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RGM / AC Bonus Guide
2
Purpose and Report Contents
Serve as an educational resource for HR and Finance within YRI BMUs
Outline design parameters for the implementation of the Yum RGM / AC Bonus
Provide detailed design steps and techniques for modeling the Yum RGM / AC Bonus
Provide support for a YRI Q1 2005 implementation
As such, this document includes the following sections
Bonus design and implementation process
Data to be collected as “pre-work” to modeling the bonus
Outline of principles and objectives of the bonus to assist in communication and education within the BMU
Steps for modeling the bonus including an outline of design parameters for each bonus component
The examples and methodologies outlined in this presentation and Bonus Modeling Tool are intended as a starting point for modeling; each BMU must consider what makes sense for restaurant performance and objectives within the BMU
Bonus Design and Implementation Process
4
Bonus Design and Implementation Process
Tools US templatesOutcomes Bonus communication materials Training materials
Q2Mar - May
Q3Jun - Aug
Q4Sept - Nov
Q1Day 1 Pd 1
Develop Field-ready bonus &
training materials
Engage Finance & Operations
Work with Finance & Operations to validate design
Test design & revisions within
TPM tool
Go Live
Execute Communication and training plan
Tools RGM / AC Bonus Guide Bonus design toolOutcome Proposed design
Test design within TPM tool
Model the bonus
Become familiar with TPM tool capabilities
Experiment with design & data Experiment with reportsTools TPM tool Report templatesOutcome Preliminary understanding of how the
bonus will be administered through TPM
Identification of issues/barriers
Finalize design and develop
communication plan
Gain BMU Approval
Pre-Work
6
Pre-Work
Collect a full year of data for the following key Yum! performance measures
Sales and Profit (RCP) data
Plan for 2004
Plan and Actual results for 2003
Flow-Thru
Results for 2003
Target for 2004
CHAMPSCheck
Results for 2003
Target for 2004
Results from Strategic Initiative measure
e.g., Team Member turnover results for 2003 and target for 2004
To ensure you have a full year of data, you could collect current YTD data and estimate the balance of the year (e.g., using plan data)
Collect the data for each restaurant including restaurant number and area number
7
Pre-Work - Tips
“Clean” the data
Use annual data for design work
Remove partial store periods and use “Full Store Periods” only
Remove extreme data points
For example, sort the data by sales and delete extremely high or low sales figures…repeat for RCP and other data points
The modeling technique outlined in this document uses full-year data, when validating the design you may want to consider what the bonus will payout for each quarter
3...
CountArea
IDStore
ID
2003 Sales Plan
2003 Sales Actual
2004 Sales Plan
2003RCP Plan
2003 RCP
Actual
2004 RCP Plan
2003 Flow-Thru
Results
2003 Flow Thru to
RCP
2003 # of 100% CHAMPS
2003 Team
Member Turnover
1 001 1,000 1,010,000 1,085,511 1,097,861 280,000 308,000 327,000 319,088 103.6 9 782 001 1,002 730,000 752,000 790,617 201,663 205,000 223,733 210,156 102.5 7 127
199 025 1,396 765,000 751,000 781,830 221,434 228,077 255,826 237,200 104.0 14 42200 025 1,398 930,000 925,000 950,460 261,934 269,792 305,527 264,397 98.0 9 120
Actual (2003) and Plan (2004) Data
The Strategic Component should be determined by the BMU. For this example, we have assumed Team Member Turnover
is the strategic component.
