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    Managing Incentive Compensation & Compliance Across the Enterprise

    The recent incentive compensation scandal at Wells Fargo has many financial institutions and companies talking about incentive compensation as a sales strategy. The consequences of using it poorly include financial penalties, decreases in customer trust, and a massive negative effect on employees and morale. It is clear a poorly managed incentive compensation plan piles huge costs onto an organization’s bottom line.

    This leads us to ask ourselves are incentives inherently bad? At Intangent we’d argue that they are not. Cars are an innocuous thing on their own but in the hands of a careless driver they can cause great damage.  The same can be said for incentive compensation; as we have seen with Wells Fargo – a lack of oversight on this kind of system can lead to extremely painful consequences.

    The role of incentive compensation in the enterprise is a big one. Organizations put forth a great deal of effort when developing incentive plans to ensure that they align sales results with company strategy. Incentive plans are designed to influence the sellers’ behavior to act in accordance with management’s desired outcomes. A well-designed incentive plan will shape the actions of the sales team to drive corporate goals. A well-managed incentive plan will remain compliant with regulatory standards and laws.

    How do you ensure you have a well-managed and compliant incentive compensation plan? We believe that it starts with strong leadership and stringent reporting. Ensuring there is proper oversight and management control is one thing, but you also need to introduce financial auditability into your program. For banking and insurance, risk management and control are also crucial. Achieving these goals is made significantly easier when you can provide accessible and transparent reporting. By developing standard reports, you give all constituents access to the information they need in order to audit, manage, and motivate behaviors.  On the seller’s side, reporting gives them the ability to view how they are performing in relation to their targets and motivate them to continue to produce the right results. Reporting for leadership, management, and finance allows them to track activity and ensure compliance. Lastly, good reporting should be system driven and not dependent upon teams of people generating ad-hoc reports.

    IBM’s Incentive Compensation Solution (ICM) is helping many organizations manage the challenging parts of the incentive compensation process.  The savings from automating the manual efforts from operations, sales, and finance in calculating payments alone generates significant ROI.  However, in today’s compliance-driven environment ICM is also providing transparency and auditability to ensure that oversight and control are functioning alongside incentives.

     

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