Incentive compensation management for a sales network ...€¦ · Incentive compensation management...

banking, insurance & capital marketsIncentive compensation management for a sales network

Comarch Commission & Incentive

Banking, Insurance & Capital Markets

Introduction

Within the last few years financial institutions in emerging

markets have changed their approach to sales forces and

methods of client acquisition. New distribution channels

based on active sales are being opened. Insurance agents,

network intermediaries and brokers have extended their

insurance offers to credit and investment products. At

the same time, incentive systems for exclusive sales

representatives and employees are being developed. This is

related to new, previously unknown challenges. Comarch’s

response is the Comarch Commission & Incentive solution,

an IT system which lets financial institutions create unique

commission & incentive programs and automate the

financial settlements resulting from them.


2


Creation of new commission and incentive programs Strong market competition and the appearance of

alternative sales channels have forced an intensive

search for new ways to activate a company’s exclusive

sales network. Simultaneously growth in the computation

potential of computers has made it possible to create

advanced programs with complex mathematical

expressions for remuneration calculation and sales

network motivation. The current market situation has

outdated classical remuneration models that were

based on the percentage of sales, as they only provide

motivation to maximize sales, and did not emphasize

the quality and profitability of the acquired client

portfolios.

The poor quality of client portfolios causes a significant

amount of loss to be incurred by the financial institution.

As a result, it is necessary to create new commission

programs, which will reward sales staff who create

profitable, stable and high quality client portfolios.

Drawing from the experience of insurance companies’

who have been rewarding their agents for low loss ratios

in their client portfolios has turned out to be very helpful

for banks.

Financial institutions have developed their own individual

remuneration models. However, each one required the

implementation of new, often complicated commission

algorithms. Innovative ideas for commission & incentive

programs, which enable optimally remunerating a sales

network, require the use of an IT solution that will handle

complex algorithms for the granting of remuneration.

The Comarch Commission & Incentive System is based

on a multidimensional model of commission calculation

and is currently using over two hundred calculation

functions. It adjusts perfectly to the contemporary needs

of financial institutions as well as to the current emphasis

put on active sales network development.

Adjusting sales force cooperationCreating coherent compensation procedures is a

serious challenge for all sales force channels. Another

is calculation, settlement automation and correction

processes after the introduction of a new, complex

compensation program. Fast delivery of valid information

- for the management of sales networks as well as for

intermediaries - has become an increasingly important

requirement. As it turns out, basic production systems

that have been applied so far were in most cases not able

to deal with these challenges. Once again this is a place for

the Comarch’s system, which includes the informational

and operational portal for sales and managers as well

as analytics and cooperating intermediaries.

Challenges and opportunities

The Comarch Commission & Incentive system makes

it possible to quickly design and implement one’s own

innovative incentive compensation programs.

3


Rationalization of sales force management • Integration of information concerning the sales force

and sales figures in one place

• One coherent compensation program for the entire

distribution network

• Ability to link remuneration with achievement of sales

and quality goals

• Ability to test the new commission algorithms on

historical data

• Flexibility in modeling the structure of a sales

network

• Management of sales network trainings.

Business benefits for the sales support team• Automating settling activities

• Centralization of settlement services

• Adjusted control and verification of sales data

• Reduction in the number of incorrect settlements and

the incidents of abuse in a sales network

• Uniform distribution of settlement tasks during the

calendar month.

Business benefits for sales staff• Increased motivation as a result of access to current

sales data (clients, products), achievement of sales

goals and money earned

• Simplification of commission settlements by enabling

on-line:

• Verification and acceptance of a detailed commis-

sion statement

• Assigning of an individual number and the ability

to printout automatically prepared commission

invoices (on behalf of a seller).

Business benefits for sales managers:• Coordination of retail sales actions in a company

• Current access to efficiency and sales figure reports

• Access to the overall results of subordinate teams

• Context information about individual members of the

team.

