IC story: From every 1% increase in goal attainment to the % of goal attainment that corresponds to 1 TRx? - 07/24

The Incentive Compensation (IC) goal curve depicts how different level of goal attainment correlates with the respective target payout. For instance, after crossing the threshold, the goal curve may offer 1% increase in goal attainment leads to 1%, or 2% or 5% increase in payout. 

However, a recent situation arose where in the baseline threshold % varied across territories, making it impractical to apply a standard mathematical formula. (Territory A had threshold of 70% of goals while territory B had 80%, since threshold was defined as average of previous two quarters )

The goal plan was structured so that a payout at the baseline equated to 70% of target pay, while reaching the goal equated to a full 100% payout. Fortunately, the goal for each territory was defined as 10 TRx more than the baseline. 

In this instance, we shifted the paradigm for defining the payout curve post threshold. The plan was devised around the idea that 10 TRx are required to attain 30% payout (remember 70% payout at baseline and 100% payout at goals). Which means we can define the goal curve as, "Each TRx represents a certain percentage of goal attainment, i.e., 30% goal attainment / 10 TRx = 3%". 

5% of goal attainment for every 1 TRx attained above baseline till 100% goals

This concept is complex, so feel free to pose questions in the comments. It took me 2-3 iterations to understand it partially 😂 Welcome to the world of IC consulting!

Follow me on LinkedIn