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Incentive Comp.
Provides Measurable Results
Executive Summary
This report evaluates the business impact achieved by three financial services companies that implemented
TrueComp Enterprise from Callidus Software to manage their incentive compensation operations.
This study concludes that payback can be accomplished in as little as 6.1 months, and that significant
financial benefits and business performance improvements occur in the following categories:
■ Revenue Growth – Business executed that would not have occurred without the use of TrueComp.
Includes faster “time to market” with incentives to promote new products and services, additional
focused selling time among the sales force, and increased mindshare with broker channel and dealer
networks.
■ Effective Use of Incentives – Effective use of incentive compensation budget dollars to maximize
market potential. Includes sales force motivation and morale improvements, better visibility into sales
performance, reduced cost of sales, and more effective use of targeted incentives.
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Table of Contents
Executive Summary .........................................................................................................2
Solution Payback Summary ............................................................................................................................2
Introduction.....................................................................................................................5
About this Study ............................................................................................................................................5
Study Methodology .......................................................................................................................................6
Terminology & Definitions ..............................................................................................................................6
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ROI Study Report:
Enterprise Incentive Management Solutions
Enterprise Incentive Management (EIM) solutions enable real-time insight into sales commission status, giving
management the ability to proactively analyze incentive program performance and effectiveness in detail.
Read more…
The net result of continuous, trusted commission feedback to the selling team is improved performance
– more selling time, more sales, higher per sales transaction size, and increased profits. Read more…
An EIM solution streamlines the change management process for incentive plans, often bringing an
organization 2-4 months of additional sales time by allowing the enterprise to get to market earlier. An EIM
automated enterprise is a more nimble organization that has the competitive edge of getting to market
efficiently and expeditiously. Read more…
With TrueComp Enterprise, over-discounting is better curbed and controlled by continually discouraging such
behavior. The net result is an improvement in average sales margin. Read more…
Effective incentive plans catalyze change, enabling enterprises to launch and introduce new product more
successfully to the marketplace. Read more…
Organizations using TrueComp Enterprise reported that their channel partners’ satisfaction with the business
relationship increased and performance improved from a better understanding of financial objectives, the
incentive game plan and commissions reaped to date. Read more…
Whereas prior compensation systems required extensive IT services, TrueComp Enterprise requires minimal IT
support. The commission department is now self-sufficient because of TrueComp Enterprise’s intuitive user
interface. Read more…
The company recognizes that it has attracted more business as a result of having TrueComp Enterprise as a
critical component in its technology infrastructure. Read more…
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Introduction
In order to meet corporate objectives and revenue goals, it is essential that organizations effectively motivate
and compensate employees, channel partners and dealer networks. Enterprise Incentive Management (EIM) is
a key driver to achieving corporate goals and objectives. An enterprise that is “on-plan” in regards to revenue
objectives is more predictable and more apt to be on-track for growth targets and operational expansion
plans.
In today’s highly competitive, dynamic business environment incentive compensation management is ever-
growing in complexity. Enterprise strategies feed this complexity with intricate revenue plans that require a
balanced sales approach, often simultaneously promoting products and services across multiple business lines
to evenly build its customer base and market share.
As a result, enterprises are increasingly challenged by the administrative and logistical quagmire of incentive
management and fulfillment. In addition, enterprises wish to exercise tighter controls over organizational
behavior with stronger predictive modeling capabilities to forecast incentive plan outcomes and guide plan
enhancements.
Most enterprises that rely on home-grown - often spreadsheet-based – solutions are destined to reach a
critical pain level. Enterprises are rapidly moving to automated EIM solutions to replace their highly manual
business process. Automated EIM solutions not only streamline the entire continuum of the incentive
management business process, but also provide the enterprise with a new level of business insight.
TrueComp Enterprise is installed in over 95 large enterprises today, including 9 of the 30 companies that
comprise the Dow Jones Industrial Average.
Specifically, Callidus comprehensively explored how TrueComp Enterprise helped enterprises automate and
streamline business processes to reduce costs and gain efficiencies, improve sales margins, and enhance
revenues. This study captures and analyzes the economic impact realized by three enterprises as the result of
its TrueComp Enterprise deployment.