• Possibility for continuous development and optimiza-

tion of a commission & incentive program.

Business and operational benefits

The aim of Comarch Commission & Incentive system

implementation is the achievement of substantial

improvements in customer business processes related

to managing and motivating a sales force which leads

to the constant improvement of client portfolio quality

and business yield.

4


The general business assumptions, which are common

for the majority of European financial institutions, have

been considered in Comarch Commission & Incentive.

They use extensive sales networks based on agents

and financial intermediaries. Configuration of commis-

sion & incentive programs are done according to these

assumptions.

Sales and goal achievement analysisOn a daily basis, the system gathers and analyzes business

data collected from single or multiple data sources like

production systems, data warehouses and batch files

from cooperating institutions (leasing companies, open

pension funds, investment fund companies, brokers).

This data includes information about the acquisition of

new clients and sale activities as well as the set of events

related to financial products sold earlier. Information

about the sales force, intermediaries and managers are

also transferred together with them. Data corrections

are also collected. Based on this information, realization

of sales goals for individual sales representatives as well

as entire structures can be calculated. The data and the

calculations are instantly accessible for managers and

the sales staff.

Commission and point calculationIn the next step, all direct sales commissions and

override commissions are calculated according to valid

algorithms applicable to the particular time period.

Additionally, bonuses for sales staff and override

bonuses for managers, depending on total sales or sold

products activities, are calculated for the determined

time interval (ex. month, quarter). Other important

system functionalities are the calculation of flat rate

remuneration and the reimbursement of agency costs, as

well as all the possible corrections of previously settled

commission. Based on the analogous algorithms the

system also evaluates the number of gathered points

for each employee, which can be a factor for additional

bonus remuneration.

Acceptance of calculated commissions Calculated remunerations can be subordinate to the

acceptance process, which for any beneficiary can be

either one-step or multistage, depending on the accu-

mulated value of remuneration in the department. La-

ter, all accepted commissions are transferred into deta-

iled commission reports, which are accessible for sales

as well as managers. If necessary, the beneficiaries can

delay the term of invoicing.

Acceptance of commission invoicesCommissions with a payment date consistent with a

current settlement period are aggregated according

to type and create the locus for a centrally generated

commission invoice. The process of acceptance and

invoice numbering is conducted by its issuer. In addition,

it is possible to report any complaint about settlement

details before acceptance.

Remuneration settlementThe accepted invoice is automatically posted into

the accounting system and a transfer order is made.

Simultaneously the issuer of the invoice prints it from the

system, signs it, and sends it to the financial institution.

The transfer order is sent to the system responsible for

the realization of transfers. When the confirmations of

transfers have been received, it immediately signals

that the invoice payments and closing an account is

possible.

Main business processes

dAtA IMpoRt

AnAlySIS CAlCulAtIon ACCeptAnCe SettleMent

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The Comarch Commission & Incentive System is based

on three main modules:

• Management of sales network structures

• Management of sales and quality goals

• Defining of the commission - incentive remuneration

models.

Components responsible for data import, mass calculation

operations, commission acceptance processes or

remuneration settlements can also be distinguished in

the system. For user authorization and authentication

processes, the system uses built-in or external tools

(Active Directory, eDirectory) as well as analytic tools

(Business Objects, Jasper Reports) for creating reports. The

system’s browser based functionality is accessible both for

headquarter employees and can also operate in dispersed

locations as well as for external intermediaries.

Standard integration • Internal data sources: production systems and data

warehouse

• Collecting information about clients, products

sold and their subsequent activities

• Aggregated data concerning the sale

• Calculating the profitability of individual products

or clients

• Exterior data sources: batch files (flat, XML, XLS)

• Information about product sales from cooperating

financial institutions

• Finance and accounting systems

• Inputting remunerations and deductions to ap-

propriate cost accounts

• Banking systems

• Generation of transfer orders and bank statement

reconciliation.

