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6 Tips for Ensuring Error-free Incentive Compensation Results, Payments, and Reports

To drive desired behaviors, a sales organization must have confidence in the accuracy of its incentive compensation results, payments, and reports. Yet, inaccurate results are often the cause of incentive compensation management failures. These errors have both individual and organization-wide negative consequences. At the individual level, errors lead to mistrust in plan results and decreased selling efforts because of additional time spent shadow accounting, disputing results, and complaining about the plan. Continuous mistakes may also give way to a dissatisfied sales force.

Organizationally, errors result in over- or underpayments, not to mention the negative fallout for noncompliance with financial reporting regulations. Errors also result in time wasted by administrative and IT staff handling disputes, correcting systems, and reprocessing payments. Furthermore, errors often result in decreased revenue and margins because of unmotivated salespeople and higher recruiting and training costs due to increased sales force turnover.

In many cases, errors go undetected because of a lack of knowledge about what to look for and how to automate the process for uncovering and fixing them. The following six tips, derived from a long-term study of the incentive compensation management practices at 100 large companies, reflect the best cross-industry practices for eliminating and preventing incentive compensation errors.

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