Bonus Design Principles and Objectives
9
Bonus Design Principles
Motivate RGMs and ACs to meet and exceed performance target
Aligned with other programs (e.g., BSC, PA) and across Operations & BMU
Achieve a balanced emphasis on Customer, Sales, Profits & Strategic
Drive operating Blue Chips
Building people capability
Driving customer mania through 100% CHAMPS
Grow profitable sales
Improve RCP & margins “Beat Year Ago”
Strategic Strategic Initiative (e.g., Turnover)
Customer 100% CHAMPSCheck
Sales & Profit Make Plan Matrix and Flow-Thru
10
Design Objective Design Element to Achieve Objective
Engage employees through short-term incentives Quarterly payout
Higher volume restaurant = Higher value to Yum! and higher rewards for RGM/AC Volume-based financial rewards
Fixed $ payout based on satisfying customers 100% each time (RGM only) Customer Mania focus
Flexibility to focus on strategic initiative Business Unit focus
Performance-based Competitive payout for on-target performance Increased payout for exceeding target Limited payout for below target performance
Leveraged to encourage higher performance
Bonus Design Objectives
11
Aligned
F/T P&L Reports
RGM Bonus
Customer100% CHAMPSCheck
People Strategic Focus
e.g., Team Member Turnover
Sales“Make Plan” Matrix
ProfitFlow-Thru
RGM Bonus
Customer100% CHAMPSCheck
People Strategic Focus
e.g., Team Member Turnover
Sales“Make Plan” Matrix
ProfitFlow-Thru
Balanced Scorecard
Customer100% CHAMPSCheck
Speed of Service
People Turnover
Core TrainingRetention
SalesNet Sales to Plan
ProfitProfit to Plan Flow-Thru
Balanced Scorecard
Customer100% CHAMPSCheck
Speed of Service
People Turnover
Core TrainingRetention
SalesNet Sales to Plan
ProfitProfit to Plan Flow-Thru
Performance Appraisal
CustomerBSC + Process (CER, 1-800)
People BSC + Leadership/Culture
(Safety, Staffing, Team Development)
SalesBSC + Leadership/Culture/Process
ProfitBSC + Leadership/Culture/Process
Performance Appraisal
CustomerBSC + Process (CER, 1-800)
People BSC + Leadership/Culture
(Safety, Staffing, Team Development)
SalesBSC + Leadership/Culture/Process
ProfitBSC + Leadership/Culture/Process
Long Term IncentiveLong Term IncentiveExamples:
Period: CHAMPS Cards
Quarter: Team Celebrations
Yearly: Champions Club Trip & Prizes
Examples:
Period: CHAMPS Cards
Quarter: Team Celebrations
Yearly: Champions Club Trip & Prizes
12
Balanced emphasis on People, Customer, Sales & Profits
BMUs will adjust weights based on overall strategy
Bonus will reward results and carries heavier weightings on financials compared to the BSC to minimize funding risk
30%
20%
20%
30%
BSC
30%
30%
20%
20%
PA (60% for RGM & AC)
20%
20%
30%
30%
Bonus
Customer
Strategic
Sales
Profit
Sales Profit
Customer
Stra
tegic
&
30%
20%
20%
30%
BSC
30%
20%
20%
30%
BSC
30%
30%
20%
20%
PA (60% for RGM & AC)
30%
30%
20%
20%
PA (60% for RGM & AC)
20%
20%
30%
30%
Bonus
20%
20%
30%
30%
Bonus
Customer
Strategic
Sales
Profit
CustomerCustomer
StrategicStrategic
SalesSales
ProfitProfit
Sales Profit
Customer
Stra
tegic
&
Long term
Process-oriented
Short term
Focused on business results
RGM Bonus - Modeling the Bonus
14
RGM Bonus -Steps in Modeling the Bonus
Step 1 Determine the target payout for each performance measure
Step 2 Calculate Sales growth
Step 3 Calculate average RCP and RCP growth
Step 4 Develop the Sales & RCP “Make Plan” Matrix
Step 5 Develop the Flow-Thru Chart
Step 6 Develop 100% CHAMPSCheck Chart
Step 7 Develop Chart for the Strategic Component
15
RGM Bonus - Step 1 - Target Payouts
*Note: In markets that do not have Flow-thru, the Flow-thru component may be omitted from the bonus design. The weight from the Flow-thru component should be redistributed to the other components.
Weight Parameters
3 20% - 30%100% Perfect CHAMPSCheck
1 30% - 40%Sales & RCP Make Plan Matrix
2 20% - 30%Flow-Thru
4 15% - 30%Strategic Initiative
The following are the performance measures and weight parameters
BMUs should determine the appropriate strategic measure initiative and adjust weights based on overall BMU strategy
A bonus can be earned for achieving targets on each measure, separately
16
RGM Bonus - Step 1 - Target Payout
Use market data to establish the overall bonus target amount
Market pricing – target Total Cash at the 50th percentile base salary and 75th percentile bonus taking into consideration the following:
Appropriate “mix” of base pay and variable pay
Financial ability to pay at the desired market level
Tips and Advice• Avoid major target
changes from year to year
Comparison of Yum! Total Cash to Market Total Cash
Market Data - Restaurant/Unit Manager
25th Percentile 50th Percentile 75th Percentile Yum! RGM Average
0
$10.0
$20.0
$30.0
$40.0
$50.0
An
nu
al D
oll
ars
(000
)
Base Pay Target Bonus Amount
Example Data
$38.5 $38.5 $38.5 $40.0
$3.9 $5.8$8.9 $6.0
$42.4 $44.3$47.4 $46.0
In this example, Yum Total Cash should be between $44.3 and $47.4
17
RGM Bonus - Step 1 - Target Payout
Worksheet Tab in the Bonus Modeling Tool
Calculate the target payout for each bonus component using the weight parameters
1_TargetBonus
From Market Assessment
Calculate a bonus target amount for each component.
