Switching to a new system for tracking incentive payments in its general bank helped Wachovia Corp. to identify inefficiencies in its business environment.
For instance, the company found that 5% to 15% of incentive payments previously were disbursed in error, according to Terrance Gilbert, a vice president who heads Wachovia's compensation infrastructure and incentive management departments.
These were "errors that couldn't be found, because the system didn't have the rigor to find them," Mr. Gilbert said. Simply by reducing the error rate to the bottom of that range, the company would cover the cost of its new system within the first year, he said.
The new system also eased the integration of new branches after the Charlotte banking company acquired SouthTrust Corp. of Birmingham, Ala., in November.
"It created an efficiency that we weren't expecting at the time," Mr. Gilbert said, and allowed Wachovia to quickly integrate SouthTrust's branch operations with its own programs.
He said the next step is to put Wachovia's mortgage lending operation on the system, which the company licensed from Callidus Software Inc. of San Jose. Though that group has only 3,000 to 5,000 employees, it has roughly 30 of its own incentive plans, which will probably double the number of transactions on the system.
Mr. Gilbert said Wachovia began using the new system last summer after an evaluation that had begun in 2002.
"This was not a bumpless ride, nor would it ever be," he said.
Another inefficiency Wachovia discovered: Its structure was more complex than executives had realized, with overlapping hierarchies organized around both product lines and geography.
"We had a hierarchy that we had not identified. We underestimated it," Mr. Gilbert said. "We learned a lot about us through this process."
Wachovia, the product of a series of bank mergers, began in the fall of 2002 to look for an incentive-pay system to replace a homegrown application that the former First Union Corp. had rigged years earlier to track and pay the incentive bonuses.
"It was never intended to be an incentive management system at all," Mr. Gilbert said.
The problem became more acute after First Union bought Wachovia in September 2001 and took its name. The old Wachovia relied on spreadsheets to track those payments, Mr. Gilbert said. After the merger, executives considered developing their own incentive system, and reviewed products from 10 vendors before selecting Callidus' TrueComp incentive management software.
The system automated the tracking of referrals and payments in the general bank. It also has an economic modeling function for managing a collection of more than 30 incentive compensation programs for more than 25,000 payees, mostly tellers and the hierarchy above them in the retail bank.
In this "heavily networked sales structure," a system must track not only a teller's referrals, but also those from the financial specialists who close the sales, branch managers and their assistants, and higher-ranking executives, Mr. Gilbert said.
Wachovia shut off the old system Sept. 1 after running the two in tandem for several months.
"We are producing payroll," Mr. Gilbert said. "There was a lot of uneasiness and skepticism. One thing about the old system, it always made payroll."
