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Monthly Archive for April, 2008

Sales Compensation Planning Made Easy - Interview with Makana Solutions

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Julien Dionne
on April 22, 2008
in Vendor / SPM Solution Review and Info
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I recently had the opportunity to spend an hour with Liz Cobb, Founder and CEO of Makana Solutions, and with Arthur Gehring, Director of Marketing.

Makana is a relatively new company (founded in 2004) offering a very good on-demand application, called Makana Motivator, which helps build effective and clear compensation plans. Makana Motivator is very easy to use and allows its users to quickly create a plan either based on other sample plans, or from the ground up. It also has the capability to “test” your plan.

As I mentioned several times, one of the biggest challenges faced by sales management or consultants when implementing a sales compensation system is the “complexity” of the compensation plans. Sometimes compensation plans are quickly described in a e-mail or over the phone, or almost handed over written on a napkin. In other scenarios, they are can be well documented but may still lack clarity, key aspects, or examples, or may be lengthy. Finally, even if a compensation plan is well documented, it does not mean that the plan is effective and well aligned with the objectives and budget of the company.

The Makana Motivator application is very intuitive to use. Companies using the application typically receive a 1-hour live tutorial from Makana, after which they are able to model plans on their own. The main components of the application consist of the space in which the plans are built, where the organization is built with assignments and territories (participants can be imported from SalesForce.com), a section for cost modeling the plans, and finally, a section that generates a plan and gives the option to save it as a PDF.


In my opinion, one of the most powerful aspects of Makana Motivator is that it allows users to choose templates from a best-practice library and to adapt them to meet individual circumstances. The application then guides the user following a “wizard” step-by-step approach to ensure nothing is overlooked. The application is very interactive; hovering over most of the application components provides additional feedback . “Blue-ribbon advice” offering expert tips and help is also available throughout the process.

Another important feature of this application is the ability to display and compare plans side by side. Such a graphical representation quickly helps identify the major differences between plans.


Plans are not only displayed side-by-side; they can also be designed and modified side-by-side. Plans consist of measures and formulas which can be edited by expanding their respective section.


The cost modeling section can show costs for the entire company or byany sub-set such as product group or geography. Projected attainment can be modified to gain an idea of the impact of those variables on the overall incentive costs. Many sales performance management applications offer modeling and analytics capabilities, but Makana Motivator allows its users to model the plans BEFORE they are implemented rather than after, which can save a lot of time, money and headaches.

Once the plans are fully designed, and since the application is on-demand; they can easily be circulated and feedback can be gathered directly in the application. Upon acceptance of the plans, plan documents can be individualized and generated. The resulting plans are very clear and easy to understand by consultants, comp teams and sales reps alike, and are visually pleasing.

Motivator adds a lot of value over the spreadsheets used for planning today by streamlining the process, providing best practice guidance, easy cost modeling, clear plans and an audit trail. Makana Motivator also provides Salesforce.com users Apexchange certified integration.

Read more about what customers have to say about Makana Motivator.

After completing a form on the Makana website, you can access several free webinars and articles about Makana Motivator and compensation plan design best practices.

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Do Big Money Bonuses Really Increase Job Performance?

Published
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Julien Dionne
on April 22, 2008
in Research and Articles
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I came across an interesting study in the “PsyBlog” about the impact of large bonuses on job performance. In this experiment, professor Dan Ariely went to India and recruited [poor] local people to accomplish several tasks, offering a performance bonus equivalent to up to a month’s salary. In 8 of the 9 tasks, the promise of a large bonus significantly decreased people’s performance.

The summary of the paper on the PsyBlog seemed a bit counter-intuitive. Most companies around the world would most likely not have some flavor of a pay-for-performance program if a bonus was actually decreasing performance.

So what is happening? On one hand, I think that if the bonus is very high, participants could have been really stressed out about the task and not performing as well because of that pressure. It is also possible that performance decreased because participants did not actually believe they would receive the bonus for a variety of reasons – sometimes when only a certain number of people can receive the max bonus, participants feel they don’t have a chance to perform at the required level and behave accordingly. Even if there is no maximum number of participants who can receive the largest bonus, the performance required to get the bonus could be perceived as being unattainable or not worth it.