Customers were selected for the study on the basis of sufficient deployment experience and significant
solution usage to pinpoint the:
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Study Methodology
Callidus Software identified and recruited three customers utilizing TrueComp Enterprise. As a first step,
Callidus conducted phone interviews with multiple executives within each of the three customer sites (e.g. IT,
finance and business groups) to inventory the value and cost drivers that contributed to the solution’s bottom
line ROI.
Applying these discoveries, our team created a custom ROI calculator that modeled each value and
cost driver. This ROI calculator, an Excel-based tool, was segmented into multiple worksheets: revenue
enhancement data, costs savings data, investment data, and the ROI scorecard. The ROI calculator was
configured to capture metrics data for a period of 3 years from contract signing. The costs of implementation
and the length of implementation are therefore included in the measured time period. The ROI calculator
generates annual total benefits by taking the sum of the net incremental changes in the business metrics
that are included; annual costs are similarly a summation of all charges and fees associated with the
implementation and operation of TrueComp Enterprise. The annual ROI for each year of the 3-year period is
calculated by subtracting Total Investment Costs from Total Benefits.
Using the ROI calculator, Callidus contacted each of these customers for a second time to capture specific
business metrics to benchmark the environment prior to and after solution deployment; this ROI calculator
was also used to document capital and ongoing support and maintenance costs associated with TrueComp
Enterprise and its implementation.
Callidus then presented and reviewed the ROI profile with each customer site to confirm and validate data
accuracy.
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Investment
Investment, alternatively referred to as the Total Cost of Ownership (TCO), represents the financial
expenditure that must be made in the solution in order to extract its benefits. Investment covers both upfront
deployment costs and recurring lifecycle costs.
Deployment costs include perpetual solution license fees, implementation costs, hardware infrastructure (e.g.
servers, storage) and orientation training.
Recurring lifecycle costs include internal/external IT staff costs, technical support, solution maintenance
contracts, and follow-on training costs.
Note that perpetual solution license fees, implementation costs and orientation training cost are amortized
over a 5-year period.
Time to Payback Horizon
To calculate the time to payback on the investment, the following equation was used:
Time to Payback = (Total Investment)/Average (Total Benefit)/12
Revenue Growth
This study validates that TrueComp Enterprise drives more profitable sales processes and captures additional
revenue.
Callidus’ customers itemized a list of areas where TrueComp Enterprise had notably delivered discrete
incremental value to their organizations. These value drivers are detailed below.
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New Business Opportunities
Some enterprises create entirely new business opportunities as the result of having the ability to manage
sales strategies that were once impossible to contemplate for implementation prior to EIM automation. In
addition, some service organizations sell incentive management services using TrueComp as their technical
infrastructure to support the service. Such a service provider’s TrueComp ROI experience is profiled in this
study; TrueComp Enterprise’s capabilities enabled this enterprise to expand its service portfolio and tap into
new revenue streams.
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Effective Use of Incentives
Value was realized at Callidus customer sites by improving the use of budgeted compensation dollars to
maximize market potential and meet corporate goals. Through more effective compensation programs and
better visibility into goals and attainment, Callidus customers have seen strong return in the following areas:
Increased Cross-Selling/Up-Selling
Enterprises typically have more than one product and more than one product line. They often experience
difficulty getting the sales force to push new products and new product lines. The problem stems from sales
team’s propensity to sell what it is familiar with.
The power of an incentive plan lies in the financial motivation that it creates for the sales team. Effective
incentive plans catalyze change, enabling enterprises to launch and introduce new product more successfully
to the marketplace. Reinforced compensation plan disincentives, through lack of accelerators, can cause a
sales team to move to new products. The selling behavior of the sales team can be highly influenced and
directed to sell combinations of products (i.e. bundles), upgrades of the customer’s current offering, add-on
capabilities and services (i.e. up-selling), as well as leverage the current relationship through sales of other
complementary products (i.e. cross-selling). However, if the cause-and-effect of the incentive plan is not
continually reinforced with the sales team, the incentive plan loses its potency.
