Calculate Quarterly Earnings Using Measure Formula Output as a Hurdle

This example demonstrates how to create a plan component that calculates quarterly incentive compensation earnings for license sales using the output of one performance measure as a hurdle. Participants must meet the objectives of the measure acting as the hurdle to receive compensation.

Calculate the incentive as a dollar amount. This calculation is based on the quarterly license attainment of participants against their goals
Provide an accelerated rate for participants when they help a services group to close deals

Also, participants must meet these goals:

Meet annual goals for service revenue before the incentive rate increases
Meet or surpass 75 percent of their service target incentives (quotas) for the interval (quarter)

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

Decision to Consider	In This Example
What is the payout frequency?	Quarter
What type is the calculation?	Interval-based
How many measures do you require and what are their weights?	Two measures, weight of 100 percent for the license measure
Are any of these measures linked?	One measure is a hurdle
How many rate tables do you require, and how many dimensions for each table?	One rate table, with two dimensions
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 application process the transaction?	Group by interval
What is the unit of measure?	Percent
What is the performance interval?	Quarter
Does the calculation involve quota?	Yes
Does the calculation involve a scorecard?	No

Summary of the Tasks to Create the Plan Component

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

Create the quota attainment expression.
Create the quota attainment rate table.
Create the two performance measures, one for the license attainment and one for the service attainment hurdle, associating the attainment expression in the measure formula for each.
Create two rate dimension input expressions and one earnings expression.
Create the plan component, associating the earnings expression, the rate table, and the rate dimension input expressions that you created earlier.

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

Create the Quota Attainment Expression

Create an expression to calculate the interval quota attainment, which both performance measures use in their measure formulas.

Click Create in Manage Expressions.
Name the expression Quarterly Quota Attainment.
In the Configure Expression section, create the expression SUM(Credit.Credit Amount / Measure.Interval Target).
1. For Attributes, click Functions > Aggregate Functions > SUM.
2. Click the left parenthesis (.
3. For Attributes, click Credit > Credit Amount.
4. Click the slash /.
5. For Attributes, click Measure > Interval Target.
6. Click the right parenthesis ).
Click Save and Close to return to the Manage Expressions page.
Click Done.

Create the Rate Table

Create a rate table that uses quota attainment to find the rate to apply when calculating commission earnings. You associate it with the plan component that you create later.

Click Create in Manage Rate Tables.
Name the table Quota Attainment Earnings.
Create two rate dimensions that determine the percentage rate for the provided license and service quota attainments, respectively.
1. On the Rate Dimensions section toolbar, click Create.
  1. Name one dimension License Quota Attainment.
  2. In the Type field, select Percent.
  3. In the Tiers section, add the From and To values for each tier, such as:
    - 0 -- 30, 30 --50, 50 -- 75, 75 -- 100, and 100 -- 9,999 for license quota attainment
    - 0 -- 75 and 75 -- 999 for service quota attainment
    Tip: Make the final To value much larger than you would ever conceivably use.
  4. Click Save and Create Another to create the second rate dimension, named Service Quota Attainment.
    
    Click Save and Close after creating the second rate dimension to return to the Create Rate Table page.
2. If both dimensions aren't in the Rate Dimensions region, then add the missing one.
3. Click Edit Rates.
  1. Edit the rates for the intersections of the tiers, such as:
    - 1,000, 1,200, 1,500, 2,000, and 3,000 for tier 1 of dimension 2
    - 1,200, 1,500, 2,000, 3,000, and 5,000 for tier 2 of dimension 2, and so on
  2. Click Save and Close to return to the Create Rate Table page.
Click Save and Close to return to the Manage Rate Tables page.