6,000 x .30 = $1,800
2
Change to reflect your bonus weightings.
Overall Bonus Target $6,000
CategoryWeight
ParametersWeight for Example $ Target
Sales & RCP Make Plan Matrix 30% - 40% 30% $1,800
Flow-Thru 20%-30% 20% $1,200
100% Perfect CHAMPSCheck 20% - 30% 30% $1,800
Strategic Initiative 15%-30% 20% $1,200
Overall 100% $6,000
Target by Category1
18
RGM Bonus -Step 2 - Sales Planning
Worksheet Tab in the Bonus Modeling Tool
2004 Sales Growth will be used to set the minimum value at which a bonus will be paid (“threshold”) for Sales vs. Plan on the Make Plan matrix
3
2_SalesPlan
3...
Calculations:2004 Sales Growth 239,100,390 245,314,938 2.6%
CountArea
IDStore
ID
2003 Sales Plan
2003 Sales Actual
2003 Sales
vs Plan
2004 Sales Plan
2004 Sales
Growth1 001 1,000 1,010,000 1,085,511 107.5% 1,097,861 1.1%2 001 1,002 730,000 752,000 103.0% 790,617 5.1%
199 025 1,396 765,000 751,000 98.2% 781,830 4.1%200 025 1,398 930,000 925,000 99.5% 950,460 2.8%
Sales Data - 2003 Actual and Plan; 2004 Plan
Collect Sales Plan data for the upcoming year
Calculate sums:2003 Sales Actual2004 Sales Plan
Calculate 2004 Sales Growth
(245,314,938 - 239,100,390) 239,100,390 = 2.6%
Make sure this number aligns to the BMU goal!
1
1
2 3
2 2 3
19
CountArea
ID Store ID
2003 RCP Plan
2003 RCP
Actual
2003 RCP
vs. Plan
2004 RCP Plan
2004 RCP
Growth
1 001 1,000 280,000 308,000 110.0% 327,000 6.2%
2 001 1,002 201,663 205,000 101.7% 223,733 9.1%
198 025 1,394 464,785 478,728 103.0% 526,647 10.0%
199 025 1,396 221,434 228,077 103.0% 255,826 12.2%
200 025 1,398 261,934 269,792 103.0% 305,527 13.2%
Averages 356,713 384,436 107.8% 410,420 6.8%
RCP Data - 2003 Actual and Plan; 2004 Plan
RGM Bonus -Step 3 - Profit (RCP) Planning
Tips and Advice• Work with Finance to ensure that the
overall RCP growth percentage is aligned to the BMU goal.
Worksheet Tab in the Bonus Modeling Tool
Average 2004 RCP Plan will be used as a basis for modeling on the Make Plan matrix and Flow-Thru chart
3...
Collect RCP data for the upcoming year
Calculate averages:2003 RCP Actual2004 RCP Plan
1
2
1
22
3_ProfitPlan
20
RGM Bonus -Step 4 - Develop the Make Plan Matrix
Objective• Fuel “Beat Year Ago” mentality• Sales vs. Plan is the Fair Pay measure
Plan assumes growth over prior yearPlan normalizes prior year peaks/valleys
and addresses quarterly anomalies
Design Parameters• Based on actual RCP results (volume-based)• Bonus increases with increase in profitable
sales• Quarterly calculation (i.e. payout based on
quarterly results)• Weight of component can vary between 30%
– 40%
Targets and Thresholds• Business Unit establishes thresholds
• The lowest point for bonus payment (e.g., payout 50% for “nearly hitting plan”) should be set such that performance exceeds prior year on a national basis
• Payouts will vary by BMU to fit strategy and financial planning • % RCP pool figure will vary based on component weight and average RCP for the BMU• 100% factor within the matrix should correspond to 100% Sales to Plan and 100% RCP to Plan • 300% factor within the matrix is the maximum upside potential and should typically reward 5-10%
of performers
21
RGM Bonus -Step 4 - Develop the Make Plan Matrix (continued)
Basic steps
Calculate the Make Plan bonus target as % of the average 2004 RCP PlanThis number will tell you the percentage of profit that should be paid for achieving RCP and Sales plans
Set up the spreadsheet to model the matrix Establish thresholds (the minimum level of performance for which a bonus will be paid) and maximums on the matrix Adjust Sales and RCP scales to determine the cost of the bonus
The modeling tool will calculate the average payout that the matrix will provide compared to the bonus target that you are trying to achieve based on prior year’s performance Adjust matrix payouts to ensure bonus is affordable
Make sure to include your Operations and Finance partners to tailor your design to the BMU.