Enterprises attributed increased cross-selling and up-selling activity to their TrueComp Enterprise deployment
due to:
■ Management’s increased ability to create balanced, attractive incentive programs that promoted
their entire product portfolio.
■ Sales personnel’s ability to better understand the rules and benefits of the incentive program
through real-time access to their individual commission history during the sales period.
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Productivity Improvements
EIM solutions streamline incentive planning, administration and fulfillment. The bottom line result is lower
operational costs.
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Reduced Incentive Management Staffing Costs
A manual incentive management process is labor intensive. Financial staff must reconcile all sales transactions
to determine each payee’s commission for the time period. Managing 50 to 100 different compensation
plans for thousands of payees using a cascade of spreadsheets is extremely time consuming. Further,
the financial staff must then analyze the sales results to direct incentive plan changes to improve sales
performance. EIM automation frees financial staff from this administrative burden to refocus their attention
on business strategy.
IT staff involvement is also required for custom report development and implementing the incentive plan
changes. With TrueComp Enterprise, major compensation changes that require new data feeds and new
structures can be accomplished in an order of magnitude more quickly – days instead of months.
The net result is that the organization is much more agile and nimble, requiring less staff to support business
and IT operations. Enterprises with TrueComp Enterprise deployments do more with less.
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Reduced Compensation Error Rate & Dispute Management
It’s no surprise that a manual incentive management approach is prone to low data integrity and high
error rates. This typically results in a high incidence of compensation disputes logged by payees. Using a
spreadsheet approach, data error resolution and dispute management can be quite time consuming, likened
to looking for a “needle in the haystack.” Customers using TrueComp Enterprise reported that data errors
and disputes with commissions were greatly reduced. Equally important, data error and dispute resolution
were accomplished an order of magnitude more quickly and easily with TrueComp Enterprise. The need to
manually reconcile commission discrepancies from several years prior was no longer a problem. Associated
enterprise expenses became much more predictable, alleviating the need to look through paper statements
to find discrepancies.
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ROI Profiles
Company Profile
The first customer case is a service provider within the financial “Since the wholesale business
services sector that offers such long-term savings and retirement was completely unautomated and
products as annuities, life insurance, and institutional products. managed through spreadsheets, the
The company writes individual variable annuity contracts which situation became untenable. We
enable customers to invest in mutual funds and other products. selected a 3rd party, best-of-breed
The company also manages employers’ 401(k) retirement plans. solution that was fully supported.
These financial products are sold exclusively through channel
“TrueComp has increased the
partners, a network of over 200 frontline sales people.
effectiveness of our frontline sales
With annual revenues exceeding $13 billion, 500 payees, 40 team. By substantially reducing sales
different compensation plans and 48 million annual compensation team “shadow accounting” we have
transactions, the company recognized that it needed an incentive recouped 2,600 days of additional
management solution. selling time annually.”
Prior to TrueComp Enterprise deployment, compensation Associate VP & Controller
management was completely manual, performed by the business
staff using spreadsheets. The company wanted to automate this
process with a fully supported, best-of-breed solution. Financial compliance and the desire to be better
prepared for audits also factored significantly into the decision to invest.
Pain Points
The business was rapidly growing in complexity; compensation management of 40 different incentive plans
became too difficult to handle manually.
■ The company wished to improve compensation data accuracy. Too many manual processes had
led to an unacceptably high compensation data error rate.
■ With 20 managers individually calculating compensation with their own interpretations of how
incentives should be calculated, the company wanted to standardize this process.
■ The company had no capabilities to easily audit compensation payout. Being a financial institu-
tion, such capabilities were paramount to ensuring regulatory compliance.
■ Finally, because the compensation group was entrenched in time consuming, manual compensa-
tion management activities, the business team had no time to analyze the compensation data to
evaluate the compensation plans to optimize sales performance.
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Prior to TrueComp Enterprise deployment, the company really didn’t have full insight as to the effectiveness
of its incentive programs. While the initial goal was to automate the incentive management process, the
company’s ultimate goal was to use TrueComp Enterprise in an analytic capacity to uncover inconsistencies
in the incentive plans across the product line and ensure a balanced, standardized, well designed incentive
program. The company was never before able to get a complete, comprehensive view across the entire
product line and sales organization. The company forecasted that TrueComp Enterprise would create more
time for business analytics activities, enabling business/financial staff to spend the majority of its time
analyzing data.
