Xactly CEO says transparency crucial to avoiding problems
“THE IDEA THAT COMPENSATION SHOULD BE CHANGED ONLY ONCE A YEAR IS SO PASSÉ.” Software could have helped Wells Fargo, National Guard avoid high-profile mistakes and update pay practices
SAN JOSE — When it comes to high-profile missteps centered around compensation, 2016 was a big year.
There was the Wells Fargo scandal, in which employees secretly opened up to 2 million unauthorized accounts — funding many with customer money — in order to meet sales quotas. There was the Pentagon demanding that soldiers repay bonuses they received after re-enlisting to fight in Iraq and Afghanistan. And there was the late-October revelation that money managers at Harvard University collected tens of millions in bonuses by exceeding investment goals — while the school’s endowment fund languished.
Christopher Cabrera, the chief executive and founder of San Jose-based Xactly, is quick to say he doesn’t want to point fingers at any specific group’s difficulties. But he believes Xactly could have prescribed remedies to bring those organization’s compensation practices into the 21st century — and help avoid the negative headlines they endured.
In a wide-ranging chat with this newspaper, Cabrera talked about current events, employee compensation, executive pay and San Jose’s fast-changing downtown. This interview has been edited for clarity and length. Q How would you describe the mission statement of Xactly? A Broadly speaking, we’re in the compensation space with our software. Our mission is to help companies drive bet-
ter behavior from their sales teams through different kinds of compensation. Q How is your technology playing out for you as a company? A The compensation space is alive and well and doing fantastically for us. We took the company public last June, and we have had a great experience in the public market. The stock is up strongly since the IPO. We have had five quarters of accelerating growth. The market is responding favorably to what we sell. Q What were the problems with compensation in the past? A One of the problems in the compensation process before Xactly was companies dumbed down their compensation plans and created these one-sizefits-all plans that are very archaic. It was only annual compensation and done through spread sheets. But those were riddled with errors and failed to embrace the individual. Q How does your software help companies tailor compensation packages to specific employees? A We individualize compensation. We allow a customization that wasn’t available before. We allow plans to be changed frequently and rapidly. The idea that compensation should be changed only once a year is so passé. Everyone is at a total disadvantage under that approach. Q How flexible is your software? A Now you can change your compensation plans at the drop at a hat. It’s that nimbleness and the ability to customize compensation that is super important. Q What are examples of compensation and incentive plans that have gone wrong? A One that was in the news recently had to do with the National Guard. The Guard needed more people to sign up for duty, and they created a bonus of $15,000. That got those people to come back and do another tour of duty. Q How did the National Guard situation go wrong? A Where it fell down and became this complete disaster is there was no transparency. No one was keeping track of who should and should not get those bonuses. Crooked individuals were giving bonuses to the wrong people, who should not have gotten them. Many bonuses went to people who were not deserving. Q What are your thoughts about the Wells Fargo bogus accounts scandal? A The problem at Wells Fargo, in my opinion, was more of an epidemic of poor culture that was worse than any software system. Q Would your software have prevented the Wells Fargo problems? A We could have helped them, for sure. But our system is not a panacea. If you have a culture where thousands of people are in kind of a conspiracy with each other to thwart the system and do things that are illegal, no software and no system in the world can prevent that. You don’t want to make it seem like you are picking on people. But if they had been using Xactly, we could have addressed parts of the problem there. Q What are some basic ways you would have been able to help Wells? A With our software, they could have had a more appropriate design for their bonuses. They would have been able to more properly analyze how to design those bonuses. Q But was the real problem the culture at Wells Fargo? A The problems at Wells Fargo resulted from a systemic cultural breakdown that started at the top and began with leadership and management. Everyone thought those sales practices were the norm. It was like getting to Lake Tahoe from the Bay Area in three hours by cheating. This was a problem that extended across thousands and thousands of employees. This was a culture going awry and management going awry. Q What do you think about how Wells responded to the problems? A Their immediate reaction was to remove all sales quotas. But that’s not going to fix anything. It’s like saying it was the compensation that caused the behavior. But that’s asinine. It wasn’t that. It was the lack of transparency, the lack of leadership, the lack of checking into what was going on.