1. Using Incentive Compensation
  2. Calculate Monthly Bonuses Using Blended Attainment

Calculate Monthly Bonuses Using Blended Attainment

This incentive plan example demonstrates how to create a blended attainment plan component.

Scenario: A sales executive incentive plan provides a monthly product bonus based on weighted revenue attainment. The bonus calculation has these requirements:

  • Attainment for each product line as the total revenue that the executives' salespeople sell each period

  • Bonus as a percentage of the weighted period revenue attainment, using a simple rate table

Here are the key decisions for the plan component in this scenario:

Decision to Consider

In This Example

What is the payout frequency?

Monthly

What type is the calculation?

Interval-based

How many measures do you required and what are their weights?

Two measures, weighted 60 and 40 percent respectively

Are any of these measures linked?

Measures aren't linked

How many rate tables do you require, and how many dimensions for each table?

One rate table, with one dimension

How do you want to apply the rate?

Use a single rate for the entire attainment

Here are the key decisions for performance measures in this scenario:

Decisions to Consider

In This Example

How should the calculations process the transactions?

Grouped by interval

What is the unit of measure?

Amount

What is the performance interval?

Monthly

Does the calculation involve quota?

No

Does the calculation involve a scorecard?

No

Summary of the Tasks

In the Compensation Plans work area, create a plan component by creating the parts first, and then associating them with the plan component.

  1. Create the weighted revenue attainment expression.

  2. Create the bonus rate table.

  3. Create two performance measures with different credit categories, associating the attainment expression in the measure formula for each.

  4. Create the rate dimension input and earnings expressions.

  5. Create the plan component, associating the two performance measures, earnings expression, rate table, and rate dimension input expression that you just created.

Use default values for fields unless the steps specify other values.

Create the Weighted Revenue Attainment Expression

Create an expression that determines the weighted revenue attainment for the period. Both performance measures use the expression in their measure formulas.

  1. Click Create in Manage Expressions.

  2. Name the expression Weighted Revenue Attainment.

  3. In the Configure Expression section, create the weighted revenue attainment expression SUM(Credit.Credit Amount * Measure.Weight).

    1. On the Attributes menu, select Functions > Aggregate Functions > SUM.

    2. Click the left parenthesis (.

    3. On the Attributes menu, select Credit > Credit Amount.

    4. Click the asterisk *.

    5. On the Attributes menu, select Measure > Weight.

    6. Click the right parenthesis ).

  4. Click Save and Close.

  5. Click Done.

Create the Bonus Rate Table

Create a rate table that uses the weighted attainment to find the bonus amount. You associate it with the plan component later.

  1. Click Create in Manage Rate Tables.

  2. Name the table Weighted Attainment Bonus.

  3. In the Type field, select Percent.

  4. On the Rate Dimensions section toolbar, click Create.

    1. Name the dimension Revenue Attainment.

    2. In the Tiers section, add the From and To values for each tier, such as 0 -- 10,000, 10,000 -- 20,000, and 20,000 -- 9,999,999. Make the final To value much larger than you would ever conceivably use.

    3. Click Save and Close to return to the Create Rate Table page

  5. Click Edit Rates.

    1. Edit the rate for each tier, such as 2.5, 4, and 6.

    2. Click Save and Close to return to the Create Rate Table page

  6. Click Save and Close.

  7. Click Done.

Create the Performance Measures

Create two performance measures that use the weighted revenue attainment expression:

  • Determine revenue attainment for the primary product, such as green servers

  • Calculate the sum of the period weighted attainment for both products, such as green servers and ultra power servers

Create the first measure using the guided process and the second one by duplicating the first measure.

  1. Click Create in Manage Performance Measures.

  2. Name the measure Primary Product Revenue.

  3. Enter start and end dates for the year.

  4. Click Next to open the Define Goal page.

    1. In the Target field, enter the goal, such as 120,000.

  5. Click Next to open the Add Credit Categories page.

    1. Add the credit category, such as Green Servers.

      If the credit category doesn't exist, then click Create to create it and add it to the measure.

