(11 votes, average: 4.09 out of 5)
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An Article in the Wall Street Journal talks about the recent challenges HP is having with their in-house incentive compensation system.
HP’s compensation system, named Omega, is having problems calculating accurate commissions for 2000 out of the 23,000 HP salesreps according to current and former H-P employees and recent company emails reviewed by The Wall Street Journal. The problem persists since November, and some salespeople have waited as long as seven months to get their correct commissions. To mitigate this problem, HP is giving some salespeople monthly payments equal to 60% or 70% of what they would earn for meeting sales quotas.
According to the article, one of the major reasons for these problems is that the solution did not scale up very well to HP’s growth.
Problems similar to this are frequent in the world of enterprise software. Many large companies decide to build their own software thinking that they will save money in the long run. This is often a short sighted view which does not consider the cost of fixing those systems, keeping them in production, keeping them up to date with the new technologies, etc (what is often called the total cost of ownership). Also, usually, homegrown systems are built for a specific purpose, not offering enough flexibility to easily handle emerging needs. As we can see with HP, this can even be a problem for companies in the software and computer hardware business.
In my opinion, an in-house solution can only be justified when there are no commercially available solution that can meet the business requirements; and if it looks like the business requirements are too complex to be handled by such a solution, it might be a good time to reassess those requirements and processes.
Ten or more years ago when the HP incentive compensation system was created, there were virtually no commercial SPM applications available. Times have changed, and with dozens of viable options, now might be a good time for HP to consider an investment that will benefit them in the long term instead of sinking money in a system that is not working properly. They might even find out that the products on the market today offer many features that could help take their sales performance to the next level.
Unfortunately, as FUBAR’d as the Omega compensation system is, HP has stated that Omega will be their go-forward tool for FY10.
Everyone Run. Oh, look, everyone IS running.
“Problems similar to this are frequent in the world of enterprise software.”
Examples please?
I think the Case study question to be asked is why a Fortune 100 global brand like HP would rather keep something like this in house, in light of their most recent setback, than go with a specialized comp provider? Whatever individual or firm is able to replace the typical sales drivel and bluster with fundamental business analysis and business strategy that speaks LOUDLY to these firms’ insecurities about these packaged comp solutions will have a leg up in this environ.
This is a case in point example of why so many companies fail as they grow - inability to scale. There are tons of solutions to problems like this available at affordable rates. Yet, I guarantee that HP spent more developing this shoddy program in-house than they would have if they had purchased their software. Some HP executive didn’t want to be “sold,” and now they’re kicking themselves. It’s as if people view the sales process as a game; if you buy a product you lose and the salesman wins, if you don’t buy, you win! Whoo hoo! Don’t buy cars because cars salesman OBVIOUSLY just want you to buy so they can get a commission. Don’t buy houses because the real estate agent WANTS you to buy a house. Don’t buy ERP because the savvy businessman NEVER gives into a sales pitch! right…?
We have this same problem with HP BRAZIL COMPENSATION SYSTEM The problem persists since 2002 and some salespeople have waited as long as 2 years to get their commissions some of them have leave HP without receive the comission . HP Brazil employees are unhappies and totally unsatisfied.. It is unceptable work in a company which dont pay corret salaries . I think that HP situation in Brazil is very bad with the Brazilian Law.