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Achieving cultural adoption of processes to improve performance is the largest alignment challenge facing organizations. This challenge has typically been addressed through the use of incentive and rewards programs used to get people and organizations to change their behavior. These programs can have significant impact, but can also raise ethics and compliance concerns in areas like revenue recognition in sales, supplier contract renewal in manufacturing and employee-to-customer incentives for closing contracts in sales and distributor management.

While these programs and allocated budgets for incentives are not new to organizations, the requirements for managing how and when they are paid out or supplied is now becoming more important for finance. This challenge has heightened in light of the fact that incentive systems and linkage to revenue recognition continue to be managed via spreadsheets or siloed applications, practices that increase the risk of fraudulent activity and open the door to inaccuracies. Organizations and especially operational management need to meet the level of scrutiny imposed by finance and develop a well-documented process that can be automated and audited through information systems. In addition, the training and approval of every participating employee, and compliance to the rewards and incentive process, should be automated and accounted for as part of the learning and training programs.

To achieve this level of automation, organizations should review how enterprise incentive management systems are deployed - either on-premise or provided in on-demand fashion - to help manage incentives and rewards for internal and regulatory compliance. These applications should be centrally managed for auditing and access by finance and operations. Achieving performance improvement across sales processes is vitally important. Another critical component is how revenue recognition and incentives, sometimes called 'spiffs', should be managed. Ventana Research recommends organizations take a consistent approach to managing this process as part of their sales or operational performance initiatives. This should be examined within the context of enterprise-wide Workforce Performance Management initiatives.

Assessment

Streamlining your performance processes, and automating the visibility and management of rewards and incentive programs, is needed to mitigate the financial and operational risks to which your organization is currently exposed. Organizations that want to prepare themselves for the inevitable and required automation of their performance processes for managing incentives and rewards should assess their environment today. Ventana Research sees the best practice in managing this process as one that synchronizes finance and operation's requirements while providing the flexibility to achieve the goal of alignment in Performance Management.