Callidus Software Inc. All Rights Reserved.

Module 5: Compensation Plans Confidential & Proprietary Information 5 - 5 Compensation Rule Process Flow Example: The above diagram shows the process flow of the Compensation Rules. There are fo ur transactions each with a specific value and two Position Assignments, PA-A an d PA-B, who need to be processes. After the Transactions have gone through a Val idate and Classify process (this will be discussed in further detail in a later module), they are filtered and assigned to the correct Position Assignment. This is done in the Credit Rule. Next, the credits are aggregated and the sum amount is taken in the Measurement Rule. The Incentive Rule then performs the math and calculates the earnings using the measurement multiplied against a commission r ate (in this example). Finally, the Payment Terms are identified in the Deposit Rule. In summary, a Compensation Plan is a collection of Compensation Rules that deter mine: The transactions or other credits for which a Position Assignment receives credit (Credit Rule) How to aggregate the credits (Measurement Rule) How to cal culate the incentive earnings (Incentive Rule) When and What amount is available for payment (Deposit Rule) Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 6 Student Lab 1: Review a compensation plan In this exercise, students will review a compensation plan for a position assign ment. 1. Locate a specific plan for a given Participant Click on the Organization tab in the Control Panel. Click on the Participant icon. Enter Holmberg in the Search box above the Related pane and click the Go button. 2. Find the Position related to this specific Participant With the Participant Scott Holmberg highlighted, click on Positions in the Relat ed pane. List the Position Name and Title for Scott Holmberg: ________________________________ Please continue to the next page. Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 7 3. Find the Plan related to this Position With the Position Sales Rep North East highlighted, click on Plans in the Related Pane. Note: Use the scroll bar if necessary to find Plans in the Related Pane. List the name of the Plan: ___________________________________________ With the Direct Sales Plan highlighted, click on Rules in the Related Pane. Click the header of the Type column to sort the rules from Credit to Deposit Note: This might require clicking more than once to sort them in this order. This concludes the exercise. Please stop here. Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 8 Topic 3: Credit Rules A Credit Rule identifies the credits on which a plan operates and allocates them to the correct Position Assignments. Credit Rules determine: Which Position Assignment should receive credits for a s ale Whether transactions should be further refined and filtered The Value of the transaction to use The type of credit the transaction becomes There are two types of Credits Rules. Direct Credit Rules: Position Assignment receives the credit directly from the t ransaction. A direct credit occurs when the Position Assignment receives the cre dit directly from the transaction. Direct credits can be allocated based on Terr itory filtering or External Credit Allocation, where the transaction is pre-assi gned to the appropriate Position Assignment. Indirect Credit Rules: Position Assignment receives the credit from a Roll Relat ionship, this is also referred to as a rolled credit. An Indirect credit occurs when the Position Assignment receives credit, not directly from the transaction, but from a relationship to another Position Assignment. Indirect credits roll f

rom the Source (the Payee with the direct relationship to the transaction, ie, Sal es Representative) to the Receiver (the Payee who receives the rolled credit, ie, Manager). Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & ProprReview and list the following: What is the purpose of the Measurement Rule? ___________________________________ _ What is the Source of this Measurement Rule? ________________________________ List the filtering condition _______________________________________________ List the value to be summed to create the measurement result amount: ___________ _ What is the Unit Type? ___________________________________________________ This concludes the exercise. Please stop here. Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 13 Topic 5: Incentive Rules An Incentive Rule calculates the earnings for a Position Assignment. Incentive Rules determine: Whether to use Credits, Measurements or other sources as the Input If certain conditions must be met before actions are taken How oft en to calculate earnings If earnings are based on achievement or other factors d efined by the company Which rates, quotas and how much attainment to consider There are two Result Types of Incentives: Incentive Only: Bonus Incentives use a non-Measurement value to calculate an incentive, so the R esult Type is Incentives Only and the Input Source is Other. Below is an example of a Bonus Incentive where $30,000 can be earned if $1,000,0 00 worth of sales is achieved. Although the bonus incentive does use sales (Meas urement) as a condition to determine if the bonus is earned, it does not use tha t Measurement amount as part of the calculation to derive the amount of the bonu s. Basic Incentives use a Measurement value to calculate an incentive, so the Resul t Type is Incentives Only and the Input Source is Measurement Basic Incentives are based on a commission structure where an aggregated measure ment is divided by a quota to derive an achievement. This achievement value may then passed to a Rate Table. The Basic Incentive Rule calculates the incentive a mount by multiplying the rate(s) by the aggregated measurement amount. Aggregate commissions are created using the Incentives Only Result Type. The output of an Incentives Only rule is an incentive record. Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 14 Below is an example of a Basic Incentive where $30,000 can be earned if sales is $1,000,000 at a 3% commission rate. In this example, the amount earned is based on a calculation where the amount of the sale is multiplied by the commission r ate. Therefore, the Measurement plays a direct role in calculating the amount of commission earned. Incentive and Commissions: Per-Credit Incentive: Uses individual credit values for calculation from a speci fic Measurement. Per-Credit Incentives are similar to Basic Incentives in that it also calculates the incentive amount on attainment performance and then can pass that value to a Rate Table. However, the Per-Credit Incentive calculates the incentive amount by multiplying the specified rate by the value of each credit in the specified m easurement not by the total value of the measurement. Below is an example of the difference between a Per-Credit Incentive and Basic I ncentive process: Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 15 Student Lab: Review the Incentive Rules In this exercise, students will review a Commission Incentive Rule and a Bonus I ncentive Rule.

