Example of Goals Matrix and Performance Score Calculation

This example illustrates a sample goal matrix with five rows showing threshold, target, and stretch amounts.

The sample matrix shows these elements:

• Five performance levels ranging from 80 percent to 120 percent (for the threshold, target, and stretch levels).

• Three goals for measuring performance.

• Weight percentages for each goal (the total goal weight is 100 percent).

• The performance values to be attained for each goal at each performance level.

  Note:

  The contribution margin is usually expressed as a percentage. The plan administrator has indicated that a contribution margin of 12 percent is the lowest value that the organization needs to reach to qualify for a reward. However, 16 percent is the ideal target.

  You do not have to express performance values as percentages. Note that the customer satisfaction performance value is a flat amount because it is measured by scores on a survey.

• The actual goal attainment value expressed in the same measure (percent or flat amount) as the performance value for each goal.

• The score that the system has calculated for each goal and the total performance score.

Calculation of the Performance Score

The formula for calculating the performance score is:

Goal Weight × Performance Level of the Attainment Value

In the example, the attainment value for on-time service accuracy is 92 percent. The 92 percent performance value falls at the 100 percent performance level. So the performance score calculation for on-time service accuracy is:

40% × 100% = 40

The attainment value for the contribution margin is 18 percent. The 18 percent performance value falls at the 110 percent performance level. So the performance score calculation for the contribution margin is:

35% × 110% = 39

The attainment value for customer satisfaction is 85. The performance value of 85 falls at the 90 percent performance level. So the performance score calculation for customer satisfaction is:

25% × 90% = 23

The total performance score is the sum of the scores for all three goals:

40 + 39 + 23 = 102

Note:

If the attainment value falls between two performance levels, the system interpolates the performance level. For example, if the attainment value for on-time service accuracy is 91 percent, the system interpolates the performance level to be 95 percent. The 95 percent value is the midpoint between the performance levels at 90 percent and 100 percent, which corresponds to the performance values of 90 percent and 92 percent, respectively.

Determination of the Payout Formula

You set up a payout schedule that associates payout formulas with ranges of total scores. The system evaluates only the scores that are equal to or higher than the threshold when it assigns payout formulas.

Here is an example of a payout schedule:

Range	Payout Formula
80–90	3% of quarterly base pay
90–100	5% of quarterly base pay
100–110	7% of quarterly base pay
110–120	10% of quarterly base pay
120	15% of quarterly base pay

In this example, the total performance score of 102 falls in the range of 100–109, so the payout formula is 7 percent of quarterly base pay. The Calculate Awards process uses the payout formula when it calculates the award.