System functionality

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CoMARCH CoMMISSIon & InCentIVe System

Functional diagram of the Comarch Commission & Incentive System

AdMInIStRAtIon

SAleS netWoRK

CoMMISSIon

& poIntS

CAlCulAtIon

CoMMISSIon SettleMentS

InVoICeSpoStInGS

ReIMBuRSe-MentS

SAleS & QuAlIty

GoAlS

InCentIVe CoMpenSAtIon

pRoGRAMS

NETWORK STRUCTURES

NEW CUSTOMERS

COMMISSIONPOSTINGS

PRODUCT INCOME

NEW CUSTOMERS

NEW PRODUCTS

ACCRUAL COSTPOSTINGS

CUSTOMERINCOME

NEW PRODUCTS

PRODUCTEVENTS

DEDUCTIONS

DATAAGGREGATES

PRODUCTEVENTS

CALCULATEDCOMMISSION

SALES GOALS ACHIEVEMENTS

CALCULATEDSALARY

COMMISSION RULES & RATES

BONUSES& POINTS

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Sales network management Sales network structuresThis module gathers necessary data about all sales

network units (sales representatives, intermediaries,

employees, managers), which might become commission

beneficiaries. In addition, information about distribution

channel structures are stored (teams, departments,

regions, macro regions, etc.). In order to operate the

complicated commission models, structure information

along with the dates of any changes is stored. Additionally,

a flat register exists for all units. This contains complete

information about their character and cooperation

history, signed agreements and annexes, as well as

commission tables attached to agreements and assigned

sales goals.

Information exchange with supervising authoritiesDepending on the local country’s regulations, the sys-

tem may be delivered with a dedicated interface for the

local Financial Supervision Authority. Such entity may

require data about insurance company agents, bank ad-

visors and employees of other financial institutions. If

the supervising authority provides no automated inter-

face, the system supports paper communication, auto-

matically generating the appropriate forms (based on

templates). As a result, processes of information exchan-

ge with supervising authorities’ proceeds expertly even

while managing a vast agent network.

Sales data repository This module is a complete aggregation of sales data

that includes all necessary business data for calculat-

ing commissions, either due or forecasted as well as

bonuses and points.

Clients, products and eventsThe data concerns clients, their products, as well as cur-

rent information about events related to these products.

In the case of a credit, the initial data involves: assigned

limits, margins, client commission, currency spread and

later events are gathered such as: disbursement of the

first credit payment, the sum of disbursed payments,

credit installment repayment. Possible events for oth-

er products are: credit card transactions, disbursement

of the insurance premium installment, calculating man-

agement fees and investment fund payments. Event

storage enables creating a remuneration policy based

on activity and actual product profitability.

Sales force and managersInformation regarding the name of the sales representative

(such as agents, employees, intermediaries, contact

referrals and managers) and their network structure (such

as internal channel - branch, external - intermediary) is

stored for each product. In the case of products sold where

commission is settled over the long-term, additional

information about all beneficiary changes is stored.

Agents registration Agents assigned to the product

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Commission and incentive remuneration programsA key functionality of the system covers the area of the

comprehensive management of company commission

and incentive programs. Its components are remuneration

programs, rules and commission rates. Each rate is com-

posed of logical and mathematical expressions, similar in

concept to the construction of Microsoft Excel formulas.

Remuneration rulesThe module contains a set of remuneration rules that are a

mathematical notation of the contract signing activity of

each salesman or manager. For each segment and group

of the sales force (agents, intermediaries, managers and

others) one or more remuneration program table can be

defi ned. Such a program is then automatically valid for all

members of the particular sales group. If any additional

specifi c rules are created, members of the sub-groups in-

herit the general rules from their base group. It is also pos-

sible to defi ne individual rules for specifi c salesman.

Commission ratesCommission rates can be expressed as an amount, a per-

centage of a given base or calculated using a mathematical

expression. The rate can result in either monetary remuner-

ation or point calculation. Points may be later used for the

calculation of bonuses or for company loyalty programs.

