How to Avoid Paying for a Sales Compensation Consultant
Determining pay structures and benefits for employees is tough. So, it’s no surprise that organizations seek out advice from sales compensation consultants.
But is hiring a consultant always the right solution? For many organizations, the answer is a resounding “No.”
This article will go over why organizations are bucking the trend of hiring consultants to run their compensation programs and what organizations can do instead to save on costs and maximize agility.
What’s wrong with sales compensation consultants?
Let’s make one thing clear. There’s nothing inherently wrong with being or hiring a Sales Compensation Consultant.
After all, the only reason they exist is that there’s a clear demand for their services.
The real issue is businesses become overreliant on a consultant’s help.The real issue with Sales Compensation Consultants is that companies over-rely on them to manage their systems. When the consultant leaves, the sales compensation team often doesn't know how to make changes without breaking the system. Click To Tweet
When you hire a consultant to build up the administrative systems of your sales compensation program, you run the risk of becoming trapped because internal teams don’t have the knowledge or capacity to manage the complex ICM software themselves.
How much do sales compensation consultants cost?
Sales compensation consultants don’t come cheap. Rates are upwards of $400 per hour, meaning you’ll pay a small fortune every few months to keep your system running.
That said, can you really blame organizations for relying on consultants?
Most modern Incentive Compensation Management (ICM) tools are clunky, bolted together systems. Plus, sales compensation administration is often at the bottom of an organization’s priorities.
All the same, large organizations need sales compensation to work properly, so what’s the harm in getting outside help?
What you get from a sales compensation consultant (and what you don’t)
Sales compensation consultants will help you develop a sound compensation structure and use various tools to systemize commission rules, payroll outputs, and plan changes.
But once that consultant leaves for another project, they bring the tacit knowledge necessary to keep the system working properly.
This problem is one of the main reasons (if not THE reason) Forma.ai exists today.
Before founding Forma.ai, Nabeil Alazzam worked as a sales compensation consultant at a global consultancy. During his tenure, he designed compensation structures for F500 companies, wrote business logic to administer the plans, and implemented systems to “streamline” the whole process.
At least, that was always the plan.
In Nabeil’s experience, the “automation” (if we can call it that) would often break once he was out of the building. One client, in particular, had such a disastrous time managing the system on their own that they asked Nabeil to join them full-time.
But Nabeil had an even better idea…Click here to read the rest of the story.
Two Alternatives to Hiring a Sales Compensation Consultants
If you’re currently stuck in an expensive partnership with a Sales Compensation Consultant or fear being sucked in yourself, consider these alternatives.
1. Sales Compensation as a Service (aka Forma.ai)
After rewriting the automation rules of a legacy ICM platform one too many times, Nabeil decided enough was enough.
He would build a new platform and approach to sales compensation that was durable, sustainable, and above all, as agile as heck.
He’d call it Forma.ai, as in perFORMAnce. Get it? (Nabeil’s a big F1 guy).
Right out of the gate, Forma.ai was a huge hit. Their first customer was delighted they no longer had to spend hours building and rebuilding formulas and automation. Everything worked smoothly, and any SPIFs, changes or exceptions they needed to make were easy to execute.
That was in 2016. Today, Forma.ai manages over $1.5 billion in annual commissions.
You’re probably wondering, “what does Forma.ai do differently, and how does it replace the need for a sales compensation consultant?
What’s Different About SCaaS?
Forma.ai dubbed their new approach Sales Compensation as a Service (SCaaS) — a new category of sales compensation software that is purpose-built for large sales teams with complex sales compensation administration.
SCaaS overcomes bottlenecks in the process thanks to its hybrid approach that combines a proprietary sales comp automation platform with external operations.
That means clients get access to a unified command center to manage their sales compensation program, and ongoing support to build, manage, and automate all their administrative duties.
With SCaaS, you no longer need to use a formula builder, no more rule changes that take weeks to implement, and no more chasing down approvals for commission disputes. It all happens in the Forma.ai platform.
The way Nabeil explains it, sales compensation administration is a multi-step process. At every step, a decision has to be made. SCaaS reduces the time between decisions, allowing for enhanced responsiveness to market conditions and unparalleled agility.
2. Train & Retain Internal Talent
Instead of hiring an expensive sales compensation consultant, building up a highly skilled internal team to manage your sales compensation system may be worthwhile.
Granted, sales compensation administrators and analysts are a rare breed. Even rarer is someone who can take ownership of the architecture of your sales compensation systems.Relying on one person to own the architecture of your sales compensation system could spell disaster if they leave for another opportunity. Click To Tweet
Like the sales compensation consultant dilemma, relying on a single team member to own the architecture of your system could spell disaster if they leave for another opportunity. In other words, if they leave the company, you’re screwed.
So, you need to invest in recruiting a strong team and retaining team members who are key to your system integrity and sharing knowledge of the system’s inner workings.
If you can retain a talented team and maintain a strong bank of tacit knowledge to manage the system, you can realize immense cost savings with this approach.
Make the Right Call for Your Organization
Hiring a sales compensation consultant may be an attractive solution to your sales ops problems, but it could end up costing you more than just money. The long-term costs are hard to measure and can include the loss of control of your sales compensation function and ballooning consultant fees.
If you want an easier way out that still allows you to retain control over what’s happening at all levels within your organization, Sales Compensation as a Service is the perfect option.
Forma.ai will take up to 99% of administrative duties off your plate so you can manage every other aspect of running a business successfully. Our sales compensation services are flexible, scalable, and specifically designed to fit into your sales structure.
Learn why top organizations are scrambling to invest in SCaaS with our research-backed guide below.