Inconsistent Administration of Sales Commissions Project Status October 23, 2003 Norcross, GA

2 AGENDA n Overview of the Project n Timeline n Investigation & Discovery n Next Steps n Questions & Discussion

3 Project Definition n Problem Statement: Inconsistent administration of sales commissions is affecting sales professionals’ morale and wasting IKON dollars in the administration of the sales commission "errors". The Phoenix CCC has consistently reported that over 40% of the sales commissions are reported “incorrect” each month. n Project Definition: This project is to reduce the need to pre-audit or post-audit 100% of the sales commission payments. The objective is to random pull commission sheets looking at about 33% of payments from a post-audited stand.

4 Project Definition n Project Benefits: Of the 29 Phoenix commission employees, 9 employees perform a 100% audit on approximately 3500 commission payments per month. A soft benefit is improving sales professionals’ satisfaction. n Financial Benefits: A reduction of headcount from 9 to 3 will result in a headcount savings of $256,320. ($42,720/head * 6 people) n Project Metric “Y”: Y 1 = Incorrect Commission Payment Requests Defined by a percentage (%) of Incorrect Commission Payment Worksheets divided by the Total Number of Worksheets received.

5 AGENDA Timeline

6 Jul AugSepOctNovDecJan TRAINING TEAM Selection – Setup Data Investigation C&E Matrix, FMEA DATA COLLECTION GAGE R & R SURVEY – Website (VOC) Tempe CCCMacon SSC Not valid unless taken after 10/1/03 in Macon Scheduled Tempe 1. New Comp Plan 2. New Staff 3. New Process

7 AGENDA Investigation & Discovery Week 1

8 FLOW CHART Sales Commission DATA POINT 1

9 Data Point 1 3,025 deals in the month

10 Where are the errors? 920 deals in the month

11 Where is the best practice?

12 Washington State Marketplace n Initially thought to be “best practice” with only 12.7% of the deals needing to be reworked. n Investigation has uncovered that a vast majority of the deals are Deal Type – “State and local government deals (SLG)” with set pricing. n Errors are kept to a minimum because there is little room for misinterpretation of pricing. n Commission Analysts and Auditors agree that Washington State deals are fairly straight forward.

13 FOCUS - FY03 Commission Worksheet NEW FOCUS

14 Flow Chart Sales Commission Detailed DATA POINT 2

15 Commission Audit Codes

16 Causal Code Analysis X

17 AGENDA Investigation & Discovery Week 2

18 FMEA Pareto

19 C & E Matrix Pareto It’s all about People and Policies !

20 AGENDA Investigation & Discovery Week 3

21 EVALUATING TRAINING 1. REACTION -How well the Reps react to a particular “training” program like Sales Comp Rollout or Core 2 & 3 2. LEARNING -Understand the specifics of the learning taking place like Core 2 Standard and Core 2 NE Modified 3. BEHAVIOR -Evaluate the training in terms of on-the-job behavior 4. RESULTS -Objectives of the Training as measured in terms of desired results such as “less commission sheets errors”.

22 SURVEY EXAMPLE - Reaction

23 SURVEY RESULTS - Western Response rate: 38%n = 276 Question 7: Understand Compensation Plan Y % N 6.52 % Question 9: More Training Needed Y % N % Question 10: Understand Commission Worksheet Y % N %

24 TRAINING STATS - Learning 217 Reps Trained 739 Possible reps 29%

25 TRAINING STATS - Learning 275 Reps Trained 634 Possible reps 43%

26 CORE 2 DOE – Behavior Prior to Six Sigma, a training experiment was underway in the Northeast Region versus the rest of the company. Based on the data provided to me, I have made the following observations about Core 2 training between Western Region and Northeast Region during Fiscal Year  50% of the sales professionals that attended CORE 2 training consisted of new hires, 1-6 weeks tenured, and mostly ASRs who all did not know their compensation plan.  About 25% had not seen their compensation plan when they attended the class.  Historical data shows that in Core 2 training, role play paperwork had 21 of 23 deals NOT billable. Once Core 2 training was modified per the NE model, the statistic had 3 of 12 sales professionals with deals that were NOT billable.  Achieved increase from 9% to 75% on a billable deal success rate.

27 CORE 2 DOE – Behavior (Cont’d)  Training the sales professional is not enough to achieve a higher success rate.  Sales Managers in the NE Region co-facilitate Core 2 training one week per year. Managers have a challenge in doing the Standard Forms Package. Questions that sales professionals ask their Sales Manager are often referred back to the Trainer.  Reinforcement and a consistent knowledgeable source is needed. We recommend the hiring of a dedicated person, “The Commission’s Trainer” in each Region who will be available to the marketplaces to make sure that answers are provided timely and consistently.

28 Recommended Changes* 1.Centralize the operation to Macon Shared Service Center and split the function process into 2 - Audit and Payment. 2.Modify Core 2 training after NE Model relative to the SFP, Leasing, and pricing information as well as adding activities to make sure that the sales professionals can manually price a deal that will be billable. 3.Hire a "Compensation Trainer" in each Region - Function will be to work on training new hires in the Sales Commission Analyst function and also serve as a dispatchable person for high error Marketplaces identified each month by the SSC. 4.Standardize the commission exception policy with signature approval levels 5.Reduce the number of Commission Sheet Audit Codes to reflect those actually used with the new FY’04 Compensation Plan 6.Design Commission Reporting on ikon.org for Sales Professionals to know what revenue/GP level they are on a YTD basis and to see what deals have been entered into the SCS for payment on a daily basis. * Subject to data validation of expected training results

29 NEXT STEPS n ANALYZE n TRAINING n Survey Data on Sales Compensation Rollout - REACTION n Track the number of sales professionals in Western Region versus Northeast Region on Core 2 & 3 in Fiscal Year 2003 – LEARNING n COMPENSATION PLAN INTERPRETATION n Understand Core 2 “Standard” versus Core 2 “NE Modified” and its impact on commission errors by specific Sales Professional - BEHAVIOR n IMPROVE n TRAINING n Adopt Core 2 “NE Modified” Training specific to the Commission Worksheet n Hire dedicated Commission Trainers in the CCCs to be dispatched for high error Marketplaces n COMPENSATION PLAN INTERPRETATION n Establish operating tolerances and signature approvals n Confirm process and validate improvements - RESULTS

30 CONCLUSION Questions & Discussion