While traditional bonus schemes reward individuals based on their absolute achievements against fixed targets, some incentive strategies require relative performance assessment to drive healthy competition and ensure fair rewards distribution across teams.
Consider situations where you want to reward your top 20% of performers regardless of absolute numbers, create competitions where only the highest-ranking individuals receive full bonuses or ensure that bonuses are distributed proportionally based on relative standing within peer groups. For instance, you might want to rank all sales representatives by their Sales vs Target performance and apply escalating bonus multipliers to the top quartile.
To aid in these scenarios CEX Incentives offers the possibility to use functions!
Functions are statistical tools used to analyze performance and provide insights, by looking at the cohort (team) performance distribution, not just the achievements of an individual. In other words functions look at sets of data not at single data points. Functions help provide a more nuanced and sophisticated approach to bonus scheme that account for overall team performance as well as performance distribution. Functions can be as simple as Sum or Average or more sophisticated such as Ranking or Percentile.
Functions are applied to KPIs or Groups, and they take all the values of the respective KPI or Group, one value for each individual in the team, and return a different value according to the selected function: the Sum of values if Sum is selected, or the Rank or Percentile of the individual achievement compared to the other achievements in the group.
At first glance Functions and Payout Curves may look similar, as in they are assigned to a KPI or group and return a value. The key difference is that the input for a payout curve is only the value achieved by the individual for which the bonus is being calculated, whereas the input for functions is the set of achieved values by all the individuals in the Team.
Check below the functions that are currently supported and their details.
Several transformations may be specified and applied to the value of a KPI or Group and only the transformed value is then used in calculating the bonus. The currently supported transformations are: payout curves, weights, eligibility criteria and functions. Like in mathematics the order of applying the operations is very important, and impacts the final result.