Creating Incentive Rules

Objective

After completing this lesson, you will be able to create incentive rules in SAP Incentive Management.

Incentive Rules

Incentive Rules calculate the earnings for each payee, based on their achievement or other company defined objectives. Typically, when Incentive Management processes an incentive rule, it compares measurements to attainment targets, such as quotas for each Position.

Incentive Rules tend to be complex because they contain most of the business logic. As a result, there are many ways to configure these rules. Let’s start by going over the basic types of Incentive Rules.

Types of Incentive Rules

A Basic or Aggregate Incentive Rule calculates commissions using either a fixed or sliding rate. This type of rule uses the Measurement as the input and generates the commission amount based on the Measurement, using a Rate Table, Fixed Value, Lookup Table or Formula.

The Bonus Incentive Rule is ideal for calculating a bonus or other incentive that is not a commission. We generally define a Bonus incentive rule as one that doesn’t calculate the amount of the incentive based on the Measurement.

A Per-Credit Commission Incentive Rule evaluates the value of each Credit to produce individual commission amounts for each credit. The rule then aggregates these amounts to yield total Commissions in the form of an incentive.

Exercise: Create a Basic Incentive Rule that uses a Rate Table

Business Example:

In this exercise, you will create a rule that calculates a monthly commission on product sales using the rate table created in a previous exercise.

ExerciseStart Exercise

Steps

Select Incentive Rule.
Select Create New Rule.
Enter the following options:
1. What kind of Incentive rule do you want to create? Aggregated Incentive Rule.
2. Name: IR_Monthly_Product_Commission.
3. Leave the Calendar and Effective Dates at the default.
Select Next.
Leave the Condition field blank and select Next.
Complete the following steps to create the Incentive Output:
1. Select Create New Incentive Amount.
2. Select An incentive that calculates an amount based on a rate that needs to be calculated.
3. Select Next.
Select Measurements associated directly to the rep.
Under Choose your Measurement, open the Which measurement menu and select PM_Product_Sales_Revenue.
Select Next.
On the Rate Table tab, set the Commission rate to Stepped rate based on an individualized rate table.
Select the Rate Table Variable RTV_Comm_Rates.
Select Next.
On the Attainment tab, use the following steps to use the quarterly quota as the target attainment goal. This target is the fixed value we created in the previous unit.
1. Is the rate based on target attainment? Yes.
2. In the Target Source field, enter ref and select Reference: Fixed Value.
3. Enter FV and select FV_Quarterly_Sales_Quota.
4. Set the Period Level to Quarter.
5. Select Next.
For the incentive amount, select Take commission rate and apply it to the source.
Change the Output Name to IO_Monthly_Product_Commission.
Change the Display Name for Reports to My Monthly Product Commission.
Change Unit Type to USD.
Leave the Period Type at Month.
Select Next, then Finish.

Create an Incentive Rule that Pays a Bonus

Business Example:

In this exercise, you will create an incentive rule that calculates a bonus.

The Services Sales Reps receive a quarterly bonus if their sales exceed the quota for the quarter. This rule will use a condition to determine if the quota was met, and if so, a bonus will be applied. We will use Fixed Values to contain the quota and bonus amounts.

Steps

Create the Incentive Rule.
1. Select Create New Rule.
2. Enter the following options:
  1. What kind of Incentive rule do you want to create? Aggregated Incentive Rule.
  2. Name: IR_Quarterly Bonus Services.
  3. Select Next.
Enter the condition stating that the measurement for the quarter must meet or exceed the quarterly quota.
1. In the field Are there any conditions that need to be met?, select Show Window Editor.
2. In the first placeholder, type ref and select reference:Measurement from the list.
3. In the dialog box, set the measurement to PM_Services_Sales_Revenue.
4. Set the Source Period to Quarter.
5. Select OK.
6. In the second placeholder, enter ">" and select "=>" from the list.
7. In the third placeholder, enter ref and select reference: Fixed Value from the list.
8. After the colon, type FV and select FV_Quarterly_Sales_Quota from the list.
9. Close the window by selecting the checkmark in the upper right corner.
10. Select Next.
Create the incentive output.
1. Select Create New Incentive Amount.
2. Select A Bonus.
3. Select Next.
4. Change the output name to IO_Quarterly_Bonus_Services.
5. Set the period type to Quarter.
6. Change the Display Name for Reports to My Quarterly Services Bonus.
7. In the Amount field, enter ref and select reference: Fixed Value from the list.
8. Type FV and select FV_Services_Bonus.
9. Select Next, then Finish.

Per-Credit Incentive Rules

Basic Incentive Rules calculate Incentives directly from the aggregated Measurement. If the amount of commission paid out for each individual credit is required, the Incentive Rule should be changed to a Per-Credit Incentive Rule.

Per-Credit Rules measures the value of each credit against a rate table or a flat rate to produce individual commission amounts for each credit, instead of for the entire measurement. This allows you to apply different rates to specific transactions. The rule then aggregates these amounts in an Incentive.

Per-Credit Rules require more processing time but provide the results detail of commissions calculated for each credit. This type of rule doesn’t produce different results than a basic incentive rule. A limitation of the per-credit commission rule is that it can only be tied to a primary measurement rule. It will not work with secondary measurement rules.

Organizations choose to use per-credit commissions for reporting purposes when rates for each product are different. Secondly, they may choose to use it, if there are special commissions for single credits over a specified amount.

The following diagram shows an example of the difference between an aggregate and a per-credit Commission Incentive Rule, even when the output value is the same.

A diagram showing the contrast between an aggregated incentive rule and a per-credit incentive rule.

Keep in mind that the measurement is still needed when creating per-credit incentive rules, because it is used to calculate the attainment. This is particularly important when using a rate table.

To create a per-credit incentive rule:

Create a new incentive rule.
On the Rule Basics tab, select Per-Credit Incentive Rule.
On the Source tab, select the measurement.
The rest of the rule is created just like a basic incentive rule.

Summary

Incentive rules calculate payee earnings based on their achievements or company defined objectives.
Incentive rules often comprise complex business logic and can be configured in numerous ways.
Basic or Aggregate incentive rules calculate commissions using a fixed or sliding rate based on a measurement.
Bonus incentive rules calculate non-commission bonuses.
Per-Credit Commission Incentive Rules evaluate each credit's value, producing individual commission amounts for each credit.

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