Create the Performance Measures

Create two performance measures:

One that uses the attainment expression created earlier to determine the license interval attainment
One that determines the service interval attainment and functions as a hurdle to higher rates

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

Click Create in Manage Performance Measures.
Name the measure License Interval Attainment.
In the Performance Interval field, select Quarter.
In the Unit of Measure field, select Percent.
Enter start and end dates for the year.
Click Next to open the Define Goal page.
1. In the Target field, enter the goal, such as 100,000.
2. Manually distribute the target numbers if they aren't identical from quarter to quarter. Otherwise, click Distribute Evenly.
Click Next to open the Add Credit Categories page.
1. Add the product license credit category.
  
  If the credit category doesn't exist, then click Create to create it and add it to the measure.
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 interval quota attainment, Quarterly Quota Attainment.
Click Save and Close to return to the Manage Performance Measures page.
Create the second performance measure:
1. Search for and select the license measure that you just created, License Interval Attainment.
2. On the Search Results section toolbar, click Duplicate.
3. Edit the name, display name, and description. Name it Service Interval Attainment.
4. Save your changes.
5. In the Goal tab, edit the target.
6. Click the Credit Categories tab.
7. Delete the existing license credit category.
8. Add the service credit category.
9. Click Save and Close to return to the Manage Performance Measures page.
Click Done.

Create the Rate Dimension Input and Earnings Expressions

Create three expressions as shown in this table.

Type of Expression	Purpose
License rate dimension input	Calculate the license interval revenue attainment.
Service rate dimension input	Calculate the service interval revenue attainment.
Earnings	Calculate the bonus amount based on the product quota attainment.

Click Create in Manage Expressions.
Name the first expression License Interval Revenue.
In the Configure Expression section, create the rate dimension input expressions Measure result.License Interval Attainment.ITD Output Achieved and Measure result.Service Interval Attainment.ITD Output Achieved and the earnings expression Rate Table Rate.

License Rate Dimension Input
1. On the User Defined Objects menu, select Measure result.
2. In the Measure field, select license performance measure, License Interval Attainment.
3. Select ITD Output Achieved.
4. Click Add to Expression.
5. Click Save and Create Another.
Service Rate Dimension Input
1. Name the expression Service Interval Revenue.
2. On the User Defined Objects menu, select Measure result.
3. In the Measure field, select the service performance measure, Service Interval Attainment.
4. Select ITD Output Achieved.
5. Click Add to Expression.
6. Click Save and Create Another.
Earnings
1. Name the expression Quota Attainment Earnings.
2. On the Attributes menu, select Rate Table Rate.
3. Click Add to Expression.
Click Save and Close.
Click Done.

Create the Plan Component

Create a bonus plan component that calculates earnings using license attainment.

Click Create in Manage Plan Components.
Name the component License and Service Bonus.
Enter start and end dates for the year.
In the Calculate Incentive field, select Per interval.
In the Incentive Type field, select Bonus.

Click Next to open the Create Plan Component: Add Performance Measure page.

Add the performance measures, as shown in this table.

Measure	Weight Percentage	Earning Basis
License Interval Attainment	100	Yes
Service Interval Attainment	0	No

Click Next to open the Create Plan Component: Define Incentive Formula page.

Complete the fields, as shown in this table.

Field	Value
Payout Frequency	Quarter
Expression Name	Search for and select the earnings expression that calculates the bonus amount based on the license quota attainment, License Interval Revenue.
Include Indirect Credits	All

Click Next to open the Create Plan Component: Add Rate Table page.
1. In the Rate Table Parameters section Rate Table Dimensions field, enter 2.
2. In the Rate Table section, add a row.
3. In the Name field, search for and select the rate table that uses quota attainment to find the rate to apply when calculating commission earnings, Quota Attainment Earnings.
4. In the Rate Dimensional Inputs section Expression Name field of the License row, search for and select the expression that calculates the license interval revenue attainment, License Interval Revenue.
5. In the Rate Dimensional Inputs section Expression Name field of the Service row, search for and select the expression that calculates the service interval revenue attainment, Service Interval Revenue.
Click Save and Close.