Save It Or Scrap It

When to Stick with Your Incentive Compensation Implementation and When to Let Go

Incentive compensation management (ICM) systems are at the heart of aligning employee performance with company goals. But what happens when your system isn’t working as expected?
Do you continue pouring resources into it, hoping it will eventually pay off, or do you take a step back and evaluate whether it’s time to move on?

When faced with a troubled implementation, it’s not always clear whether you should save it or scrap it. The decision can be complicated by the sunk cost fallacy, where past investments cloud our judgment, making it hard to walk away from a project that has already consumed significant time, money, and effort.

This dilemma is common, especially in complex areas like incentive compensation management. But knowing when to cut your losses or when to pivot can be the difference between wasted resources and long-term success.

What Does the Sunk Cost Fallacy Have to Do With ICM?

The sunk cost fallacy occurs when past investments, whether financial, time, or effort, lead us to continue with a failing project, simply because we’ve already invested so much. In the context of incentive compensation systems, you might find yourself asking:

• Why are we still struggling with these slow calculation times?
• Why do we keep relying on workarounds that only complicate things?
• Why aren’t our reports giving us the insights we need?

If you’ve been nodding along to these points, it may be time to re-evaluate your current system.

Signs It Might Be Time for a Health Check

A Health Check is a comprehensive system evaluation that considers both the technical and strategic performance of your ICM solution. Think of it as a proactive way to assess whether your current system is functioning optimally, or if it’s time to make changes. Below are a few signs it could be time for a Health Check:

1. Your system is over 5-10 years old:
If your compensation management system has been in place for over a decade, it’s likely showing its age. Technology evolves rapidly, and systems that were cutting-edge a few years ago may no longer meet today’s business demands. A Health Check can help determine whether newer features or configurations could enhance your system's efficiency or if a more modern solution would better suit your needs.


2. Your compensation system doesn’t align with your business goals:
Does your system empower your sales teams to surpass targets, or is it bogged down by inefficiencies that make it harder for them to succeed? If your ICM solution isn’t helping to drive employee performance or providing the transparency needed to manage compensation effectively, it might be time to reassess. A Health Check can help identify areas where your system might be misaligned and suggest ways to realign it to your organizational goals and processes.


3. Manual workarounds are a common part of your process:
If your team is constantly relying on manual calculations or adjusting to compensate for system inefficiencies, it’s a sign that your ICM solution may not be keeping up with the complexity of your needs. A Health Check will uncover inefficiencies and offer opportunities to automate processes, saving time and reducing the risk of errors.


4. Your team is unsure where to begin fixing issues:
If you’ve encountered a series of issues that seem insurmountable: slow performance, poor reporting, complicated workflows. A Health Check can serve as a first step in identifying root causes. Sometimes, what seems like a large problem is a collection of smaller, fixable issues. A comprehensive evaluation helps break down the complexity and shows you the best path forward.

When You Might Consider this

A WorkCentive Health Check takes a comprehensive approach, evaluating both the business and technical aspects of your incentive compensation system. On the business side, we examine processes like workflows, approvals, and hierarchy to ensure your system aligns with organizational needs. On the technical side, we review data integration, calculation accuracy, and system performance to ensure everything is running smoothly and efficiently.

To help illustrate how a Health Check can address specific challenges, here are some common scenarios where our comprehensive evaluation can provide clarity and actionable insights:

1. If you're unsure whether to transition from your current platform:
Sometimes, it’s hard to determine if a change is necessary, especially when the system has been in place for a while and you're invested in it. A Health Check can offer valuable insights, even if you’re unsure about transitioning to a new platform.


2. If it’s not working for you:
If you’re noticing ongoing issues like slow performance, unreliable reporting, or constant manual workarounds, it's worth considering an evaluation to determine if you should improve or abandon the system.


3. Following a Merger or Acquisition:
Combining multiple compensation systems can be complex. A Health Check streamlines the process by aligning systems with the company’s new objectives and uncovering any potential gaps.

When It Makes Sense to “Save” the Implementation

Sometimes, a troubled ICM implementation is worth saving, particularly when there’s a clear path to improvement. Here are some situations where continuing with your system might be the right choice:

1. You’ve identified the issues and have a clear plan to fix them:
If the system is fundamentally sound but has encountered specific challenges, such as temporary patch fixes or incomplete integrations, it may be worth addressing those issues directly rather than replacing the entire system. A Health Check could provide insights on how to realign the system to meet your needs.


2. The cost of reimplementation outweighs the cost of fixing the current system:
Reimplementing a system is often a significant investment, both financially and in terms of time. If your current solution is mostly functional, a targeted Health Check might uncover simple improvements that can restore its efficiency, saving you from the additional costs of re-implementing.


3. You have the right support in place:
If you have a capable team or vendor support that understands your system and can help address the issues, continuing to invest in refining your current setup might be the best choice. Expert guidance can often resolve issues that might seem overwhelming at first.

When It Might Be Time to “Scrap It”

There are instances where continuing to pour resources into a troubled ICM implementation may not be the best path forward. Here's when it might make sense to cut your losses and move on:

1. The system can’t keep up with your needs:
If, after evaluating the system, you realize it cannot be effectively adapted to meet your evolving business needs or the demands of your incentive program, it might be time to start fresh. If a Health Check reveals limitations that cannot be addressed or overcome, transitioning to a new solution or re-implementing your existing model may be the most effective path forward.


2. You’re seeing diminishing returns:
If your system costs more to maintain than it delivers in value and fails to provide expected improvements, it may be time to transition to a more modern solution that could help you make better use of your resources.


3. The opportunity cost is too high:
Every moment spent troubleshooting a system that’s not performing well could be better spent elsewhere. If your ICM solution is causing inefficiencies and delays, it may be preventing your team from focusing on higher-value activities. Transitioning to a more effective solution or re-implementing your existing system can help align with your business goals and drive greater success.

Conclusion: Making the Right Choice

Deciding whether to save or scrap an ICM implementation is never easy, but it’s essential to step back and evaluate whether your current solution is still the best fit. A Health Check can provide valuable insights, identify opportunities to resolve issues and improve performance while helping determine whether to continue with your current system or start fresh.

The sunk cost fallacy can make it tempting to continue investing in a failing system. However, the key is to ensure your compensation strategy aligns with your goals and maximizes value for your business. Taking a step back, conducting a thorough evaluation, and making an informed decision, whether to improve your current system or re-implement it, will help ensure long-term success.

At WorkCentive, our Health Check services offer an impartial and comprehensive assessment of your existing ICM solution. By evaluating both technical and strategic aspects, we help you determine whether your current setup meets your needs or if it’s time for a change. With our expertise, you'll gain the clarity needed to make an informed, data-driven decision about whether to save or scrap your existing solution, ensuring your investments align with the best path forward for your business.