Michael Graves on Why the Spreadsheet Must Die

Michael Graves on Why the Spreadsheet Must Die G. Gschwandtner: Hi, my name is Gerhard Gschwandtner and welcome to Selling Power TV. Today, we have the pleasure of continuing our conversation with Michael Graves, chief technology officer of Callidus Software, welcome. Michael Graves: Thank you Gerhard. G. Gschwandtner: Michael, can you explain the history of compensation management. What does it looked like if maybe in the 20’s? Michael Graves: In the 20’s, for the most part is actually is just paper. And basically, they have degree in major paper and simple connection statements. G. Gschwandtner: And a plumb bob. Michael Graves: Angular, absolutely so I think it’s very commissioned flurry arms are very tied to volume for example. So if the number of units is sold sort of commission right and often times there was actually a portion to screen major paper. G. Gschwandtner: That was a simple world then. Michael Graves: It was, yes. G. Gschwandtner: And when did Excel take over. Michael Graves: Well, I think it starts ago really in the early 90’s and in fact and I think Excel really was a tool that really help enable sales manager to come up with a more creative compensation plans and also be able to automate that to some extent, Excel as well as Access databases. So early in the 90’s, it’s really about the Excel’s spreadsheet. G. Gschwandtner: And when did the next revolution takes place? Michael Graves: Yeah, so in terms of just enterprise class package software for incentive management that role was early on in this decade around 2000 and 2001. They started to see the rise of package software applications and these are software applications that combine all the flexibility that you can get with Excel but also brought that into like kind of a well-defined domain and that you could use to adjust territory scores and account plans. G. Gschwandtner: And it allows you to modeling as well. Michael Graves: Absolutely, so these programs allow to define a territory, as your core, as your account plans but also too large to find for --is there a help you take through a planning process that you can figure out so for example if you do change your territory or if you do an quota or if you do change your commissions rights for example and help you understand what the impact would be relative to your cost and to your sales organization. G. Gschwandtner: So what would you estimate percentage wise, how many sales organizations have over 50 sales people actually still using spreadsheets? Michael Graves: Easily 90% so our experience has been that 89% of companies still used Excel spreadsheets, Access databases to process commissions. G. Gschwandtner: What’s wrong with that picture? Michael Graves: Well, the problem is we have Excel spreadsheets in the Access databases is that it’s really impossible to understand what you're paying to your sales reps, to pay them accurately and to pay them timely. And also back to our early discussions on sales 2.0, it’s really hard to be agile. G. Gschwandtner: So what about the mistakes that people make when they have to reconcile spreadsheets from six different territories or countries and for hundreds of sales people? Michael Graves: And that’s a situation where you have manual systems, there is a notion that shadow accounting where each sales rep keeps track of their own set of transactions and look out for their own commission right which is a lost of time. But there are also some good statistics around the actual area and I really get to understand that sales reps if they’re underpaid you're absolutely sure to get emails and complaints for underpayment. They often complaint about overpayments and so a typical sales commission system on a manual basically is 7% or 8% inaccurate and so for some of the largest companies it paid billions and billions of dollars of commissions, they can be many tens or $20 millions worth of commissions. They’re really inaccurately paid. G. Gschwandtner: How come that 90% of all companies are still using the Excel spreadsheet? Michael Graves: There is couple of aspects. One aspect is that there is this mission of technology adoption brief and we’re definitely seen the leaders right now in their adoption process where we do expect that the rest of the group of companies will follow on. But also it’s just a notion so if you run your commission system the same way for us in years it can be very destructive to try to change that. So the question is going to be what’s the value of being able to pay accurately. What’s the value of being more responsive and adaptive in the sales 2.0 typical of sales management process and is by proposition enough to take you to the hurdle to change the system? G. Gschwandtner: Do people worry about the jobs that if you're automated they may have to cut a couple of positions in the payroll department. Michael Graves: Absolutely and you’ve seen some of our customers they’ve had 200 people actually just focus on sales commissioning and if they implement our system then it’s like 10 or 20 have to move so it’s a pretty dramatic cut on the administrative side in terms of managing the systems. G. Gschwandtner: Well, thank you Michael. We will continue our conversation with Michael Graves tomorrow where we talk about web differentiates, Callidus software in the marketplace.