution nees to !e estimate% This is the investment that is to !e pai !ack in savings an revenue increasesD

that pay!ack perio is calculate "ith the follo"ing for mula@

ROI +ayack Ti"e ("onths)

= 12 x (captal_nvestment)

(estmate!_annual_savngs) (estmate!_annual_ncr emental_r evenue)

3stimate costs "ill inclue !oth one time an recurring costs%

O-$ TIM$ #OSTS R$#URRI-. #OSTS

Costs incurre in only the first year of

the ne" system*s life%

E ?ar"are #On-premise an

some hosting solutions$

E .oft"are licensing #On-

premise an some hostingsolutions$

E Implementation F activationcosts

Costs incurre every year

E ?ar"are F .oft"ar e

maintenance fees #On-pr emisean some hosting solutions$

E .u!scription fees #.aa. an

some hosting solutions$

E Internal IT costs


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.T32 : – Calculate the ROI

Gou "ill "ant to evaluate the savings or recovery percentage for each cost an revenuer ecovery opportunity ientifie in .tep 4%

1etermine a factor to !e use !efore incluing the figures in your ROI calculation% Compare "ithspreasheets or legacy systems, a ne" ICM system that is "ell implemente shoul allo" for => –

H=; recovery of costs or incremental revenue realization incluing@

E .hao" accounting costs

E Overpayment costs

E Aministrative costs

E 3+cessive attrition costs

E 1ispute costs

E 1ispute lost r evenue

'eighing .oft an ?ar cost or incremental revenue items

Be more conservative "hen estimating savings or incremental revenue opportunities if they are

!ase solely on stuies or surveys rather than harer ata o!taine from analysis or auit of your particular pr ocess%

Create an ROI .pr easheet

Create an ROI spreasheet to facilitate ROI values an pay!ack perio calculation% 1on*t forgetto elay cost savings an revenue recovery realization until the implementation is complete%


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.ummary

Most organizations are !eginning to unerstan that@

E ICM rives cost r euction

E ICM improves employee perfor mance

E ICM aligns !usiness goals an plan ef fectiveness

E ICM enhances management insight

?o"ever, even if an organization has these anticipate !enefits in min, it shoul al"ays unertake

an internal auit of e+isting challenges an opportunities !efore investing in an incentive

compensation management solution%

'hile ICM offers a "ie !reath of !enefit to help companies increase performance, lo"er costs,

align !usiness goals "ith compensation plans an gain meaningful insight, the !usiness case is that

much more compelling "hen it is mae "ith a thoughtful calculation of anticipate ROI%

A!out Iconi++

Iconi++, a glo!al pioneer in Incentive Compensation Management, elivers innovative solutionsfor companies of all sizes, across verticals an aroun the "orl% 1ra"ing on its su!stantial

tenur e an vast kno"lege capital in ICM !est practices, Iconi++ enhances ef ficiencies,

improves visi!ility an rives "orkforce performance, across the organization% The Iconi++suite of solutions provies holistic support in a fle+i!le manner to save money, eliminate errorsan streamlines processes to rive !usiness results an ensure client success% or moreinformation a!out Iconi++ visit "" "%iconi++%com%

:87> 3+ecutive Center 1rive, .T3 7=>

Austin, T H6H:4

6HH-ICOI

ww w/iconi%%/co"
http://www.iconixx.com/http://www.iconixx.com/http://www.iconixx.com/http://www.iconixx.com/http://www.iconixx.com/http://www.iconixx.com/

(263995840) Iconixx White Paper ROI

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