A successful incentive for Wachovia bank

When Wachovia decided to introduce specialised incentive management software into its retail banking arm, it had a deadline of just over a year to implement a new application suite for paying commission and bonuses.

When Wachovia decided to introduce specialised incentive management software into its retail banking arm, it had a deadline of just over a year to implement a new application suite for paying commission and bonuses.

“Incentive management software is more than a nice-to-have. We need to have it or otherwise it would be pretty difficult to pay 30,000-plus people every month and it would be hard to integrate new companies if a merger or acquisition takes place,” says Terry Gilbert, vice president and manager of Wachovia Corp’s salary and incentive management department.

Wachovia Corp, which is based in North Carolina, was formed from the merger of Wachovia and First Union Banks in September 2001. It is the fourth largest bank holding company in the US with assets of $553.6bn and comprises four core businesses – retail banking, capital management, wealth management, and corporate and investment banking. The organisation employs 97,000 staff to cater to the needs of 13.4 million household and business customers.

The decision to introduce specialised incentive management software into Wachovia’s retail banking arm was taken following the 2001 merger because neither of the separate entities’ existing systems was up to the job of dealing with the increased workload.

Gilbert explains: “The merger presented us with two models from an incentive management perspective. First Union was using a 20-year old platform that wasn’t designed for managing internal payments and Wachovia was using spreadsheets and masses of people. But when you put the two businesses together, volumes increased to such an extent that it exceeded the capabilities of either system so we had to come up with an alternative.”

The organisation had a deadline of just over a year to implement a new application suite for paying commission and bonuses as it had to be in place by the time the last local branch was integrated. The project was initiated and sponsored by the head of the retail bank and a steering committee was set up. This included a project manager and representatives from the IT department and human resources.

But it was quickly decided that such a system could potentially be used in other areas of the business and so responsibility for the project was passed to Gilbert, who manages a team of 30 within the HR department looking after salary allocations and incentive payments.

“We were definitely in a situation where we had to do something and that’s typically when change takes place the quickest. But the cost of this project was sufficient that it required a lot of reviewing and signing off from myself and others in the business. We looked at our requirements, put a business case together and a project plan and all that took a couple of months in itself,” Gilbert explains.

Nonetheless, he believes that getting the project plan right is one of the key success factors in an initiative of this type. “It’s very important to develop, implement and follow up your project plan because every day something comes up. It’s a never-ending story and my best advice is that anything that can go wrong will because it’s the nature of the beast, so you have to plan for it,” he advises.

The next step involved finding a packaged software supplier and saw the bank sending out a request for information to which 12 suppliers replied. It shortlisted five of these to respond to a request for proposal and after evaluating both products and suppliers using a scorecard system, the organisation selected Callidus Software and its TrueComp offering.

A key challenge that it faced when implementing the packages, however, involved customising them to fit its own particular multi-layered internal sales management hierarchy. This includes not only a traditional staff/line manager reporting structure, but also another based on geographical sales territories, and yet another based on product types.

“Our situation is pretty normal for a large retail bank, but it’s more complex than that of a lot of organisations because the incentive structure is not the same as the reporting hierarchy,” Gilbert explains.

“This meant that we had to do quite a lot of customisation. But to do that, you have to step back and evaluate the hierarchy of the system in relation to the business’s hierarchy and work out the delta that you’re going to have to deal with so it’s quite involved.”

This process took Wachovia a couple of months, which was significantly longer than had been first envisaged. But a second, equally important issue that likewise had to be addressed related to change management.

“Prior to turning on the system, you have to have a sub-project plan in place for communications and training. It’s important to identify what people need to know and provide them with that information before you turn the system on. You can’t turn it on bit by bit so you have to get it right from the start or people won’t accept it,” Gilbert says.

As a result, it was necessary to provide training in parallel with the introduction of the new applications to the seven staff that would be using them to process the 2.75 million transactions each month arising from more than 30 different compensation schemes.

“One of the clear and stark differences for my staff was that they had to learn a whole new system, adjust to a new routine of writing plans and check results in a different way. So it took time for them to adjust and get used to the new ways of working,” Gilbert says.

But training also had to be given to the 25,000 sales staff that were putting incentive payment data into the system in the first place and the 5,000 managers that now had access via a portal to real-time web-based reports for the first time.

“You have to manage people’s expectations. The reports didn’t look exactly the same so we had to let people know that in advance. Even minor changes require giving people the opportunity to look, absorb and accept because if it’s not what they expect to see, you’re likely to get 5,000 phone calls. And we didn’t have enough people to deal with that,” explains Gilbert.

The initiative took 16 months from conception to deployment, but the new system was run in parallel with the old ones for two months. “The biggest risk we faced was that we’d bring the platform up and it wouldn’t work. So we ran the new system in parallel with existing processes until we were satisfied that the results we were getting were close enough to those that we’d been getting previously,” Gilbert says.

In terms of what its incentive management applications have delivered to date, however, Wachovia has already seen a return on investment and been in a position to keep staff numbers stable.

“At Wachovia, we were paying $170m in incentives with a 2% to 3% error rate because with any spreadsheet system, there’s a degree of error. But the new system has more than offset that because its error rate is pretty non-existent and if there is a consistent error, it’s much easier to pinpoint and fix,” Gilbert says.

He also indicates that the new applications have boosted staff productivity. “We now have about seven people working on incentives, but before the merger, we used to have the same number doing less than half the amount of work. So the system has really saved us money – there’s no doubt about that,” Gilbert says.

Another key advantage is the fact that because all of the data is held in one database, it makes it much easier to track payments through the system and audit such activity. The system also speeds up the processing of incentives as it automatically calculates payments that in the past would have had to be undertaken manually.

“A big benefit is the regulatory adherence that a platform like this provides. It’s got all sorts of built-in rules that ensure compliance with current legislation, which is very important in today’s climate,” says Gilbert.

While the applications are now operational in most areas of Wachovia’s retail arm, some commercial sections such as mortgages that have not yet made the move are expected to do so over the next 12 to 18 months.

As Gilbert concludes: “There’s no mandate for other parts of the business to migrate, but people are continually looking to automate what they’re doing to save money. So the desire to drive cost out of the business encourages people to take a more fervent look at the tools available to them, and this is one of them.”


What is incentive management software?

Incentive management applications automate the process of managing, assigning and validating incentive payments such as sales commission and staff bonuses. Such systems provide a single underlying database for holding sales information, while the applications themselves can be configured to handle a range of potential compensation plans based on this data.

Business intelligence tools can also be used against the database to pick out sales trends. This enables managers to adjust or create new incentive schemes as necessary, for example, in order to boost sales activity around a given product line.

Most systems also include report-writing tools to generate sales and incentive-based information relating to individuals or teams so that managers can monitor results and outcomes against key performance indicators.

Read more on IT project management