Using Weighted and Matrix Goals to Manage Plans

This chapter provides overviews of weighted goals, the performance factor calculation, and matrix goals and discusses how to:

Enter weighted goal attainments.
Run the Organization and Group Goals report.
Enter matrix goal attainments.

Understanding Weighted Goals

This section discusses:

Steps for using weighted goals.
Weighted goal terminology.
Weighted goal levels.

Steps for Using Weighted Goals

Here are the high-level steps for using weighted goals to manage a plan:

Define goal IDs on the Vc Goal Table (variable compensation goal table) page.
Define weighted goals as a plan option on the VC Plan - Plan Definition (variable compensation plan - plan definition) page.
1. Select Weighted Goals as the plan goals type.
2. Specify the plan goal weights for each of the three goal levels (the total must be 100 percent).
Set up weighted goals in the Plan Goals component (VC_PLAN_GOAL) or the Plan Goals w/ Group (plan goals with groups) component (VC_PLAN_GOAL_WG).
Enter goal attainments for each level of weighted goals on the goal attainments pages.
Calculate a performance factor for organization and group goals by running the Determine Allocation Application Engine process (VC_DET_ALLOC).
Calculate a performance factor for individual goals by running the Calculate Awards Application Engine process (VC_CALWRD or VC_CALWRD_WG).
Apply the performance factor to the target payout by running the Calculate Awards process.
Run the optional Organization and Group Goals report before or after the measurement period.

Weighted Goal Terminology

This section discusses terminology related to weighted goals.

Goal	A performance measure that you define on the VC Goals Tbl page.
Attainment Percentage	The percentage of accomplishment of performance goals at each goal level.

Weighted Goal Levels

You can manage a variable compensation plan by using weighted goals at up to three levels. The three levels are organization, group, and individual. When you define the plan, assign a plan goal weight to each level. The plan goal weight indicates the relative value of each level in the final performance factor calculation. If you don’t use a level, assign a plan goal weight of 0 percent.

To calculate the performance of an individual, the system multiplies the goal attainment at each level by the goal weight percentage to produce a weighted attainment. It then calculates the total weighted attainments of all three levels.

Organization Goals

Organization goals are performance goals that you set for the entire organization. Assign a weighted goal percentage to each organization goal to determine its importance relative to other goals at the same level. The attainment percentage of the organization goals affects the variable compensation calculation of all plan members equally. An organization goal might be financial (for example, revenues), or it could be operational (for example, headcount).

Group Goals

You can use group goals if you administer the plan by using groups. Group goals are performance goals that you set for all members of a group. Child groups inherit the performance factor of parent groups unless you establish different goals at the child group level. When you specify goals for a group, the group performance factor is calculated based on the attainments for the group’s own goals. If no goals are specified, the group performance factor is taken from the parent group.

Assign a weighted goal percentage to each group goal to determine its importance relative to other goals at the same level. The attainment percentage of group goals affects the variable compensation calculation of all members of the group equally.

Individual Goals

Individual goals are performance goals that you set for individual plan members. You assign a weighted goal percentage to an individual goal to determine its importance relative to other goals at the same level. The attainment percentage of individual goals affects only the variable compensation calculation of the individual plan member.

Setting Up Variable Compensation Control Tables

Calculating the Performance Factor

This section provides an overview of the performance factor, the performance factor calculation, an example of a performance factor for goals established at three levels, the application of the performance factor, and lists the pages used to calculate performance factors.

Understanding the Performance Factor

The Determine Allocations process calculates the performance factor for organization and group goals. The Calculate Awards process calculates the performance factor for individual goals. The Calculate Awards process also calculates the total performance factor and applies it to the prorated target payout.

Understanding the Performance Factor Calculation

The system multiplies these three percentages to calculate the performance factor for each goal:

The weighting percentage that you assign to the goal level when you define the plan.
The weighting percentage that you assign to the performance goal.
The percentage of accomplishment of the performance goal.

The formula for calculating the performance factor for each goal is:

Plan Goal Weight Percentage × Weighted Goal Percentage × Attainment Percentage

The Calculate Awards process sums the performance factor of all goals to derive the plan member’s total performance factor. It rounds the calculation up to five decimal places.

Example of a Performance Factor for Goals Established at Three Levels

This section provides an example of the performance factor calculation for established goals.

Scenario Background Information

Here are the plan goal weight percentages:

Organization: 50%.
Group: 35%.
Individual: 15%.

Note. The total of the plan goal weight percentages is 100%.

The weighted goal percentages for two goals are:

Goal 1 at organization level: 35%.
Goal 2 at organization level: 65%.
Goal 1 at group level: 50%.
Goal 2 at group level: 50%.
Goal 1 at individual level: 100%.
Goal 2 at individual level: not applicable.

Note. The total of the weighted goal percentages is 100% at each level.

The attainment percentages are:

Goal 1 at organization level: 100%.
Goal 2 at organization level: 125%.
Goal 1 at group level: 75%.
Goal 2 at group level: 50%.
Goal 1 at individual level: 100%.
Goal 2 at individual level: not applicable.

Calculation of Performance Factors

This example illustrates the calculation of performance factors.

The formula used for these calculation is:

Plan Goal Weighted Percentage × Weighted Goal Percentage × Attainment Percentage = Performance Factor

Understanding the Application of the Performance Factor

The Calculate Awards process multiplies the prorated target payout formula by the performance factor. This section illustrates an award calculation using the performance factor calculated in the preceding example.

Scenario Background Information

Here is the background for the example:

Employee salary: $50,000 (annual rate).
Plan payout formula: 15% of base pay (quarterly).
Proration factor: 0.75.
Performance factor: 0.95.

Award Calculation

Here is the calculation of the award:

($50,000 × 15%) ÷ (4 × 0.75 × 0.95) = $1,335.94

See Also

Manage Variable Compensation Reports

Understanding Matrix Goals

This section discusses:

Types of matrix goals.
Steps for using matrix goals.
Matrix goal terminology.
Example of managing a plan by using matrix goals.

Types of Matrix Goals

When you use a goals matrix, you set up goals, performance levels, and a payout schedule. The system calculates a performance score that determines the payout formula that the Award Allocation process uses to calculate awards.

Because a goals matrix determines the payout formula at the organization or group level, consider your options carefully before using a goals matrix for plans administered with one of these plan member rules:

Employee VC Record
Employee VC Record with Groups

With these plan member rules, you can set the target payout at the individual plan member level. You override this feature when you use a goals matrix.

You can manage a variable compensation plan with a goals matrix at the organization level or the group level. The level depends on the plan member rule that you established for the plan, as follows:

Use an organization goal matrix if the plan member rule is Empl VC Record (without groups).
Set up the matrix at the group level for group goals if the plan member rule is Empl VC Record with Groups or Define Tree/Group.

The system does not support matrix goals at the individual level.

Organization Goals Matrix

With this type of matrix, you set performance goals for the entire organization. The performance score for organization goals determines the payout formula for all plan members.

Group Goals Matrix

With this type of matrix, you set performance goals for all members of a group. Child groups inherit the group goals and attainments of parent groups, unless you establish a different goals matrix at the child group level. The performance score for group goals determines the payout formula for all members of the group.

Matrix Goal Terminology

This section discusses terminology related to matrix goals.

Weight	The weighting percentages assigned to the performance goals that you set up in the matrix.
Threshold	Minimal performance conditions that must be met before a payout occurs. Thresholds cancel payouts when a minimally acceptable performance level is not achieved for the goals that you set.
Target	Performance conditions that must be met before an optimal payout occurs. A target involves the average level of performance in achieving the goals in the matrix. A group or organization typically meets the target level of performance 80 percent of the time.
Stretch	Performance conditions that must be met before the highest payout occurs. Stretch involves the maximum level of performance in achieving the goals in the matrix. A group or organization typically reaches the stretch level of performance 50 percent of the time.
Performance level	The percentages that you assign to the threshold, target, and stretch levels in the matrix. The system uses these percentages to calculate the performance score. The number of performance levels corresponds to the number of columns that you specify for the matrix. It is common to set up five levels that range from 80 percent to 120 percent. In such a scheme, 80 percent and 90 percent represent performance that is below expected, 100 percent represents the expected level of performance, and 110 percent and 120 percent represent higher-than-expected performance. Three-level and seven-level matrices are also common.
Attainment	Numeric representation of the attainment of a matrix goal. The system interpolates the goal attainment value to a performance value. That performance value determines the performance level percentage used in the performance score calculation.
Score	The system calculates the score for each goal by multiplying the goal weight by the percentage of the performance level at which the attainment value falls. The total performance score is the sum of the scores for all goals in the matrix. The system determines the payout formula based on where the total performance score falls on the payout schedule.
Total score	Sum of the performance scores for all goals within the matrix. The system determines the payout formula based on where the total performance score falls on the payout schedule.
Payout schedule	Schedule of performance score ranges and associated payout formulas.
Payout formula	Formula that the system uses to calculate the plan member’s variable compensation award. Typically, the formula is a percentage of base pay.

Steps for Using Matrix Goals

Here are the high-level steps for using a goals matrix to manage a variable compensation plan:

Define goal IDs on the VC Goal Table page.
Define the goals matrix option on the VC Plan - Plan Definition page.

To define the goals matrix:
1. Select Goals Matrix as the plan goals type.
2. Define the number of columns that you want to set up in the matrix.
Set up the goal matrix on the Plan Goals - Matrix Goals page or the Plan Goals with Groups - Matrix Goals page.
1. Enter the goal IDs that you use to evaluate performance.
2. Establish a weighting percentage for each goal ID (the cumulative total of the weights for all goals must equal 100 percent).
3. Enter the threshold, target, and stretch performance level percentages for the number of matrix columns that you define for the plan.
4. Identify the measurable performance level values for each goal at each performance percentage level.
On the Payout Schedule page, identify a payout schedule that represents the amount of award that a plan member would receive at the various performance levels.
On the matrix goal attainment pages, enter the goal attainment value for each goal.

The system performs these calculations:
- Determines the performance score for each goal.
- Sums the scores of all goals.
- Determines the payout formula.
Calculate the award using the payout formula by running the Calculate Awards process.

See Also

Defining Goals

Example of Managing a Plan Using Matrix Goals

This example illustrates a sample goal matrix with five columns:

Sample goal matrix

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 correspond 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.

Entering Weighted Goal Attainments

To enter weighted goal attainments, use the Organization's Goals (VC_ORG_ATN), Group Goals (VC_GRP_ATN), Individual's Goals (VC_IND_GOAL_ATN), and Individual w/in Group (VC_IND_WG_ATN) components.

This section provides an overview of goal attainments and discusses how to:

Enter organization goal attainments.
Enter group goal attainments.
Enter individual goal attainments.
Enter goal attainments for individuals with groups.

Understanding Goal Attainments

A goal attainment is a percentage that expresses the degree to which the organization, group, or individual meets the stated goal during the performance period. Enter an attainment percentage greater than 100 percent if performance of the goal exceeds expected performance. If you do not enter an attainment percentage for a goal that you have set up, the system uses 0 percent as the attainment percentage for that goal.

Enter goal attainments at each level for which you set up weighted goals in the plan. When you access a goal attainment page, the system displays a data row for each goal ID that you set up at that level for the plan or group.

Enter goal attainments whenever the information is available in the organization’s business process, subject to these limitations.

Organization and Group Attainments

Enter all organization and group attainments before you run the Determine Allocation process.

Individual Attainments

Enter individual attainments any time after you've run the Eligibility process but before you run the Calculate Awards process for the plan or group.

Pages Used to Enter Weighted Goal Attainments

Page Name	Object Name	Navigation	Usage
Organization Goal Attainment	VC_ORG_GOAL_ATN	Compensation, Variable Compensation, Define Goal Attainments, Organization's Goals	Enter the goal attainments for the organization goals that you set up for the plan.
Group Goal Attainments	VC_GRP_GOAL_ATN	Compensation, Variable Compensation, Define Goal Attainments, Groups Goals	Enter the goal attainments for the group goals that you set up for the plan.
Individual Attainments	VC_IND_GOAL_ATN	Compensation, Variable Compensation, Define Goal Attainments, Individual's Goals	For plans that don’t use groups, add goals and weights, change or delete default goals and weights, and enter goal attainments for individual plan members.
Ind. Attainments With Groups (individual attainments with groups)	VC_IND_GOAL_WG_ATN	Compensation, Variable Compensation, Define Goal Attainments, Individual w/in Group	For plans that use groups, add goals and weights, change or delete default goals and weights, and enter goal attainments for individual plan members.

Entering Organization Goal Attainments

Access the Organization Goal Attainment page.

Period ID	Select the plan payout period for which you want to enter goal attainments.
Goal ID	Select a goal ID. The system displays a row for each goal ID that you enter on the Organization Goals setup page. You must enter a goal attainment for each goal that you set up. The system use 0 percent as the attainment percentage if you leave this field blank.
Weight	The system displays the weighting percentage that you assign to the goal ID.
Attainment	Enter the percentage attained value for the goal.
Comments	Enter any information pertinent to the goal attainment.

Entering Group Goal Attainments

Access the Group Goal Attainments page.

The system attributes a group’s performance factor to all of its child groups unless you have set up goals at a child level. As a result, any child group without defined goals takes on the performance factor of the next highest group with defined goals on the tree.

Note. The child group does not inherit the actual attainments; it inherits only the performance factor.

All fields on this page are identical to the fields on the Organization Goal Attainment page, with the addition of the Group ID field.

Group ID

Select the ID of the group whose goal attainments you want to enter. The system displays the description of the group.

See Also

Entering Weighted Goal Attainments

Entering Individual Goal Attainments

Access the Individual Attainments page.

The Individual Attainments page is similar to the Group Goal Attainments page and the Organization Goal Attainments page. The Eligibility/Proration process loads the default individual goals onto this page for all eligible plan members. Use the defaults as a starting point for updating the individual’s goals before entering goal attainments.

Period ID	Displays the ID for the plan payout period for which you want to enter goal attainments.
No Goals	Select to delete all individual goals for the plan member. When you select No Goals, the system deletes all individual goal records for the plan member. This renders the fields unavailable for entry. The system then uses 100 percent as the attainment percentage at the individual level. That way, a lack of goals does not cause a reduction of the award.
Total Weight	The system sums the weighting percentages as you change or enter them for each goal, and it displays the cumulative total in this field. Adjust the weights for goals until the sum of all goal weights for the payout period is 100 percent. Before you can save the page, the total weight must equal 100 percent.
Goal ID	Displays a row for each default goal ID that you enter on the Organization Goals setup page. Select a data row for a default goal ID, or add a new goal by selecting an ID from the options.
Weight	Displays the weighting percentage assigned to the default goal ID. Change the default weight, or enter a weighting percent for a new goal ID. The total of all weights for the payout period ID must equal 100 percent.
Attainment	Enter the percentage attained value for each goal.

Entering Goal Attainments for Individuals with Groups

Access the Ind. Attainments With Groups page.

The system does not automatically apply the attainment percentages of a parent group to its child groups on the tree. You must select the group ID of each group for which you want to modify default individual goals and enter attainment percentages.

The Eligibility/Proration process loads the default individual goals into this page for members of groups with default individual goals defined. Use the defaults as a starting point for updating the individual’s goals before entering goal attainments.

All fields on this page are identical to the fields on the Individual Attainment page, with the addition of the Group ID field.

Group ID

Select the group ID of the plan members whose goal attainments you want to enter. The default value is the highest level group ID for which you set up default individual goals. When you move the cursor out of the field, the system displays the description of the group.

Lower-level groups do not inherit the goal attainments of higher-level groups. Select each group and each member for which you want to enter attainment percentages.

See Also

Entering Organization Goal Attainments

Calculating the Performance Factor

Understanding the Performance Factor

Understanding the Performance Factor Calculation

The system multiplies these three percentages to calculate the performance factor for each goal:

The weighting percentage that you assign to the goal level when you define the plan.
The weighting percentage that you assign to the performance goal.
The percentage of accomplishment of the performance goal.

The formula for calculating the performance factor for each goal is:

Plan Goal Weight Percentage × Weighted Goal Percentage × Attainment Percentage

The Calculate Awards process sums the performance factor of all goals to derive the plan member’s total performance factor. It rounds the calculation up to five decimal places.

Running the Organization and Goals Report

To run the Organization and Goals report, use the Organization and Group Goals (RC_VC_GOALS) component.

This section lists the page used to run the Organization and Goals report.

Page Used to Run the Organization and Goals Report

Page Name	Object Name	Navigation	Usage
Organization and Group Goals	RUNCTL_VC_REP	Compensation, Variable Compensation, Variable Comp Report, Organization and Group Goals	Run the Organization and Group Goals report (VC011). This report provides the plan goal weights for the variable compensation plan ID and period ID. It also lists all organization and group weighted goals in the plan with their weighting percentages and attainment percentages.

Entering Matrix Goal Attainments

To enter matrix goal attainments, use the Matrix Goals (VC_MTX_ATN) and Matrix Goals with Group (VC_MTX_WG_ATN) components.

Enter goal attainments after you have completed the performance review. You must complete the attainments before calculating awards.

This section discusses how to:

Enter matrix goal attainments for plans without groups.
Enter matrix goal attainments for plans with groups.

Pages Used to Enter Matrix Goal Attainments

Page Name	Object Name	Navigation	Usage
Matrix Goal Attainment	VC_MTX_GOAL_ATN	Compensation, Variable Compensation, Define Goal Attainments, Matrix Goals	Enter the numeric value for the attainment of each goal in the matrix. The system calculates the performance score and determines the payout formula.
Matrix Attainments With Groups	VC_MTX_GOAL_WG_ATN	Compensation, Variable Compensation, Define Goal Attainments, Matrix Goals w/in Group	Enter the numeric value for the attainment of each goal in the matrix. The system calculates the performance score and determines the payout formula.

Entering Matrix Goal Attainments for Plans Without Groups

Access the Matrix Goal Attainment page.

Viewing the Goals Matrix

The system displays the goals matrix that you set up for the plan ID with the values that you entered on the Matrix Goals setup page. You cannot change those values on this page.

Entering Goal Attainments

Attainment	On each row of the matrix, enter the goal attainment value for that goal. It is expressed in the same numeric representation as the performance values that you entered into the matrix. The system uses the goal attainment value to interpolate a performance value in the matrix, and it uses the percentage of the corresponding performance level in the performance score calculation.
Score	The system calculates the performance score by multiplying the goal weight by the performance level that was calculated for the attainment.
Total Score	The system displays the sum of the performance scores for all goals. It uses the total score to determine the payout formula.
Payout Formula	The system compares the total score to the score ranges that you set up on the Payout Schedule page. It populates the Payout Formula field with the payout formula that you defined for the corresponding range.

Entering Matrix Goal Attainments for Plans with Groups

Access the Matrix Attainments With Groups page.

This page and its fields are identical to the Matrix Goal Attainments page, with the addition of this field:

Group ID

Find the group ID for which you want to enter goal attainment values. Only the groups for which you have security access are available.

The system automatically applies the highest group’s attainments, performance scores, and payout formula to all child groups, unless you have set up a different matrix at a lower level. By default, child groups take on the matrix and payout formula of the next highest group with a goal matrix.