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Incentive Compensation Measures and Rules

Rules and performance measures are used to calculate compensation on a compensation plan.

Performance Measures

Each rule has a performance measure which indicates the type of performance that employees must achieve to receive an incentive. Siebel Incentive Compensation includes several predefined performance measures. Table 7 lists the predefined performance measures by category. For information on creating customized performance measures, see Configuring Incentive Compensation.

For more information, see the following sections:

• Performance Measures for Commissions or Bonus-Sales Results
• Subjective Performance Measures for Bonus-Other Results
• Performance Measure 2
• Cumulative Performance Measures

Performance Measures for Commissions or Bonus-Sales Results

This section explains sales or order-based performance measures for Commissions or Bonus-Sales Results rules.

Revenue. The revenue amount generated by an order. For example, you might create a commission that pays based on the revenue amount on the order.

Cumulative Revenue. Pays for revenue accumulation over time—evaluated for each deal. The rate is determined by an accumulation of revenue to date.

Units. The number of product units or service units sold. For example, you might create a bonus for selling a certain quantity of products for a quarter.

% Quota. The percentage achievement against a target number. Many plans often compensate employees for achieving the quota. For example, you might give sales representatives a quota target of closing $1,000,000 of revenue for the year. If they achieve that goal, they receive a bonus.

Cumulative % Quota. The cumulative percentage of quota is determined by an accumulation of revenue to date. The rate is determined by the total of the deals to date rather than the amount of the current deal.

% Margin. The percentage of margin earned on a product or service. Organizations can pay employees a bonus for having high margins on the products they sell.

% Discount. The percentage of discount given for line items on an order. To encourage smaller discounts, an organization might pay a bonus to an employee for having a low discount on an order.

Subjective Performance Measures for Bonus-Other Results

This section explains subjective performance measures for Bonus-Other Results rules. Bonus-Other Results rules do not have to be subjective; for example, leads.

MBO. The score received on a management-by-objective measure. Employees might be given one or more objectives to accomplish during a time period. A manager might assign an employee a score based on the employee's performance toward those objectives. Bonuses can be set up to pay an employee for achieving a certain score.

KSO. The score received on a key sales objective measure. Employees might be given one or more sales objectives to accomplish during a time period. A manager might assign an employee a score based on the employee's performance toward those key sales objectives. Bonuses can be set up to pay an employee for achieving a certain score.

Customer satisfaction. The score received on a customer satisfaction measure. Many organizations take customer satisfaction surveys to determine the satisfaction and loyalty of their customers. These scores are often associated with the employee who works closely with them. Bonuses can be set up to pay an employee for achieving a certain customer satisfaction score.

Time available. A bonus is based on the amount of time spent on the telephone as a percentage of total time available. Bonuses can be set up to pay an employee for achieving a certain score.

Leads. A bonus for generating qualified leads. Bonuses can be set up to pay an employee for achieving a certain number of leads.

Service level. A bonus for achieving a monthly service level for incoming calls. The percentage of calls answered in a certain time period is the monthly service level. Bonuses can be set up to pay call center managers for achieving a certain percentage.

Performance Measure 2

You can have a second performance measure for your plan rule, known as Performance Measure 2 in Siebel Incentive Compensation.

When two performance measures are specified, an implied AND exists. For example, if Performance Measure 1 is Revenue and Performance Measure 2 is % Discount, then the definition could be read as shown in Table 8.

NOTE:  Bonus-Other Results rule types cannot have a second performance measure.

For example, Performance Measure 2 is used when you create matrices. In this example you have a matrix in which the compensation of a given order is determined both by the Revenue and the % Discount, as shown in Table 9.

The information appears in Siebel Incentive Compensation as Performance Measure 1 and Performance Measure 2; the first measure is Revenue and the second measure is % Discount.

Cumulative Performance Measures

Cumulative performance measures, such as Cumulative Revenue and Cumulative % Quota, allow compensation calculations on accumulated revenue or % Quota Attainment. You can accumulate revenue or quota within a period, or over a number of periods. To accumulate over more than one period, you must define the cumulative measure period for calculation runs that are not year-to-date. For more information on year-to-date calculation runs, see Incentive Compensation Calculations.

For example, assume the commission rule of the Geographic Sales Rep Plan pays commission based on cumulative revenue, as shown in Table 10.

Table 11 illustrates how the revenue is accumulated and how the compensation is calculated using accumulated revenue.

NOTE:  The order in which revenue is accumulated is important because it can make a difference in the payout. The order is determined by Plan Date and time.

A compensation plan can be created with an incentive rule that has a performance measure of Cumulative % Quota. For example, the bonus rule of the Geographic Sales Representative Plan pays compensation based on cumulative quota attainment, as shown in Table 12. The quota target amount for this plan is $100,000 and target incentive is $10,000.

Table 13 illustrates how the revenue is accumulated and how the compensation is calculated.

NOTE:  These examples show compensation as percentage of target incentive. You can also use more complex formulas in the Rate Calculation field to calculate compensation.

Rates and Rate Tables

Siebel Incentive Compensation rate tables are preconfigured to calculate payout based on a percentage of a deal, a dollar amount, or a target incentive amount. However, you can also calculate payout using your own formulas. This section explains how rates and rate tables are used in Siebel Incentive Compensation.

Simple and Tiered Rate Tables

There are two types of rate tables, simple and tiered. Simple rate tables pay out an amount corresponding to the row of the table that matches the amount of the performance measure. Tiered rate tables pay out an amount that is a function both of the row of the table in which the revenue falls and of all previous rows. Specifically, a tiered rate table pays out the maximum amount that the previous rows yield, plus an amount corresponding to the excess of the attained value over the lower range of the attained row.