ROI Profile
Reduced/Avoided Costs
Compensation Mgmt Staffing Savings $ 0 $ 175,000. $175,000. $276,108.
Total: $ 0 $ 175,000. $175,000. $276,108.
Reduced/Avoided Costs
Reduction in Compensation Disputes (%) 240 -> 120 240 -> 120 240 -> 120 N/A
50% 50% 50%
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ROI Analysis
The company deployed TrueComp Enterprise 3 years ago. The company estimated that each of their 200
frontline sales people at their channel partners spent 2 hours a week tracking and checking their individual
compensation calculations. TrueComp Enterprise has increased the accuracy of commission data, thereby
increasing channel partners’ trust in the company’s incentive management business processes. The practice of
“shadow accounting” has been eliminated, since each sales team member can view individual compensation
reports at any time online. This has enabled the company to reclaim 2,600 days of selling time annually.
Taking into account the revenue share of each of the three product lines (i.e. life, annuities, 401(k)), average
sales transaction size per sale, average selling time to achieve a closed sales transaction, and average profit
margin per product line, this additional selling time contributed over $1.7 million in net annual revenue.
After the first year of deployment, the company also recognized a cost savings of $175,000 by avoiding
hiring 2 additional business/finance staff members. TrueComp Enterprise streamlined the incentive
management process making it possible for the company to grow its business with sympathetically scaling its
staff costs.
Compensation disputes also decreased. Prior to TrueComp Enterprise deployment, 20 compensation disputes
arose per monthly pay cycle (i.e. 240 annually); post deployment, the disputes dropped by 50% to 10
per monthly pay cycle (i.e. 120 annually). Dispute resolution time also decreased. Compensation disputes
averaged 2 hours of finance staff’s time to resolve prior to TrueComp Enterprise deployment. The combined
50% drop in disputes and drop in resolution time per dispute to .75 hour enabled the finance team to
recoup 19 person days over the course of the year. Data accuracy and data traceability were both enhanced.
Since the company was already employing electronic reporting and payment prior to TrueComp Enterprise
deployment, no cost savings were recognized in these areas.
Payback was achieved in just over 6 months on the adjusted 3 year project.
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Customer Case 2: Service Provider to Financial Institutions
Company Profile
The second customer case is a service provider to financial
institutions (e.g. regional banks, local credit unions and major “Our business is providing
banks) throughout the U.S. and Europe. Creating marketing promotions management services
programs with accompanying compensation SPIF programs for for the financial services industry.
its clients’ internal sales staff and external channel partners (i.e. TrueComp is the infrastructure that
broker networks), this service provider creates and manages allows us to bring new products to
compensation plans that goal its clients’ workforces. The company market.”
builds customized plans for clients according to their needs for Director of Commissions
brokerage channels and internal sales forces.
The company’s top goals are to provide timely and accurate commission information to its clients. The
company prides itself on being the forerunner of the industry. Being technologically advanced is a critical
component to maintaining its market leadership.
The company must be able to handle widely diverse types of compensation structures in order to be
flexible to its clients. The company is committed to meeting the growing demand for analytical reporting
of compensation data. While compensation reports from 10 years ago did not allow clients to download,
extract and analyze data – today these are “must-have” capabilities.
Deploying TrueComp Enterprise in February 2002, the service provider now processes 7-8 million
compensation transactions per month for its 7,000 clients (i.e. payees).
Pain Points
The company wanted more control on commission expenses and more commission expense visibility.
Attaining this level of visibility would guide the company on where to renegotiate with each client’s
commission rate, giving it greater control of expenses.
The company needed to stay competitive by providing its clients with an increased range of products. These
new products warranted the need to create unique commission structures and plans, all of which needed to
be aggregated into one report.
Dynamic changes in the financial industry and the need to create new compensation structures for packaged
SPIF programs mandated the need for flexible, automated incentive management.
The company needed to expand its service portfolio to include analytics that helped its clients to determine
whether their compensation plans were undergoaled/overgoaled.