1. Highlight the Incentive Rule named IR_Monthly_Commissions to review the detai ls. Review and list the following: What is the purpose of the Incentive Rule? _____________________________________ __ What is the Result Type? ______________________________________________ Which measurement is being used to calculate incentives? _____________________ Is this a Bonus or Basic Incentive? __________________________________________ What Rule Element is being used to derive rates? ____________________________ What is the period considered for the Attainment to date? ____________________ List the name of the incentive result: _______________________________________ Please continue to the next page. Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 16 2. Highlight the Incentive Rule named IR_Quarterly_Bonus to review the details Review and list the following: What is the Result Type of this rule? _______________________________________ State the filtering condition ________________________________________________ What is the purpose of the filtering condition? ________________________________ _ How often will this rule fire? ______________________________________________ What is the Input Source of this Rule? _________________________________________ __ Which Rule Element is being used to derive the amount of the bonus? ____________ ______ Is this a Basic or Bonus Incentive? ____________________________________________ __ Is there an Input Multiplier to be used against the bonus amount? ______________ ________ This concludes the exercise. Please stop here. Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 17 Topic 6: Deposit Rules A Deposit Rule determines which earning to pay and when. A Deposit Rule does not process until the earning is available for deposit. For example, a Deposit Rule with a Deposit Value from a quarterly incentive does not run until the last month of each quarter. In this case, Compensation Management generates a deposit amount only in the last period of each quarter. If deposits need to be held back for any reason, for example, unpaid customer invoices or m aximum earning policies for a product, it is also possible to hold the deposit f or a specific period of time. Deposit Rules determine: Whether to use Credits or Incentives as the input How m uch of the compensation to deposit for each Position Assignment assigned to the Compensation Plan When to make the deposit In which Earning Group and Earning Co de each deposit should be included There are two sources for Deposit Rules: Incentives: Deposits are based on Incentive, Measurement or Formula calculations . Credits: Deposits are based on credit level calculations, also referred to as a detailed deposit. When creating Deposit Rules, we associate the rules with an Earning Group and Ea rning Code. The Earning Group is used to combine similar types of deposits. Each earning gro up s set of deposits is balanced only against itself, the positive amounts are add ed together and offset by any negative balances within the same earning group. B alances from different earning groups are not affected. Earning Codes are components within earning groups that identify different types of deposits to be passed to payroll, the general ledger, or for other external accountinietary Information 5 - 9 The Reporting Roll Relationship is automatically created between managers and su

bordinates when Positions are associated with a manager. Often, organizations ma y need to compensate people outside the sales reporting structure, for example M arketing Managers or Sales Engineers. Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 10 Student Lab: Review a Credit Rule Highlight the Direct Transaction Credit rule Pre-assigned Revenue Credit to revi ew the details Review and list the following: What is the purpose of the Credit Rule? ______________________________________ What is the purpose of the Territory filter? ___________________________________ __ List the filtering condition ______________________________________________ What is the name for the credit result? ____________________________________ What is the Credit Compensation Management Roadmap Compensation Planslt amount: _________________ This concludes the exercise. Please stop here. Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 11 Topic 4: Measurement Rules A Measurement Rule aggregates values for the Position Assignment. Measurement Rules determine: Which credits and credit values to aggregate (Prima ry Measurement) Which Primary Measurements, Formulas or other values to aggregat e (Secondary Measurement) If credits should be further refined or filtered There are two kinds of Measurements: Primary Measurements Aggregate credits. In a Primary Measurement Rule, Credits a re the input. Primary Measurement Rules sum a Position Assignment s credits for a leaf level. Measuring performance at the Primary level can mean totaling credits by different product lines, types of revenue recognized, counting credits or an y other measurements a company may use to calculate incentives. Secondary Measurements Aggregate Primary Measurements or calculations based on F ormulas. In a Secondary Measurement Rule, sources other than credits are the inp ut. Sources for Secondary Measurements include Primary Measurements, formulas or other calculations. Secondary Measurements can be used to sum two Primary Measu rements that may have totaled credits by different product lines or types of rev enue recognized, thus providing a total measurement value for both. Callidus Software Inc. All Rights Reserved. Module 5: Compensation Plans Confidential & Proprietary Information 5 - 12 Student Lab: Review the Primary Measurement Rule Highlight the Primary Measurement Rule named PMR_Sales_Revenue to review the det ails.