The document summarizes an incentive compensation program at a major Canadian telecommunications company. It discusses setting budget guidelines, including targets, headcounts, and incentive types. It also covers aligning the program to corporate objectives through the use of thresholds, accelerators, decelerators, and other strategies. Justifying the return on investment of the program is mentioned through tracking budget achievement, sales growth, costs, and overall performance.

1. Incentive Compensation as a Finance Function Lori Haughian Lynn Salekin Director – Sales Compensation Senior Sales Incentive Manager TELUS Communications Inc

2. Agenda Introduction Setting Budget Guidelines Alignment to Corporate Objectives Justifying the Return

3. is. . . A leading national telecommunications company in Canada Provide a wide range of wireline and wireless telecommunication products and services Data Internet protocol (IP) Voice Video Entertainment Services In 2006, generated $8.9 billion annual revenue TELUS subscribers include 4.5 million network access lines 5.3 million wireless subscribers 1.1 million Internet subscribers

4. SIM is. . . Human Resources Sales Incentive Management Compensation & Benefits Recruitment … Human Resources Compensation & Benefits Recruitment … Finance Sales Incentive Management Accounts Payable …

5. Setting Budget Guidelines Getting Started Headcounts Inclusive of hierarchies Targets Revenue projections Expected growth Resigning Unit counts Incentive Types Incentive at target Payout per transaction Bonus payments Reward programs Statistical Information External impacts Internal impacts

6. Setting Budget Guidelines Targets Overall target by area Headcount Determine baseline Comparisons Average Target per headcount Compare headcount to revenue expectation 6 5 Support Reps 27 28 Total 18 20 Sales Employees 3 3 Directors 2007 2006 VP Team A $1,000 ($8/125 units) $500 ($5/100 units) Unit Counts Quantified $9,500 $6,500 Total $2,000 $1,000 Expected Growth $6,500 $5,000 Revenue 2007 2006 Targets $167 (21 units) $100 (20 units) Unit Counts Quantified $111 $50 Expected Growth $241 $179 Revenue 2007 2006 Targets to Total Headcount

7. Setting Budget Guidelines Incentive Overall budget by area $426.25 $385 Total $101.25 ($3.75/employee) $105 ($3.75/employee) Bonuses $324 ($12/employee) $280 ($10/employee) Incentive at Target 2007 (27 employees) 2006 (28 employees) Incentive Types

8. Setting Budget Guidelines Overall Target by Area Overall Budget by Area Productivity Costs

9. Setting Budget Guidelines Overall Target by Area Overall Budget by Area Productivity Costs If overall target by area is constant and there is an Increase in headcount If overall budget by area is constant and there is an Increase in overall target

10. Setting Budget Guidelines Identifying the Cost of the Program Per transaction costs FTE costs (administration, management, information system support) Volume of Transactions Processing Costs Overall budget by area Revenue Generated Incentive Paid Payment as a metric of performance

11. Alignment to Corporate Objectives How do you balance costs with wants? Thresholds Accelerators Decelerators Graded Scales Caps Bonuses Guarantees SPIFS

12. Alignment to Corporate Objectives No increase in sales for this product Decelerators Reduce focus on non-strategic products Sales should remain constant or increase Accelerators Increase cross selling and up-selling of products Increased volume of reps achieving higher results Graded Scales Motivates agents to excel & drive new revenue to the channel Increased performance and/or increased churn on under- achievers Threshold Will move under- achievers up or out Expected Outcome Application Corporate Objective

13. Alignment to Corporate Objectives Short term increase in specific sales targeted SPIFS Increase specific sales target for a given period No impact to employee for low sales results Guarantees Appropriate induction of new employees Increased volume of reps achieving annual results Bonuses Drive annual achievement No payments made over cap amount Caps Risk mitigation on revenue assurance Expected Outcome Application Corporate Objective

14. Justifying the Return Overall tracking of ROI Tracking to budget achievement Budget Outlook Actual Budget Sales Team Growth Sales Headcount Processing Costs Overall performance Total payments Total target by area

15. Questions