1 or 1 pages, using single line spacing and a font size of 12 ptsYour solution to the problem(s) in the case.

More often than not, problems with incentive compensation plans can be attributed not to the plans themselves but rather to the systems, processes and people associated with administering and managing the plans. Inflexible, hard-coded systems; inefficient, laborintensive processes; and lack of expertise and resources are the root causes of nearly all problems with incentive compensation plans. Three companies that have solved these problems and turned their sales commission plans into a source of competitive advantage are ADVO, Wyeth and GE Healthcare. ADVO Addresses Lack of Best Practices Everyone has received a missing child postcard and advertisement in the mail at some time - if not at least once a month. The successful company responsible for combining a public service with "junk mail" is direct mailer ADVO Inc. of Windsor, Connecticut. Focused on building on their success, ADVO wanted to change the behavior of their salespeople to be more consultative. But instead of focusing on supporting its sales staff, corporate attention was being consumed by commission processing. The salesforce in turn wasn't promoting the right messages to prospects. Rather than selling products as key to a customer's business growth and success, the mind-set was one of "push product and get paid." However, their existing mainframe sales commission system - built internally over the years - was inflexible and proved to be a constraint that prohibited them from deploying a more innovative incentive compensation plan. Despite a lot of time spent by IT on upkeep of the system, their plan remained out of alignment with their strategy. Furthermore, the system was administratively inefficient, causing late and inaccurate payments - and resulting in distractions for the salesforce. Instead of communicating with customers and negotiating deals, salespeople were engaged in "shadow accounting" and speculating about their futures. ADVO knew they needed to find a solution. They also knew they didn't simply want a new commission system; they needed to find a company with expertise in rethinking their incentive compensation management processes. They began looking for help and ultimately selected Synygy, based in Chester, Pennsylvania, to provide ADVO with a plan management outsourcing solution - where Synygy assumed responsibility for the management of ADVO's sales commission plan. With Synygy, ADVO now has the flexibility it needs to design plans that are truly aligned with their strategy. Synygy does this by being able to quickly adapt to desired changes, paying salespeople accurately and on time and streamlining the reports that go to sales associates, reducing them from as many as 100 page of data to a mere five pages of meaningful information. They see their goals, their progress toward them, their reward for goals met, and - more importantly - they see the bigger ADVO business picture. As a result, ADVO was able to change how their salespeople approach the sales process. They were also able to redirect their internal human resources, accounting and information technology resources to sales support and business growth initiatives that were critical to the company's success - all while getting greater control over and better visibility into the entire incentive compensation management process. Wyeth Finds Rx for Resource and Process Deficiencies Wyeth Pharmaceuticals, a division of the pharmaceutical and healthcare products giant Wyeth, headquartered in Madison, New Jersey, is a longtime supporter of performance-based incentives. But the internally developed system the company was using lacked a clear link between performance and payments. Further complicating the situation, Wyeth merged with another company, American Cyanamid, and doubled the size of its salesforce. The two companies had different methods of managing performance and driv96 Case Study: Solving Incentive Compensation Management Problems Mark A. Stiffler | President & CEO, Synygy executive and board perspective ing business behavior. The executives at Wyeth wondered how they could marry two sales cultures when they couldn't even get one incentive compensation system to work effectively. Wyeth turned to Synygy for help. Opting to fully outsource the management of their incentive compensation plans, Wyeth now takes advantage of Synygy's domain expertise instead of diverting precious internal IT infrastructure and analytical resources to maintaining an in-house system. Wyeth has over 50 plans that cover different groups, products and levels in the organization. Participation of sales reps in the plans depends on the products they sell and where they work within the organization. With Synygy's assistance, Wyeth has been able to keep the plans in sync so that a consistent message is delivered throughout the company. In addition, Wyeth creates specific budgets for its incentive compensation programs and tracks how the funds are spent. If Wyeth goes over budget for a particular product because it is outperforming expectations, Synygy can tell them why. Wyeth now also can tie payments to specific reps and their performance so that there are no longer any end-of-year surprises. Having visibility into sales results and getting paid sooner enhances the satisfaction of the sales reps, which in turn improves performance. Wyeth salespeople now receive their incentive compensation payouts twice as often as before and monthly sales reports are available online and updated monthly, with information available one week earlier than when paper-based reports were used. GE Healthcare Reaps Healthy Rewards The feedback at a sales meeting five years ago for Amersham Biosciences (now a part of GE Healthcare Biosciences, a $3 billion business based in Little Chalfont, U.K.) was loud and clear: Sales reps had lost confidence in the company's incentive compensation systems. The company's sales compensation system had not kept pace with its increasingly specialized salesforce, growing product line and the need for compensation plans targeted to each sales role. Incentive plans were being managed with four different software tools, including Microsoft Excel, Lotus Notes, Oracle and Business Objects. When the company was smaller, the system wasn't as troubling. But the company was acquiring two to three companies per year and soon had 175 sales professionals operating on 30 different incentive compensation plans in four sales areas. The manually produced spreadsheets were neither flexible nor adaptable to changes. There were no executive-level reports and no way to calculate "what if" scenarios. It often took up to six weeks to calculate payments and four weeks to correct errors. Sales reports were invariably late because the company did all its sales territory reporting and incentive compensation processing in-house. Averaging 18,400 sales reports each year, the mailing task alone took an entire day each week. The company knew it needed outside help and decided to outsource its incentive compensation management process to Synygy. Synygy's staff of plan management experts now produces a full suite of sales reports - including new modeling and analytics that the old system couldn't produce - and the company has been able to refocus information management resources on other projects. Amersham saw a 40 percent return on investment in the first year and a 175 percent ROI in the second year. Today, GE Healthcare BioSciences makes its quarterly incentive payments within four weeks of the quarter close - and has the highest level of sales rep confidence in their sales reports and incentive compensation in more than five years. In fact, there has been a 20 percent drop in sales rep turnover. Outsourcing Is the Solution Managing incentive compensation plans is not a core competency of most organizations. Similar to payroll, it is now something that can be outsourced - where another company maintains plan rules, does data validation and cleansing, calculates and certifies results, communicates individual performance to each participant and analyzes plan effectivenessfor management. Each of the industry-leading companies highlighted in these cases chose to outsource management of their incentive compensation plans rather than continue to devote disproportionate amounts of time and resources struggling with in-house processes and systems. Turning outside their own organizations to improve flexibility, efficiency and effectiveness of their plans, these companies are now realizing the full potential of their pay-for-performance programs while focusing on doing what they do best.