The relative value of bonuses versus the effort required to obtain them is another factor which could affect the participant’s behavior. If working exceedingly hard is required to get the max bonus but that only a moderate amount of work is required to get a bonus which is only slightly inferior, many participants could be settling for the smaller bonus.

I spent some time looking for other papers on this topic and found a few other possible explanations. The “crowding out” theory supports the hypothesis that incentive pay decreases employees’ motivation to perform up to abilities. The explanation generally given for this is that the introduction of an obligatory amount of output to produce is often considered by employees as a signal of distrust. The papers I found discussing the crowding theory are: Titmuss (1970), Rothe(1970), Gneezy and Rustichini (2000), and McNabb and Whitfield (2003). Papers by Kruse (1992), and Ichniowski and Shaw (2003) “prove” that incentive pay positively affects employees’ effort.

As for me, based on my own observations and “empirical evidence”, I will side with Kruse, Ichniowski and Shaw to say that incentive pay (if used properly) can positively affect employees’ performance.

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Related Posts:
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Upcoming Free Webinar: Industry Banking Best Practices for Maximizing Your Customer Value and Sales Behavior

Published
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Julien Dionne
on April 18, 2008
in Events
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A free webinar “Industry Banking Best Practices for Maximizing Your Customer Value and Sales Behavior” will be hosted by Callidus Software and Accenture on Wednesday April 23rd at 11:00 EDT.

Learn about banking industry best practices from Accenture to ensure that your front line sales people are selling efficiently and effectively - and selling the right products to the right customers. Together with strategies and best practices, you’ll also learn how other financial services organizations are using the latest solutions and technologies to optimize these processes, and achieve competitive advantage.

For additional information and to register for the event go to: http://www.callidussoftware.com/go/08/banking-best-practices-to-maximize-sales/

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Related Posts:
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Spiffs, Bonuses and Contests - Ask the Expert #3

Published
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Julien Dionne
on April 17, 2008
in Best Practices and Miscellaneous
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In this 3rd installment of David Cichelli’s “Ask the Expert” series on this blog, I asked David about his thoughts on spiffs. I asked him if it was possible to use spiffs while avoiding encouraging employees to push a certain product upon a customer at his or her expenses. I also asked David if there was such a thing as too many spiffs. Previous posts of this series are here and here.

Before going into David’s answer, I want to give a bit of background regarding what is a spiff.

SPIF (or SPIFF) may stand for “Sales Performance Incentive Fund”, “Special Performance Incentive Fund” or ” Special Performance Incentives for Field Force”. The exact origin of the term is open for debate. Wikipedia defines a spiff as a small, immediate bonus for a sale. They can be paid by a munufacturer or the employer, to the salesperson who sold a specific product.

I have seen spiffs used in several scenarios such as when a manufacturer wants to gain market adoption with a new product, when a retailer wants to liquidate some of its inventory, to incent sales people to sale certain combinations of widgets, etc. The goal is always to have an immediate impact on sales force behavior. Of course, spiffs are not without their own pros and cons, but they can fit nicely within a compensation strategy.

Here is what David had to say about spiffs:

Julien, you might want to check the spelling of “spiff.” I spell it with one “f.” It means Special Performance Incentive Fund. Check Wikipedia for a nice discussion on the spelling. [Sorry David - I'm sticking to spiff for now, so far I've seen it spelled this way more often than "spif"].

First of all, I consider spifs, contests and campaigns an integral part of the sales management’s tool kit. Here are the rules for appropriate use of these programs:

  1. Budget of all programs should not exceed the total earnings of the sales force by 3% .
  2. Spifs should be used for “doing something new for the first time.”
  3. They should not be used to spike performance during a period.
  4. They are narcotic in nature: the more you use them the more you need to use them. Moderation of use with healthy hoopla is the best prescription for success.
  5. Avoid the use of “chance” to determine winners and payouts–it ’s unethical to do so: this is an employment relationship, not Las Vegas.

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Related Posts:
The Origin of the word “SPIFF”
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Can Performance be Measured?

