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Sap Incentive and Commission Management With Mysap Erp351
Sap Incentive and Commission Management With Mysap Erp351
mySAP ERP
CONTENTS
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
The Challenges of Todays Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meeting Your Organizations Vision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Alignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Productivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
EXECUTIVE SUMMARY
Variable compensation plans, which at one time were
limited to a companys sales force and senior management,
play an increasingly important role at all organizational levels.
In todays economy, it is essential to align high-cost items like
your compensation plans and their administration with your
overall corporate goals.
You can greatly enhance your organizations productivity by
rewarding your employees with variable pay according to their
performance and business contributions. More important, you
can align desired behaviors with business strategy and help all
employees develop a connection between their contributions
and your organizations goals.
Incentive1 and commission management (ICM) has an important part to play in achieving positive business results. This is
true both for organizations that derive significant revenue from
an externally facing sales force (such as companies in the automotive, retail, telecommunications, insurance, and e-business
sectors) and for organizations that can benefit from a greater
focus on key performance indicators (such as project-driven
activities in the construction and IT sectors).
Various factors might motivate you to design a sales incentive
plan. Perhaps your company is in a highly innovative industry
in which an aggressive sales force is vital to entering and
penetrating the market with new products. Maybe you want
to change your current incentive plan to encourage employees
to obtain specific results, such as retaining existing business.
Maybe your company has a fast-changing organizational
structure, dynamic sales channels, and frequent new-product
introductions. Perhaps you want to motivate your internal
workforce by replacing fixed-salary agreements with
performance-related remuneration.
See the glossary at the end of this paper for a description of this and other terms set in bold type.
FINANCE
SUPPLIER
Purchasing
Manufacturing
Marketing
Distribution
CUSTOMER
Contracts
Contracts
INTRANET
INTERNET
INCENTIVE AND
COMMISSION
MANAGEMENT
COST CONTROL
PRODUCTIVITY
DESIGNING YOUR
COMPENSATION PLAN
Productivity
Your organization must be clear about the roles and expectations for your sales force. This may include, for example, emphasizing the connection between business development and achieving sales volume targets, developing new business as opposed to
managing existing business, developing cross-selling opportunities, or following through with after-sales care. All these factors
combine to determine, for each sales group, the appropriate
balance between fixed-pay and variable-pay components, the
mix of incentive-pay arrangements (bonuses versus commissions), and the rules for calculating commissions and incentives.
Your managers, especially those in sales, cant achieve these
desired results without the necessary systems infrastructure.
With an ICM solution, you can adapt rapidly to changing business conditions and easily track the history of your incentive
and commission compensation plan.
Key Challenges in Designing a Compensation Plan
DECISION SUPPORT
DATA STORAGE
OPERATIONAL PROCESSES
DECISION SUPPORT
Rules
Calculation
ICM
Accounts
IMPLEMENTING YOUR
COMPENSATION PLAN
Implementing an incentive and compensation management plan
is not a one-time event. It is an iterative, ongoing process that is
defined by a closed management loop model (see Figure 4).
Amend compensation plans
for future periods
ANALYZE
MEASURE
Measure
compensation
results
(per region,
product line,
customer
hierarchy . . .)
DECIDE
INCENTIVE AND
COMMISSION
MANAGEMENT
Design
compensation
plans aligned
with corporate
business strategy
EXECUTE
Calculate commissions
Calculate incentives
Prepare settlement operations
Commission
Case
Business Partner
The results from this data processing can then be posted as commission documents. If the processing cant be completed, the
commission case is set to pending and forwarded to the work lists
of the commission administrators for manual handling. At the
end of the compensation period, the commission account and all
its documents are closed, and the relevant data is transferred to
the settlement system for payout to the recipients. The following
sections take a closer look at how the execution process works.
Commission
Activity
Business Object
Commission
Contact
Organization
Determine Participants
Valuate Objects
Calculate Remunerations
Post
Commission
Account
Settlement
Disburse Pay
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Periodic
Calculation
Participant Determination
Once an ICM solution has made the reimbursement calculations, it is important to collate the data for analysis and review.
A good ICM solution will allow you to access calculation details
from different views (by product or region, for example). It will
also allow you to export the information to any data-warehouse
solution, where it can be compared with other information,
such as relevant sales statistics.
Analyzing Compensation Plan Data
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SALES CYCLE
COMPENSATION SYSTEM
The board of directors defines the companys sales and marketing strategy.
Rules are defined for the promoted products valuation and for
the variable compensation of commission recipients.
accordingly.
A quotation is presented.
contract is signed.
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CONCLUSION
GLOSSARY OF TERMS
You face many sales challenges, and you must consider key issues
when designing, reviewing, and implementing sales incentives
and compensation across your organization. SAP Incentive and
Commission Management can benefit your staff, managers,
administrators, IT teams, and organization in many ways.
business object
commission account
To learn more about how SAP Incentive and Commission Management can help your organization streamline its compensation
programs, visit swww.sap.com/erp
commission administrator
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commission case
indirect commission
commission contract
standard contract
commission recipient
The fee or percentage sales representatives receive for the services they render
direct reward
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www.sap.com /contactsap