Recently, we have seen an increase in calls for greater geographic centralization in the Incentive Compensation function within global pharmaceutical companies. The aim generally is to strive towards HQ driven incentive compensation administration and defragment of IC management across geographies within the organization.
There are a few key questions that need to be answered, though. What does centralization really encompass? What strategy must be applied towards achieving centralization?
Let us take a look at the three aspects of centralization of the IC administration process
- Standardize the software solution across geographies. The HQ, in effect, approves a software solution for deployment across its various geographies. This may mean that the HQ actually makes the purchase or just whitelists the software solution, and the various geographies are free to adopt this locally with global best practices and support. This is also very attractive from a global procurement and support perspective for obvious reasons.
- Create a global incentive compensation plan framework and drive the design process from HQ. The HQ attempts to standardize compensation plans across its various geographies while considering localised requirements, such as compliance and reporting.
- Centralize global incentive compensation operations and change management. In effect, a global Center of Excellence (CoE) is created to handle the incentive compensation needs of the organization globally, as well as drive best practices from the centre out.
In the first part of this series, we will discuss the standard software solution aspect in more detail. The HQ prefers to implement the same IC solution across geographies. After considering specific requirements from individual geographies, the HQ approves a software solution for deployment across its various geographies. This actually allows the HQ to make the purchase or just whitelist the software solution globally while the various affiliate geographies are free to adapt the solution locally based on their needs. Generally, HQ constitutes the team consisting of members from global HQ as well as regional headquarters to ensure that all the broader requirements are considered during the shortlisting and tendering processes. They come up with broader implementation guidelines and milestones to ensure standardization within a defined timeframe. It is also the responsibility of this group to define the critical success factors at the individual affiliate level.
There are various standard capabilities desired in the solution for it to be considered for evaluation:
- Standard design components which provide scalability and flexibility for future business and hence incentive plan changes Integrated quality framework
- In-built data-rich, visual dashboards with detailed quality checks and performance summaries
- Role-based access control
- In-depth auditing framework to view any changes made to the system as well as inform compliance reporting requirements
- Integrated field reporting engine
- Direct data integration with source systems
- Integrated payment approval framework
- Payment accrual dashboard
- Lower implementation and ongoing operations (TCO) cost when compared to outsourced and consulting led approaches
This doesn’t necessarily meet with too much friction from the leadership of individual geographies as long as the solution meets most requirements of these local markets and the cost of ownership is acceptable across geographies. The affiliate leadership is required to provide regular implementation updates to HQ along with any type of feedback on the selected vendor and discrepancies between reported and actual capabilities. They are also required to act as solution support liaisons and report on consistent and comparable (between affiliates) project success KPIs.
The advantage of this aspect is that it provides access to an industry standard solution for all geographies with lower available financial resources e.g. emerging markets. They get to move from Excel / homegrown data script solutions to a more automated, streamlined solution with strong reporting capabilities and the ability to scale easily. This approach should definitely be adopted if the solution meets the majority of the geographies’ IC needs out of the box and is flexible and agile to adapt to the rest.
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