Each rule defi ned in the system has a specifi c commission

type (e.g. “Indirect commission for cash credit sales”), which

determines the automated method of cost settlement (one-

off, linear, EIR – effective interest rate) and the number of the

cost account on which this commission is booked.

Commission rate selection expressions Selection expressions are used for the defi nition of

commission rules with many possible rates or in the

case of initial conditions that must be fulfi lled in order

to grant this type of commission (e.g. minimum of 50%

sales goal achievement). Each expression, which was

called upon during the daily calculation process returns

a “YES” or “NO” value, this determines if the algorithm

should begin calculating a commission for a particular

event or not.

Commission rate calculation expressions If the selection expression for a specifi c rate was successful,

remuneration and point calculations follow. A built-in ex-

pression editor allows creating and validating a free-form

algorithm according to methodology that is well known for

Microsoft Excel users. The variables in the calculation expres-

sion can refer to product parameters and events as well as

to the achievement of sales goals. The available functions

can access all data regarding sales volume in terms of time,

sales structure and product type. This truly fl exible tool in

the hand of trained business users gives unlimited possibil-

ities for the creation of inventive compensation rules.

System functionality

Elements of an extensive commission and incentive system

QuAlIty

oF WoRK

GAIned

poIntS

ACHIeVInG

tARGetS

CoMMISSIon RenuMeRAtIon

SAleS

ReSultS

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Goal-driven motivationGoal-driven motivation is the key element of sales for-

ce management. The corresponding module provides

functionality for creating and adjusting the annual sa-

les & quality plan, which is composed of a set of goals.

Each sales force group may have a different set of goals

to achieve. Overall performance or specific goal achie-

vement may significantly affect the remuneration paid

to sales staff. Goals can be created in terms of:

• distribution channels (the sales network, branches,

minibanks)

• types of sales network structures (department, mul-

tiregional, regional, team)

• market potential (agents from the capital market,

agents from the agglomerations market, agents from

small towns)

• career stages for a sales representative (junior agents,

agents, expert agents)

• individual sales representatives (representatives with

very high sales performance or those with temporarily

poor results).

Quality goals are based on the comparison of two or

more objectives or ratios (such as the acceptance level

of credit applications, bad credit ratio, insurance loss

ratio, etc.)

Sales goals can relate to the acquisition of new clients,

sales of selected product lines (mortgage loans, auto

insurance) or particular products types (mortgage loans,

motor casco insurance). It is specified which event (e.g.

disbursement of the first credit payment) causes an

increase in the particular goal achievement level.

Sample configuration of commission rules• The level of monthly basic salary depending on the

achievement of sales goals

• Calculation of remuneration or points based on:

• Only those credit cards which are used by clients

• Value of the disbursed credit payment

• Value of new capital in the case of revolving credit

• Value of charged client fees

• Factual profitability of a given product or

customer

• Achievement of monthly or accumulated sales and

quality goals

• Number of points gained within the selected time

period.

The list of individual commissions Details of calculated commission

9


Information portal for a sales force and managersThe information portal is a supplement to the

commission settlement portal. This CMS solution

(Content Management System) allows easy distribution

of news, articles, documents, trainings, calculators and

marketing folders amongst specific sales groups. Portal

can be available both in an intranet and extranet.

Sales network trainingsThe system supports the organization of sales trainings,

including basic information about the training,

invitations for participants, distribution of training

materials and setting the grading criteria. Trainings can

be voluntary or mandatory for particular sales groups.

After the training, the system allows for registration

and analysis of test results and the settlement of costs.

Grades obtained by agents from the final training tests

can be used in commission & incentive algorithms. The

module stores information about the subjects and places

of the training, a list of available trainers and participant

grading criteria.

e-mail and SMS communication with salesThis functionality allows distribution of information

within a company’s sales network via additional

communication channels. Instead of checking the

Commission & Incentive portal daily, the agent may be

informed via SMS or e-mail about current performance

and the aggregated amount of earned or forecasted

remuneration. The module may also inform sales about

important events, such as upcoming trainings or an

invoice acceptance deadline.

