Money Changes Everything
Banks, like any other business, have to sell products and services to make a profit, be they savings accounts, lines of credit, or mortgages. Personnel typically receive a commission for referring business to the right officer, or for closing the deal themselves. During the wave of mergers that broke over the financial services industry in the early 2000s, banks were faced with the sudden need to unify their already complex and individualized compensation programs.
Wachovia was acquired by First Union in April 2001, with the combined entities taking the Wachovia name. Terry Gilbert, vice president and manager of Wachovia's salary and incentive management department, was tasked with integrating the original Wachovia program with First Union's Nomad, a 20-year-old spreadsheet incentive system that had been tweaked to perform compensation functions as well. "It was doing a job it wasn't designed for, needed lots of manual intervention, and only one person in the company understood how it all worked," Gilbert says. "It was little more than a big, 20-year-old calculator."
A rickety, poorly understood application is a recipe for internal disaster, to say nothing of Sarbanes-Oxley compliance failure. Gilbert started looking for a new system. "We narrowed the search down from about 20 vendors to a short list of five by spring 2003." After more trials, Wachovia decided on Callidus Software and its TrueComp application. The implementation was supposed to go live in June 2004, running parallel with Nomad for three months.
At least, that was the plan. After a problem-free development cycle, Wachovia experienced a sudden shock upon turning off Nomad and using the new system (called SOLD) full-time. "We turned it on but it didn't work," Gilbert says. After much head scratching, the team eventually figured out the issue--miscommunication of terms.
"We were using different definitions for the concept of transaction," says Callidus CFO Ron Fior. "Wachovia's definition of a transaction is a deposit hitting the system; Callidus TrueComp considers that, plus every time the deposit moves in the system to touch anybody's incentive folder." As a result, the bank had underestimated the infrastructure needed, and had to spend another $150,000 for five more servers.
After solving the error in scale, the new SOLD system became the mainstay of the entire organization. It virtually eliminated the roughly 5 percent error rate in commission calculations, representing about $7.5 million a year almost entirely at the bank's expense. Loan production at legacy Wachovia branches has risen 450 percent since the merger, from a quarterly average of $499,000 per branch to $2.3 million. The bank's overall customer satisfaction scores have risen from a low of 5.59 in 1999, on a scale of 1 to 7, to 6.57.
TrueComp's TrueAnalytics modeling capabilities have also given Gilbert a way to match strategy against corporate goals. He might think that increasing teller incentives from $25 per new account signing to $35 would be the best strategy to motivate sales of a million new checking accounts, but now he can use historical data to simulate whether increasing incentives for customer satisfaction ratings will have a bigger impact. "I don't need to guess," Gilbert says. "I can now go back to management with a game plan that I can feel confident [about]."
By switching from a homebrew system to Callidus TrueComp, Wachovia:
saved $7.5 million annually by eliminating compensation errors;
increased loan production 450 percent;
raised customer satisfaction scores 17.5 percent; and
improved cost controls and reporting for Sarbanes-Oxley compliance.