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A recent article in InformationWeek pointed out that “The wireless carrier is facing a class-action lawsuit over allegations that it shafted employees of commissions totaling more than $5 million”. Who is the culprit? The integration of Sprint’s and Nextel’s is supposed to have caused the system failure leading to potentially 19,000 employees not receiving their full commission on sales of new phones, calling plans and accessories.
Chris Cabrera, the founder of Xactly, actually found this article before I did, and came up with a few conclusions. 1) This type of mess can be avoided. 2) Providing sales reps with real-time visibility in their commission plans and performance should help out identify issues before they cascade in a lawsuit. 3) Audit trails are mandatory and should make the appealing process much quicker and straightforward.
So we know that many companies using legacy commission systems or spreadsheets often make several mistakes in calculating their employee’s commission. However, Sprint IS using one of the leading compensation solutions. This means employees probably have real-time visibility in their commission and that audit trails are available. It also means that any challenges related to contesting an incorrect commission is probably caused by internal processes or the lack of resources rather than a lack of functionality in the comp solution.
According to the article, the integration of back-end systems is to be blamed. This goes back to several of my earlier posts regarding how sales performance systems were not a silver bullet to fix all comp related problems. If the correct information is not fed to the comp system, the results won’t be accurate. The other hint pointing in another direction than that of the comp system is that Sprint spent $10 million to fix the problem. That’s a lot of money. That’s much more than the cost of implementing a brand new leading SPM solution…
Could this situation have been avoided easily? Probably not easily, but I’m sure it could have been avoided. How? By more rigorous testing of the backend systems, by more rigorous testing of the end-to-end comp process, and probably by having more complete test data and better defined expected results. Too often do I see a situation where an implementation is tested very well in isolation (unit tests, and system tests), but where the end-to-end tests (system integration tests, user acceptance tests) could use more attention. Once an issue is identified, it should be relatively “simple” to fix it. This situation shows the importance of paying incentive compensation accurately, which can only be achieved by identifying defects before the system goes “live”.
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