The information on the following pages is intended as guidelines to assist you in decision making around the Make Plan matrix. Judgment is required to focus appropriate behavior
within the BMU.
22
RGM Bonus -Step 4 - Develop the Make Plan Matrix
Worksheet Tab in the Bonus Modeling Tool
Calculate Make Plan bonus target as % of the average 2004 RCP Plan
Make Plan Target as % of RCP Plan is the percentage of profit that RGMs would be paid for achieving sales and profit plans. The number will be used as the basis for calculating the payout on the Make Plan Matrix.
4a_MakePlanMatrix
(1,800 410,420) x 100 = .44%
From Step 1
From Step 3Sales & RCP Make Plan Bonus Target 1,800
Average 2004 RCP Plan 410,420
Make Plan Bonus Target as % of RCP Plan 0.44%
Calculation of Make Plan Target as a % of RCP
23
CountStore
ID
2003 Sales vs.
Plan
2003 RCP vs.
Plan
2004 RCPPlan
2004 RCP Actual
.44% of RCP
Matrix Multiplier All Receivers
1 1,000 107.5% 110.0% 327,000 359,700 1,578 200% 3,155 3,155
2 1,002 103.0% 101.7% 223,733 227,435 997 125% 1,247 1,247
12 1,022 102.2% 90.6% 372,887 337,806 1,482 0% 0
199 1,396 98.2% 103.0% 255,826 263,501 1,156 60% 693 693
200 1,398 99.5% 103.0% 305,527 314,693 1,380 60% 828 828
Estimated Pay-out if Last Year's Performance
Pay-Outs
RGM Bonus -Step 4 - Develop the Make Plan Matrix (continued)
Set up the spreadsheet to model the matrix
Worksheet Tab in the Bonus Modeling Tool
4b_MakePlanMatrix
12 3
In the bonus modeling tool,include your prior year Sales
and RCP data as well ascurrent year RCP Plan
4 5
12 3 4
5
Identify the appropriate matrix multiplier from the Make Plan matrix using 2003 Sales vs. Plan and
2003 RCP vs. Plan
Calculate payouts by multiplying .44% of RCP by the Matrix Multiplier
1,578 x 2.0 = 3,156
Calculate .44% of 2004 RCP Actual for each
restaurant
.0044 x 359,700 = 1,578
Calculate estimated 2004 RCP Actual based on last
year’s result1.1 x 327,000 = 359,700
Create a column for “Receivers” and for those
RGMs who earned $0 bonus, leave the cell blank.
6
24
RGM Bonus -Step 4 - Develop the Make Plan Matrix (continued)
Calculate averages
Worksheet Tab in the Bonus Modeling Tool
There are two averages that should be calculated:
“All” is the average of bonuses paid to all RGMs, even those who received $0. This number would be used to gauge the overall cost of the bonus. “Receivers” is the average of the bonus paid for only those RGMs who received a bonus (e.g., excludes those who received $0). This number would be used to assess how competitive the bonus is relative to the labor market.4b_MakePlanMatrix
Calculate the average payout for “Receivers”,
excluding payouts of $0.
