Incentive programs – Mastering the devil in the details

by Human Capital02 Jul 2012

Most organisations have some kind of incentive program in place, but the devil is in the details – and there are many details. An incentive program not only needs to manage, monitor and approve payments in accordance with the scheme; it must also include protocols that administer scheme eligibility, long-term sickness, staff movements and changes, top up and catch up payments, and discretionary interventions –any one of which can lead to errors and undermine what an incentive program is all about: motivation and reward.

Every organisation has essentially three choices when it comes to an incentive management system:

1. Buy an off-the-shelf solution;

2. Custom build an in-house solution; or

3. Outsource the process.

Let’s look at each of these in turn. Each has its virtues, but there are also hidden pitfalls that range from day-to-day operational issues to regulatory concerns.

First, the off-the-shelf solution. The attractiveness of off-the-shelf is obvious: ability to break free of in-house overhead (more on that below), and seeming ease of implementation and use. I say seeming because this is where the off-the-shelf model falls down.

Every organisation is different, but by definition off-the-shelf software is designed for a mass market.

What “customisable” features are included are only partially customisable and invariably will be unable to address the complex nuances and needs of your company’s incentive program.

Yes, an off-the-shelf solution may have say 80% of the rules necessary to incentivise your sales force, but the 20% it lacks could make the difference between single and double digit revenue growth. Not only that, but there will be the functional headaches that come from trying to force someone else’s vision of how your company works onto how your company actually works. The rules that might be missing could include a critical part of your reporting or analysis process that you will quickly find you cannot live without.

That brings us to the diametric opposite of off-the-shelf: a solution custom built in-house for your organisation. A well-built in-house sales incentive system will fit an organisation like a glove, delivering sales enhancement while remaining unobtrusive – after all, you want to incentivise your sales people not weigh them down with onerous administrative tasks.

An in-house system can be built for the operational, regulatory and tax considerations of your business while using a bonus system that works with your particular sales landscape and cycle. Moreover, an in-house system can harness the particular culture of your organisation and tap the inherently competitive nature of your sales force via custom-designed leader boards.

The strength of an in-house system, however, can also be its weakness. Typically, in-house systems are developed by an in-house team with intimate knowledge of the organisation who proceed to build the system around designated individuals who know the ins and outs of the business and the system. This is exactly where it fails.

Since the in-house system is so connected to the individuals that built it, and to the DNA of the organisation, over time it might actually be too quirky, too idiosyncratic. In other words, a system may be “over customised”.

How? Often only one person will know how the system works. If they move on, the system gets handed over and over time, falls into the kind of disarray not easily remedied. It is unlikely that a new manager will have the same kind of mastery or understanding of the systemic implementation as the person who built the system.

And in all reality, in-house systems are often built around spreadsheet systems that are prone to cause costly calculation errors such as incentive overpayments. Additionally, when code needs to be changed in the software, a coder has to be brought in and testing done.

An outsourced incentive management solution, particularly hosted/cloud-based systems, can combine the relative cost-savings of an off-the-shelf solution with the “custom fit” of the in-house model, whilst going beyond what companies can typically achieve for themselves.

Importantly, outsourcing the incentive program does not equate to outsourcing control. Typically outsourcing and building your incentive management tool involves working with Specialist Business Intelligence (BI) agencies, which will identify how they can best help their clients achieve their goals, and work with them to implement these. The outsourcing benefits include:


  • access to expertise and experience of incentive tools design and build;
  • enhanced reliability and robustness of technology;
  • superior performance and scalability through hardware; and
  • best tier security, including latest firewall protection, intrusion detection systems, SSL encryption and proprietary security products.


 An outsourced solution developed in close consultation with such companies will:


  •  increase accuracy, eliminate risk and save money;
  • drive sales growth and the retention of top performers; and
  • provide the regulatory compliance and audit trails required to seamlessly interface between Sales, HR and Finance functions.


Ultimately, the right kind of sales incentive system is a living thing, adapting to both the industry and the changing needs of the company while reducing head count at the same time. Moreover, as long as the outsourced solution provider offers true business intelligence and is genuinely consultative, the organisation will benefit from being able to build, refine and manage incentive programs that will perform better and deliver more than most in-house solutions at a fraction of the cost.


About the author

Regan McCracken is director – commercial effectiveness, Mercurial. For further information visit: