Example of Incentive Compensation Business Units by Region

This example shows business unit analysis as part of enterprise structure planning by region.

You work for a multinational conglomerate that operates in 15 countries worldwide.

You have three processing centers:

• Asia-Pacific

• Americas

• Europe and Middle East

And you have two divisions:

• Agricultural Products

• Consumer Products

Agricultural Products has three medium-complex compensation plans that are used globally. Consumer Products has over 50 simple plans, half of which are used globally and half regionally.

There's no overlap of plans between the divisions. You use local currency to create incentive compensation plan rate tiers and quotas, as well as to pay participants.

Employees may report to managers in different regions, who receive rollup credit. Also, employees in the Agricultural Products division may belong to sales teams with members from other regions.

You want to segregate data for security purposes by region; local analysts can work on compensation for either division, but only for participants in one region. Both divisions and all business units use local currency as the operating currency, so that executives can easily review all performance and expenses at the national level, across divisions and participants.

Global Enterprise Structure Model

Because you have cross-region rollups and teams, you create three separate business units.

• Set up the three business units to correspond to the three processing center regions, combining operations for the Agricultural Products and Consumer Products divisions.

• For all business units, set the transaction currency to Participant home currency.

• Create and manage the three global plans for the Agricultural Products division and 25 global plans for the Consumer Products division in each of the three regional business units, as they're not too complex.

The implementation of three business units:

• Meets the currency processing requirements

• Provides consistent enforcement of company policies

• Improves efficiency across the organization