  6. Click Next to open the Define Measure Formula page.

    1. In the Process Transactions field, select Grouped by interval.

    2. In the Expression Name field, search for and select the expression that calculates the sum of the weighted revenue period attainment, Weighted Revenue Attainment.

  7. Click Save and Close to return to the Manage Performance Measures page.

  8. Create the second performance measure.

    1. Search for and select the primary product measure that you just created, Primary Product Revenue.

    2. On the Search Results section toolbar, click Duplicate.

    3. Edit the name and display name. Name it Second Product Revenue.

    4. In the Goal section, edit the target to 200,000.

    5. Select the Credit Categories tab.

    6. Delete the existing credit category.

    7. Add the secondary credit category, such as Ultra Power Servers.

    8. Click Save and Close.

  9. Click Done.

Create the Rate Dimension Input and Earnings Expressions

Create two expressions shown in this table.

Type of Expression

Purpose

Rate Dimension Input

Calculate the sum of the weighted period revenue attainment, for both products

Earnings

Calculate the bonus amount using weighted attainment and the rate table associated with the plan component

  1. Click Create in Manage Expressions.

  2. Name it Revenue Attainment for Products.

  3. In the Configure Expression section, create the rate dimension expression Measure result.Primary Product Revenue.ITD Output Achieved + Measure result.Second Product Revenue.ITD Output Achieved and the earnings expression (Measure result.Primary Product Revenue.ITD Output Achieved + Measure result.Second Product Revenue.ITD Output Achieved) * RTR.

    Rate Dimension Input

    1. Name the expression Primary and Second Attainment.

    2. On the User Defined Objects menu, select Measure result.

    3. Search for and select the measure that determines revenue attainment for the primary product, Primary Product Revenue.

    4. Select ITD Output Achieved.

    5. Click Add to Expression.

    6. Click plus +.

    7. Search for and select the measure that calculates the sum of the weighted period revenue attainment, for the second product, Second Product Revenue.

    8. Select ITD Output Achieved.

    9. Click Add to Expression.

    10. Click Save and Create Another.

    Earnings

    1. Name it Weighted Attainment Bonus.

    2. Click the left parenthesis (.

    3. On the User Defined Objects menu, select Measure result.

    4. Search for and select the measure that determines revenue attainment for the primary product, Primary Product Revenue.

    5. Select ITD Output Achieved.

    6. Click Add to Expression.

    7. Click plus +.

    8. Search for and select the measure that calculates the sum of the weighted period revenue attainment, for the second product, Second Product Revenue.

    9. Select ITD Output Achieved.

    10. Click Add to Expression.

    11. Click the right parenthesis ).

    12. Click the asterisk *.

    13. For Attributes, select Rate Table Rate.

  4. Click Save and Close to return to the Manage Expressions page.

Create the Plan Component

Create a bonus plan component that calculates period earnings using weighted attainment.

  1. Click Create in Manage Plan Components.

  2. Name it Weighted Attainment Bonus.

  3. In the Calculate Incentive field, select Per interval.

  4. In the Incentive Type field, select Bonus.

  5. Enter start and end dates for the year.

  6. Click Next to open the Define Performance Measure page

    1. Add the performance measures that you created, as shown in this table.

      Measure

      Weight Percentage

      Earning Basis

      Primary Product Revenue

      60

      Yes

      Second Product Revenue

      40

      Yes

  7. Click Next to open the Define Incentive Formula page.

    1. In the Expression Name field, search for and select the earnings expression that calculates the bonus payment, Weighted Attainment Bonus.

  8. Click Next to open the Add Rate Table page.

    1. Complete the fields in the Rate Table Parameters section. This table lists field names and their respective values.

      Field

      Value

      Number of Dimensions

      1

      Split Attainment Across Tiers

      Yes

      Split Option

      Fixed within a tier

    2. In the Rate Table section, add a row.

    3. In the Name field, search for and select the rate table that uses the weighted attainment to find the bonus amount, Weighted Attainment Bonus.

    4. In the Rate Dimensional Inputs section Expression Name field, search for and select the expression that calculates the sum of the weighted period revenue attainment. Primary and Second Attainment.

  9. Click Save and Close to return to the Manage Plan Components page.

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