Published
by
Julien Dionne
on April 17, 2008
in Performance Measurement and Research and Articles
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John Fletcher posted an interesting article “Why Quantitative Measures Often Make Performance Worse, not Better” on the Slow Leadership Blog about how quantifiable objectives is more about office politics than performance.

The article takes the point of view that performance measurement does not work well because typically what is measured is not what matters the most, and that performance often delines when it is measured because once people reach their target there is no incentive to exceed it.

I previously shared some information on performance measurement as well as some personal stories. I agree with John that sometimes quantifiable objectives can be more about office politics and that they can have undesirable effects and he raises a several good points. However, I will say that performance cannot be evaluated without well defined criteria. The article also seems to say that any quantifiable objectives are not as good as less tangible measures, a statement which I can’t agree with.

The example of setting set targets also shows what to avoid; In the example, the goal is to answer 90% of inquiries - answer less than 90% and the employee does not get a bonus, answer more than 90% and the employee receives a bonus. This strategy could lead to employees doing the bare minimum of work to reach 90%, but not strive to achieve 100%. If the department’s goal was to answer as many queries as possible, a better solution would be to use a quota approach: achieve target and receive a bonus, answer between 90 and 95% of inquiries and receive a bigger bonus, answer between 96 and 99% of inquires and receive an even bigger bonus, and answer 100% of inquiries and get the max bonus. This way, at least in theory, employees will always be motivated to exceed the target.

Choosing “good” performance measures and metrics is one of the most critical aspects of designing an incentive plan, while”bad” measures could result in encouraging undesired behaviors. It is important to know exactly what the desired behaviors and goals are before choosing any measurement. Also, as David Cichelli from The Alexander Group and Liz Cobb from Makana Solutions pointed out earlier, too many measures can ruin a compensation plan by making it overly complex and confusing the payees.

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Ready… Set… Go-Live!

Published
by
Julien Dionne
on April 15, 2008
in Implementation
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Before an ICM implementation can be deployed, there are a number of things that need to be done. “Go-Live” refers to an implementation being transitioned from being developed and tested, to being used in production. An application that is “in production” means that it is now used with real data, to pay real people, and bugs, errors and overpayments are not an option.

Meeting the go-live date when building an ICM solution is particularly important because those dates are often related to pay-roll cycles and are often less flexible than other type of systems.
With tight deadlines and little tolerance for mistakes, go-lives are the most stressful moment for anyone involved on the project. No matter how good the relationship with the client and how well the implementation went, if go-live is not successful, executives can get bitter, people can get fired, and all the hard work put in the project can be forgotten.

Implementing different applications require different steps to go live. An on-premise application will have more steps such as migrating the application from the development hardware onto the production hardware and making sure this hardware conforms to the development/test environment. For a SaaS solution there are less steps, migration is usually easier and there is no need to worry about hardware.

What is most stressful for a consultant during the go-live phase is that it’s the ultimate milestone; the system must be rolled-out, and the implementation must be completed and functional. The User Acceptance Test (UAT) must be performed on the system and signed-off. UAT is essential to capture the client’s agreement that the implementation performs as desired.
With all that is involved in the go-live phase, consultants will work 80-100 hours a week to make it happen; it’s “crunch-time”!

Here are a few ideas of items to include on your ICM go-live check list:

  • Setup and test all relevant hardware (if on-premise)
  • Ensure updated documentation exists and that users are trained.
  • Ensure a roll-back strategy is in place in case there is a ‘show stopper’
  • Ensure vendors and consultants are available during go-live period
  • Backup any existing configuration
  • Install, test and configure all required software, including the creation of a production database
  • Migrate all reference data such as order types, credit types, calendars, business groups, users, rolls, etc.
  • Migrate all organization data such as positions, titles, hierarchy, territories, customers, relationships, etc.
  • Migrate all plan artifacts such as plans, rules, formulas, tables, quotas, etc.
  • Migrate any other objects such as reports, draws, documents.
  • Ensure any script or data integration items are migrated / updated to reflect the environment change
  • Migrate all the required data to the new database
  • Test new system rigorously
  • Obtain sign-off on results (same results as user testing)

I haven’t written on my blog in the past 2 weeks because I am just in the process of going live with 2 projects at the same time, for 2 different clients. Please be patient, I will start writing again soon.

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