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IC Centralization :Balance Governance with Best Practice (Part 3) - Aurochs Software

By 2015-07-22 Incentive Compensation, Incentive Compensation Management, Centralization

In the third part of this series, we will discuss the other aspect of the centralization process. HQ prefers to create a global incentive compensation plan design and structure. This may be considered as taking a “framework” approach from which regions and countries may pick from a menu of plan components.


IC Centralization

This is the final part of the three part series on Centralization of Incentive Compensation program management. You can catch up on the first two parts here : PART1 and PART2

In the final part of this series, we are going to discuss centralization of ongoing IC operations and change management processes. In effect, a global Center of Excellence (CoE) is created to handle incentive compensation needs of the organization globally. The objectives are: to gain operational efficiency, remove variability in system deployment, provide best practice guidance from the center, and to reduce overall operations costs.

This aspect of centralization is most likely to have the greatest pushback amongst the three aspects considered in this series. Primarily this emanates from the feeling that it separates the IC administration from the local market and local leadership. This may also be perceived as lacking transparency and may impact field relations with local IC admin personnel. The preferable approach to tackle this aspect would be to create a global framework for management and governance of the operations and changes. This framework sets an operational paradigm within which each geography needs to manage their IC operations locally. It also embeds a healthy level of governance and rigour. This operational paradigm should include aspects like:

  1. Operational Quality Framework

    • Quality Assurance
      • Paradigm defining quality touchpoints
      • Business Insights – trends, top & bottom performers etc
    • Quality Control
      • Input data validation – Format of files, control totals etc.
      • Constraint Checks – Range checks, month over month variations etc.
      • Referential Integrity Checks – across files, with master dimensions etc.
  2. Documentation Standards

    • Process maps with clearly defined input, output, processing time and exception handling information
    • Standard operating procedures (SOPs) describing activities necessary to run the processes successfully and to deliver desired outputs. This document should include all the information including any additional manual checks (QCs) that needs to be done on intermediate and final outputs. There should be clear roles and responsibilities (perhaps a RACI matrix) defined to avoid any confusion during the process run. There should also be provision to track ongoing processes along with some capability to provide sign-offs, auditing and approvals
    • Issue tracking document highlighting various issues related to data, process and technology during monthly operations to track the health of the existing program.
  3. Communication Protocol

    • Broader framework to communicate any changes to various stakeholders and with HQ. To make the operations guidelines effective, it is also important to incorporate certain design principles during system and process implementation. These design principles enable simplicity and ensure flexibility for any future changes.
    • Clear strategy and framework to account for various processing touchpoints like:
      • Input receipt
      • Data discrepancies
      • Payment approval
      • Field dispute resolution
      • Process or data adjustments
      • Output delivery
    • HQ reporting requirements
      • Sales Trends
      • Performance Trends
      • Plan Effectiveness Parameters
      • Attrition Performance Analysis
      • Compliance / transparency
    • Field reporting requirements
      • Modular & Visual reports
      • Clear & Transparent Calculation flow
      • Actionable Insights (IC Calculator)
  4. Process Reviews

    • Mandatory periodic reviews to provide opportunities to assess the health of the existing process and to suggest any future improvements
    • Operations data tracking with clearly defined KPIs
      • number of issues each month (broken down by activities)
      • Processing time for each activity
      • Manual time
      • Automated time
      • Payment delays
      • number of field disputes / month
      • Overpayment currency
      • Underpayment currency
      • number of issues by type of input
      • Time spent / month for changes
  5. Change-Management Governance Structure

    • Standard ticketing / documentation system with prioritization capability
    • Protocol for change feasibility and impact analysis
    • Change prioritization and implementation approval
    • Standard for implementation
    • Guidance on existing documentation changes

Such an approach which provides a broader operational framework but allows individual regions (where appropriate), and of course country affiliates to manage their own operations is more desirable.

In this approach, individual country affiliates are required to identify local process owners, define their responsibility matrix (RACI), perform IC plan administration using SOPs, act as a liaison for the local sales teams and take the lead with any queries including dispute resolution. They are also required to track operational KPIs and report them to the HQ.

This approach empowers the affiliates to take complete ownership of their IC program and results in better relationships between sales operations group and the sales team as well as with HQ. It also drives the sharing and adoption of best practice, process improvements, efficiencies and financial savings across the organisation.

Have something to add to this blog post? Please share it in the comments. For more information on Aurochs Software, drop us a mail at info@aurochssoftware.com