Employers with sales teams receiving incentive compensation and commission payout are overcomplicating their programs, according to industry player Xactly.
“The biggest problem is that comp plans are too complicated,” Xactly vice president Erik Charles told PYMNTS in a recent interview. He added that if a sales representative cannot give a clear, immediate answer about how much commission they will receive on a single deal, then it’s likely the program is to blame — not the sales representative.
In a recent report published Tuesday (Aug. 21), Xactly found that 83 percent of companies surveyed have inaccuracies in their sales compensation payments. The costs of these mistakes are high, considering that, for the companies surveyed, firms spend an average of 10 percent of revenue on these commissions.
A business with $100 million in revenues can lose millions if even one percent of its commission payments are higher than they should be.
Xactly founder and CEO Christopher W. Cabrera said in a statement “leaders have an obligation to ensure that this money is being spent appropriately.”
“Errors in commission payments represent a huge business cost — in terms of revenue attainment, as well as employee trust, motivation, and performance,” he added.
Analysts at Xactly warned that these errors, coupled with the added friction of complex compensation structures and a lack of employee visibility into these programs, means many businesses aren’t able to maximize their ROI of sales incentives. Incentive compensation management (ICM) technology can be critical in streamlining these efforts, however, by automating audit checks and flagging discrepancies and errors.
Nearly three-quarters of businesses using ICM technology are able to complete payouts in less than three weeks, 20 percent more than businesses relying on manual spreadsheets to manage and calculate commissions.
According to Xactly’s Charles, streamlining a compensation program isn’t just about clarifying financials, it’s also about ensuring employees can deliver on the expectations established by their managers.
“A lot of companies do a terrible job at explaining to employees exactly what they want them to focus on,” he told PYMNTS.