Compensation plans are like spaghetti recipes

Sales Cloud Incentive Compensation is great, powerful, very flexible calculator that can calculate sales compensation, but many things more.

I must admit it is one of my favorite things in Sales Cloud !

Incentive Comp can basically execute calculations on what ever type of data that is fed to it.  It could be things like who is performing best within a team of people, by calculating scores or rankings that we then can use to display using reporting tools like BI Answers, in interesting ways like the one below.

Track Race

How Incentive Comp actually does its calculations is quite interesting.  It is an incredible flexible machine that can be implemented by breaking up each calculation in 5 blocks that each serve a particular purpose.  The way these blocks of information are used by the Incentive Comp calculator can be best explained using the analogy of a recipe book.

icRecepes

Measures

Measures are the things we will actually calculate (or parts of calculations – see later).  This can be a monthly commission, a yearly bonus, or a score for a ‘gamification’ like the track race report shown in the beginning of this post.  When investigating the requirements of my customers, I look for what corresponds to measures, by wondering ‘what’ needs to be calculated.

In the analogy to the recipe book, the measures would be the things we need to make, and in order to make spaghetti, we need e.g. tomato sauce

Formula

Formulas describe how we can calculate whatever the measure wants to get as a result.  These are expressions that describe ‘how’ the calculation needs to be executed e.g. for every transaction a % of the transaction amount can be added to the monthly commission payment.

The interesting thing about Sales Cloud Incentive Comp is that no programming skills are needed to create these formulas.  Let me rephrase this: Oracle Sales Cloud does not provide any capabilities to define these formulas using a programming language.  Oracle Sales Cloud does not require any IT/technology/programming related skills to define compensation plans!

In the analogy of the recipe book, the formula would describe how to make the tomato sauce that is needed to complete the spaghetti recipe, what types of ingredients are needed, how they need to be prepared, and at what temperature they need to be assembled.

Rate Table

Rate Tables are used to define amount or percentages, based on all types of conditions, that need to be used in the formulas.  These are the variable parts of the formula that might change from person to person for which the calculation is executed.  They can be found by wondering ‘how much’ is needed in the formulas.

In the example describe above under formula, the % in the formula is not defined.  The formula knows it needs a percentage, but the rate table will provide the percentage.  Using a rate table, the percentage e.g. can depend on the time of the year the transactions are closed (transactions closed in periods that are traditionally calmer business periods could be promoted with a higher incentive), the size of the transactions (higher % for bigger transactions), the products for which the transaction was closed (higher percentages might be used for new products, or products that are under performing), or anything else that might make business sense.

The example below shows a rate table where a percentage is returned based on the type of product that was sold, and the amount of products that were sold over a period of time.

icRateTables

In the example above, each of the conditions is a dimension in the rate table, and it is important to know that Oracle Sales Cloud Incentive Compensation is not bound to just two-dimensional rate tables, it can handle multi-dimensional rate tables with as many dimensions as you would need.

Notice how much more text I need to describe rate tables compared to the other 4 blocks.  This is not because rate tables are complex or hard to manage, but because they are the driving force behind the flexibility of the Incentive Comp calculator.

In the analogy of the recipe book, rate table would contain how much of each ingredient is needed, depending on how many people are coming over for dinner.

Plan Components

Plan components are what Incentive Comp is all about.  These are the calculations that will provide the desired result, whether it is an amount to pay, or a score to be used in a ranking.  They can be calculated by combining 1 or more measures, where one measure serves as input for another to calculate together the final result.

In the analogy of the recipe book, plan components are the recipes.  If spaghetti is what you want to serve your guests, then the spaghetti recipe is what you need to use.

Compensation Plans

Compensation Plan are nothing more than containers.  This might seems weird, but all they do is grouping plan components together into a package.  This is an important feature though, since compensated individuals typically need to evaluate their entire package in the beginning of the fiscal year in order to decide whether they accept it or not.

In the analogy of the recipe book, compensation plans are the recipe book.  You buy the book as it is, or you do not buy it.  You cannot buy only a few recipes that are in the book.

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