One of many topics in the realm of automating variable compensation that deserves extended examination is how to harvest the benefit of flexibility. While this is a very important thing to get right, it so often falls to the bottom of priority lists and at the end of the day leaves C-level management feeling under-served. There are a few ways to think about flexibility. First, is your compensation plan definition and communication prepared organizationally and legally to support multiple changes in a year? This may or may not be a goal, but some think of flexibility as being able to make changes now, not waiting till the next plan year. Another way to think about it is the ability to design and deploy very different structures and methods (rapidly) - and ideally without losing important analytical history. Again, such may not be your particular goal, but, like yoga, flexbility brings other benefits. When you are very flexible small changes are not big deals because the preparedness for change is embedded end to end in your implementation.
There are a few reasons that the flexibility benefit so often touted by vendors is not often delivered. Foremost is that compensation plans are seldom written to allow mid-year change. Then, even if the organization is conceptually prepared to change, there are prioritzation gaps. Variable Comp is about getting people to behave synergistically with corporate goals and paying them correspondingly. Actualizing the payeable portions of the program at hand, especially in the face of tight budgets and timelines, is a very visceral, ,compelling, and measurable goal. Putting priority on the ability to perform yet to be determind tricks is hard to measure and hard to cost justify. Stakeholders have primary responsibility for prioritizing this goal. Further, it's not the easiest to deliver. Because these systems are rule-based and configured on a per-implementation basis, the flexibility is more a capability than gaurantee. Unless it is designed in at a level above the implmentation, it will not be readily available. It's about archtecture, design patterns, and operational rigor.
The benefits of flexibility can be profound. With it a company can
- Respond within the market cycle to changing conditions
- Prevent undue losses on failed and runaway plans
- Implement SPIFFs easily
- Continuously improve solution capabilities
- Continuously model and test alternative compensation approaches
Building a flexible Variable Comp System is well served by
- Strong sponsorship. It just won't happen without that.
- At least partially automated plan communication. When a new plan is assigned or changes are made to a plan it really helps to have automatic creation of emails with relevant details, and also a workflow that obtains the necessary signatures.
- Abstraction: Each end to end compensation component (the flow from input to output) should be understood as being composed of pattern elements.
- Mature and comprehensive change control protocols. Without these breakage, rather than flexibility, will be the outcome.
- Encapsulation of the variable comp vendor tool within an Enterprise wrapper. Interface design to upstream and downstream should be defined at an enterprise level not specific to any vendor solution. The comp engine should be defined in the architecture as a black box(es) with certain capabilities and responsibilities. This is so that the Enterprise wrapper can be continuouly and proactively enriched without disturbing the various solution vendor specific integration flows.
- A priori validation capabilities. Unique pattern components should have datasets that demonstrate their viability before specific instances are designed and deployed.
- Configurable automation. Scripts are ok, but scripts that read tables in order to know what to do are superior. Adding new jobs should not require an external consultant. The regular operationalization of new processes should be a bread and butter behavior.