The rate table in Table 14 illustrates a typical scenario. Assume that you have closed a deal worth $180,000. The row of the table in which this revenue falls is the second row, with a low value of $150,000, a high value of $200,000, and a corresponding payout rate of 2%.

Using a simple table, 2% is paid on the entire $180,000 (yielding $3,600 commission for this $180,000 deal).

Using a tiered table, 1% is paid on the first $150,000 and 2% is paid on the remaining $30,000 (yielding $1,500 + $600 = $2,100 commission). The tiered table payout is the maximum amount of the first row (1% * $150,000 = $1,500), plus the incremental amount of the attained value of the deal, over the lower range of the attained row (2% * $30,000 = $600).

It is possible to create a negative rate table when calculating compensation for negative orders, such as when making adjustments. For example:

-1000 to 0: pay -$500

This type of rate table processes negative orders and calculates compensation accordingly.

Types of Rates

The type of rate you can apply depends on the rule type chosen for the plan rule, as shown in Table 15. The types of rates are:

• Dollar amount. A dollar amount payout is a reward for a performance measure attained based on a dollar amount, such as $1,000. For example, on a $150,000 deal, you receive $1,000.
• % Deal. A %Deal payout is a reward for a performance measure attained based on a percentage of the revenue on a deal—for example, 1%. In this case, you receive 1% of the deal revenue on a $150,000 deal which results in commission of $1,500.
• Percentage of target incentive. A percentage target incentive is a reward for meeting a bonus criterion—for example, 80%. For meeting 90% of quota, you receive 80% of the target incentive. The target incentive amount is defined in the Plan Participants view and may vary by employee.
• Rate Calculation. If you are calculating payout using your own formulas, use the Rate Calculation field to create those formulas.
• Recognition Award. A recognition award is a nonmonetary award consisting of items such as trips, plaques, merchandise based on points earned, or other prizes.

If your rule type is Commission, you can pay either a dollar amount, %Deal payout, a rate calculation, a recognition award, or a combination of the four.

As Table 15 shows, if your rule type is Bonus-Sales Results or Bonus-Other Results, you can pay either a dollar amount, a percentage of the target incentive amount, a rate calculation, a recognition award, or a combination of the four.

Credit Allocation and Nonaggregated Rules

In the following scenario, the commission rule of the Geographic Sales Representative Plan pays out 5% of every deal sold.

Geographic sales representatives Terry Smythe and Keith Beale collaborate to close a deal for $100,000. The credit allocation for the deal is split equally between the representatives.

Compensation for the deal is calculated at 5% of the deal amount, or $5,000, as the total commission on the deal. However, because the commission is split between the representatives, each receives 50% of the total commission (Smythe receives $2,500 and Beale receives $2,500).

There could be an additional member on the sales team, such as a product specialist, whose credit allocation may be 100%. However, because product specialist is associated with another compensation plan, the specialist receives 100% of the compensation for this deal.

The credit allocation on a deal does not have to equal 100%. However, it often equals 100% for the same type of sales representative on a deal (in this instance, Smythe and Beale in geographic sales).

Credit Allocation and Aggregated Rules

For an aggregated rule, the payment is made on an aggregate of deals for a time period (for example, when the salesperson receives a bonus on the deals closed for the month). The bonus rule of the Geographic Sales Representative Plan pays a bonus based on monthly, aggregated revenue, as shown in Table 16.

In this example, geographic sales representatives Terry Smythe and Keith Beale are working together to close a deal for $100,000. The credit allocation on the deal is split equally—50% for each representative.

The deal is included as part of the monthly total for both Smythe and Beale. Therefore, the credit allocation is used to determine how much of the deal should be credited to each representative. Because each receives a 50% credit allocation, Smythe receives credit for $50,000 and Beale receives credit for $50,000.

If this is the only deal that Smythe and Beale close this month, then each representative is paid $1,000.

Separate Values for Commission Credit Allocation% and Quota Credit Allocation%

In many sales situations, several people working together as a team are responsible for closing a deal. When a number of people are assigned to a particular deal, you must determine how much credit each person receives for closing the deal. In the case of splits, you might divide the commission among the members of the sales team (for example, each geographic representative on the deal gets 50% of the total commission on the deal). If you double the commission, then everyone on the sales team receives either a partial or full credit for the deal (that is, each geographic representative on the deal receives 100% of the total commission on the deal).

Either Commission Credit Allocation% or Quota Credit Allocation% can be used to calculate commissions. For example, suppose a $1 million deal is closed. You would use the full $1 million revenue to calculate Commission Allocation. However, there might also be an award toward which the revenue is credited, and the award only counts 50% of the revenue. In this case, $500,000 would go into the Quota Credit Allocation.

You can use Siebel Assignment Manager to make certain that the employees are assigned to the appropriate opportunities. You can also use the Sales Credit Assignment view to verify that employees are assigned to the right orders. For more information about Siebel Assignment Manager, see Siebel Assignment Manager Administration Guide.

For each member on the sales team, you can determine the correct credit allocation on the deal. This credit allocation is applied when compensation is calculated.

Set the credit allocation in the Transaction Workbook in either the Sales Team field or Transaction Team field.

NOTE:  Orders can be imported from either the Order Sales Team or from Order Sales Credit Assignments. You can change the positions listed on the sales team and adjust credit allocations.