Building Incentive Compensation Management Systems: What Can Go Wrong?

Abstract

Incentive compensation is a much more complex problem than it first appears. The actual calculation of the payout is relatively simple, but there are a whole host of hidden administrative and plan management issues that determine the ultimate success or failure of an incentive compensation management system. Companies are starting to take a hard look at their incentive plans and at the systems used to support them. This leads quickly to a decision concerning whether to use one of the new enterprise incentive management software solutions and services from companies or build a custom incentive compensation management system in-house. This article highlights the challenges companies can face when building an incentive management system and provides real-world examples of attempts to develop such systems.