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Investing in TrueComp Enterprise
The company was using a home-grown incentive management solution, created as an extension of its billing
system. The time had come for a standalone incentive management process that was not limited to a fixed set
of pre-specified compensation plans. TrueComp Enterprise was a logic-based system that provided maximum
compensation plan flexibility. Clients needed easy access to reports that could be efficiently published via the
Internet.
Using the homegrown EIM solution, the company, out of necessity, had to focus all resources on just trying
to keep up with manual compensation payment processes each month. The company simply didn’t have time
to analyze the performance of its clients’ compensations plans. After evaluating TrueComp Enterprise, the
company knew it could streamline the compensation payment process and provide the integrated analytical
tools to offer its clients’ add-on strategic analysis services.
ROI Profile
Reduced/Avoided Costs
Paper Reporting Cost Savings $109,000. $109,000. $ 109,000. $ 271,067.
Commission Check Fulfillment Savings $ 10,000. $ 10,000. $ 10,000. $ 24,869.
Compensation Mgmt Staffing Savings $ 0. $ 70,000 $ 70,000 $ 110,443.
Total: $119,000. $189,000. $ 189,000. $ 406,379.
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Intangible Payback Profile
Reduced/Avoided Costs
Reduction in Compensation Disputes (%) 120 -> 4 120 -> 4 120 -> 4 N/A
99.9% 99.9% 99.9%
ROI Analysis
TrueComp Enterprise has enabled the company to offer an advanced new compensation program service
to its clients that could not be offered in the past. This has allowed the company to expand and broaden its
service set and realize substantial increased revenue opportunities.
Compensation reports are no longer printed for clients; instead compensation information is sent
electronically. Prior to TrueComp Enterprise deployment, commission data was manually input; now data is
electronically uploaded into the system. IT assistance is no longer needed for final report production. There is
an enhanced flow of information within the company. Clients’ service groups can now perform analytics by
accessing data directly at their desktops. This process change represents a savings of $109,000 annually. The
company has also achieved quick turnaround on report publications that profile what each client has earned
over the time period; this helps clients meet their financial reporting timelines.
TrueComp Enterprise has also eliminated paper check processes; all payments are now made electronically.
The workload of the company’s A/P group has been substantially reduced. The company recognized a
$10,000 savings annually.
Quicker turnaround in commission expense processing enabled the company to pay in the current month,
avoiding the 45-60 day accrual commission expense that plagued them in the past. Having accurate
compensation information has led to improved, prudent business decisions for the company.
Whereas prior compensation systems required extensive IT services, TrueComp Enterprise requires minimal IT
support. The commission department is now self-sufficient because of TrueComp Enterprise’s intuitive user
interface. This decrease in IT staff requirements for solution support and compensation processing enables IT
to focus on other areas of the business.
Operational expense for the commission payment process has been reduced. Disputes with commissions
have decreased from 120 down to 4 annually and the average time to resolve a dispute has been reduced
from 8 hours to 2 hours. The need to manually reconcile commission discrepancies from 2 years prior is no
longer required. The company’s associated expenses are now much more predictable. The need to look
through paper statements to find discrepancies has been totally eliminated.
Channel partners of the company’s clients are happier because of increased accuracy of and visibility to
compensation data.
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The company recognizes that it has attracted more business as a result of having TrueComp Enterprise as a
critical component in its technology infrastructure. The company feels it offers its clients the most advanced
technology and the best business solutions, which has led to a stronger reputation for the company.
In summary, the company’s investment in TrueComp Enterprise has brought the following areas of financial
payback, enabling the company to reach break-even in its investment within the first year of deployment:
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Customer Case 3: Financial Services Company
Company Profile
This financial services firm – the third company case - with over
“We justified that the company
5,000 employees and $2.5 billion in annual revenue computes
could rollout corporate strategies
compensation for 3,500 payees across 50 incentive plans. The
quicker with a compensation
company performs between 1.4 million to 3.4 million compensation
automation system. We forecasted
transactions per month, totaling over $75 million in annual incentive
a financial savings of $900,000
payments. The company’s goal was to reward its people well,
annually – which was not only
accurately and quickly. Compensation plans needed to be tied back
realized – but exceeded.”
to strategy.