Vacation and sick leave for agentsThis functionality supports agents applying for vacation

or reporting sick leave which can result in the temporary

suspension of his or her duties described in their

contract. This information helps managers coordinate

overlapping vacations inside their sales teams so that

sales performance stability is guaranteed. Information

about lost working days may be used in the compensation

program to reduce a monthly sales goal. This is a very

useful feature when an agent’s salary depends directly

on his or her monthly sales performance.

System extensions

List of commissions invoices Documents register

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Comarch’s solutions for the fi nancial market are service-

oriented, based on high-quality components and are

capable of being managed through workfl ow. The system

architecture is based on coarse-grained integration and

communication.

technical architecture The concept for the technical architecture is based on

Oracle database. Thanks to this solution, all data is cen-

tralized and stored in one place, where it can be acces-

sed by any authorized user (agent, fi nancial advisor,

dealer, his/her employee). All business users (branch

employees as well as mobile and external workers) use

the system via Internet browser.

logical architecture In order to provide a high level of modularity, scalability,

flexibility and easy integration with other systems,

service oriented architecture (SOA) has been chosen.

For implementation of SOA, Comarch decided to use tools

based on Java, Spring Framework, Hibernate and Oracle

technology. By applying this platform, the system has not

only gained the ability to integrate with many different

technologies (EJB, TopLink, Java Classes, WebServices,

Portlets, Struts, JSF, JSP), but also the possibility to install

it on all application servers supporting J2EE standards.

logical multi-layered architecture:

• Presentation layer: Java Server Faces

• Business logic layer: Spring Framework

• Data access layer: Hibernate

• Data layer: Oracle.

The Comarch Commission System’s architectural scheme

Head office

pdA user

Mobile user

Branch user

100 Mbit lAn

WeB Server Firewall

J2ee Application server

Head offi ce user

oracle 9i/10g database server

Administratorother systems

https

Architecture

11

www.finance.comarch.comwww.comarch.com www.comarch.pl www.comarch.de www.comarch.ru

Comarch Inc.

10 W 35th Street

Chicago, IL 60616

United States

phone: +1 800 786 4408

fax: +1 800 684 5916

e-mail: [email protected]

Comarch Software AG

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01187 Dresden

Germany

phone: +49 351 3201 3200

fax: +49 351 438 97 10


Comarch ooo

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119034 Moscow

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phone: +7 495 783 36 71

poland

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uAe Dubai

ukraine Kiev, Lviv

uSA Chicago, Miami

ComArch Spółka Akcyjna with its registered seat in Kraków at Aleja Jana Pawła II 39A, entered in the National Court Register kept by the District Court for Kraków-Śródmieście in Kraków, the 11th Commercial Division of the National Court Register under no. KRS 000057567. The share capital amounts to 7,960,596.00 zł. The share capital was fully paid, NIP 677-00-65-406

Copyright © Comarch 2008. All Rights Reserved. No part of this document may be reproduced in any form without the prior written consent of Comarch. Comarch reserves the right to revise this document and to make changes in the content from time to time without notice. Comarch may make improvements and/or changes to the product(s) and/or programs described in this document any time. The trademarks and service marks of Comarch are the exclusive property of Comarch, and may not be used without permission. All other marks are the property of their respective owners.

Comarch is a leading Central European IT business solutions provider

specializing in forging business relationships that maximize customer

profitability while optimizing business and operational processes. Comarch’s

primary advantage lies in the vast domain of knowledge accumulated in

and applied to our software products. These products incorporate highly

sophisticated IT solutions for businesses in all vertical sectors. Comarch has

a multinational network of offices employing over 2800 highly-experienced

IT specialists in Europe, the Middle East and the Americas.

en-2008.07

Comarch Headquarters

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Poland

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