Assist. VP Field Compensation
The company deployed TrueComp Enterprise in January 2003. Financial Group
Pain Points
This company had four critical reasons for investing in an EIM solution:
1. More flexibility in supporting compensation plan changes that supported the corporate strategy.
The compensation modification process, considered a process bottleneck, needed to be
streamlined to ensure quicker time to market with new products.
2. Wrestling with the time consuming logistics of complex charge backs, the company needed to
address cost structure issues. The company needed to lower unit costs and use less expensive,
more efficient processes that would reduce headcount and increase operational efficiency.
3. Needed to eliminate paper reporting and replace with an internet-based reporting system. The
paper processes were cumbersome, expensive and were a competitive disadvantage.
4. The company’s system migration plan was to proactively move away from legacy and mainframe
systems with the goal to eventually retire them. The desire was to slow mainframe growth.
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■ Underlying EIM solution’s technology was a fit into the company’s corporate architecture/
infrastructure.
■ Vendor had strong, comprehensive project methodology for customization, installation and
deployment of the EIM solution.
ROI Profile
ROI Analysis
Due to TrueComp Enterprise’s strong online reporting capabilities, the company saved $303,400 annually.
This savings was derived from the reduction of one administrative person to manage report production, plus
80% recovery of costs from printing, and 100% recovery of costs from shipping, microfilming and archival
storage.
In addition, TrueComp Enterprise enabled the company to perform the compensation management function
more efficiently. As the result, 1 business/finance position and 1 IT position were eliminated, bringing a total
savings of $265,000. Major compensation plan changes that required new data feeds and new structures,
used to take 6 months to implement; after TrueComp Enterprise deployment, such changes now take
only 6-8 weeks. Similarly, minor changes that use to take 2-4 months now take 2-4 hours. This represents
more than an order of magnitude improvement in IT response time. As the result the company feels the
organization is much more agile and nimble.
The annual costs of the company’s former incentive management solution annual costs of ownership
were high at $1,950,000, in comparison to the TrueComp Solution at $890,000 – an annual savings of
$1,060,000.
Another important metric for the company is system availability and predictability. The company promised to
have daily reports published at precise timeframes for the business; the company now has achieved a 98.8%
on-time track record using TrueComp Enterprise.
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In summary, TrueComp Enterprise has helped the company achieve the following:
■ Replace a slow and costly reporting process with a real-time, online view for all payees.
■ Decrease the compensation management cost to serve the product line, thereby making the
solution group more profitable.
■ Improved reporting and general efficiency of compensation system.
■ Reduced operational costs.
■ Redeploy staff to new business opportunities and initiatives that, prior to TrueComp Enterprise
deployment, the company did not have resources to apply.
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About Callidus Software
Founded in 1996, Callidus Software (www.CallidusSoftware.com) is the leading Enterprise Incentive
Management (EIM) provider to global companies across multiple industries. Callidus’ EIM systems allow
enterprises to develop and manage incentive compensation linked to the achievement of strategic
business objectives. Through its TrueComp® Grid architecture, Callidus delivers the industry’s only EIM
solution that combines the power and scalability of grid computing with the flexibility of a rules-based
interface. Customers/Partners include AOL Time Warner Corporation, AT&T Wireless, BMC Software, CUNA
Mutual, DIRECTV, Dun & Bradstreet, IBM, JPMorgan Chase & Co., Pennzoil-Quaker State Company, SBC
Communications and Sun Microsystems. Callidus is publicly traded on the NASDAQ under the symbol CALD.
© 1998-2006 Callidus Software Inc. All rights reserved. Callidus Software, the Callidus Software logo, Callidus TrueAnalytics,
TrueChannel, TrueComp, TrueComp Datamart, TrueComp Grid, TrueComp Manager, TrueInformation, TrueIntegration, TruePerformance,
TrueReferral, TrueResolution, TrueService and TrueSupport are trademarks of Callidus Software Inc. in the United States and other
countries. All other brand, service or product names are trademarks or registered trademarks of their respective companies or owners.
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