2
Average Payout for "All" 2,130
Average Payout for "Receivers" 3,183
CountStore
ID
2003 Sales vs.
Plan
2003 RCP vs.
Plan
2004 RCPPlan
2004 RCP Actual
.58% of RCP
Matrix Multiplier All Receivers
1 1,000 107.5% 110.0% 327,000 359,700 1,578 200% 3,155 3,155
2 1,002 103.0% 101.7% 223,733 227,435 997 125% 1,247 1,247
12 1,022 102.2% 90.6% 372,887 337,806 1,482 0% 0
Estimated Pay-out if Last Year's Performance
Pay-Outs
1
1Calculate the average payout for “All”, including
payouts of $0. 2
25
RGM Bonus -Step 4 - Develop the Make Plan Matrix (continued)
Set Sales minimum for payout – To ensure “Beat Year Ago” is achieved, the minimum should be set such that achieving the minimum level of performance will result in improvement over the prior year. In this example, sales growth is targeted to be 2.6% (from Step 2) so payment should be made only when that level of performance is achieved (98% of plan).
Guidelines - Setting Sales and RCP Scales
Set RCP minimum level of payout – Work with Finance to determine the expected level of RCP if 98% of Sales is achieved. A rule of thumb used in the US is to assume that RCP will be 33% of Sales. This number will vary based on the country's margins. For example…
Formulas:2004 Sales Plan x .98 X .33 = Expected 2004 RCPExpected 2004 RCP 2004 RCP Plan = Threshold
Example of an average store1,226,575 x .98 X .33 = 396,674396,674 410,420 = 96.6%
The first increment is typically from the threshold amount (i.e., 98%) to 99.9%. Model the scales using the bonus modeling tool (see next slide)
0.44% % of RCP Times 98 100 102 105 108 110--- --- --- --- --- ---
99.99 101.99 104.99 107.99 109
96 --- 99.99 40% 50% 50% 50% 50% 50%
100 --- 101.99 50% 100% 125% 135% 145% 150%
102 --- 103.99 60% 100% 135% 150% 175% 200%
104 --- 109.99 60% 100% 145% 175% 200% 225%
110 --- 114.99 60% 100% 155% 200% 250% 275%
115 --- 60% 100% 165% 225% 275% 300%
Net Sales vs. Plan
RC
P v
s P
lan
For setting both Sales and RCP scales, you may want to consider aligning the scales to the Balance Scorecard targets.
26
RGM Bonus -Step 4 - Develop the Make Plan Matrix (continued)
0.44% % of RCP Times 98 100 102 105 108 110--- --- --- --- --- ---
99.99 101.99 104.99 107.99 109
96 --- 99.99 40% 50% 50% 50% 50% 50%
100 --- 101.99 60% 100% 125% 150% 175% 175%
102 --- 103.99 60% 100% 150% 175% 200% 200%
104 --- 109.99 60% 100% 150% 200% 200% 200%
110 --- 114.99 60% 100% 150% 200% 225% 225%
115 --- 60% 100% 150% 200% 225% 250%
Net Sales vs. Plan
RC
P v
s P
lan
Adjust scales to determine what total spending would be and if the
program would be affordable
Average Payout for “All” would be the number used
for accrual
Average Payout for “Receivers” would be the number to gauge how you
are paying for performance. $1,800
should be the payment for achieving plans. The
matrix is paying $3,183 for exceeding plans.
1
1
2
3
2
3
Worksheet Tabs
4c_MakePlanMatrix
4b_MakePlanMatrix
1
1
2003 Est. 2004
Make Plan Target 1,800
Actual Sales vs Plan 102.4% 102.4%
Actual RCP vs Plan 107.8% 107.8%
Average Payout for "All" 2,124
Average Payout for "Receivers" 3,173
% of RGMs Receiving a Bonus 67%
Count Area IDStore
ID
2003 Sales vs.
Plan
2003 RCP vs.
Plan
2004 RCPPlan
2004 RCP Actual
.44% of RCP
Matrix Multiplier All Receivers
1 001 1,000 107.5% 110.0% 327,000 359,700 1,578 200% 3,155 3,155
2 001 1,002 103.0% 101.7% 223,733 227,435 997 125% 1,247 1,247
199 025 1,396 98.2% 103.0% 255,826 263,501 1,156 60% 693 693
200 025 1,398 99.5% 103.0% 305,527 314,693 1,380 60% 828 828
Averages 102.6% 107.8% 410,420 445,374 2,124 3,173
Estimated Pay-out if Last Year's PerformancePay-Outs
27
RGM Bonus -Step 4 - Develop the Make Plan Matrix (continued)
If the bonus is not affordable using the current matrix percentages, consider changing the matrix percentages
Again, the following are guidelines to assist you in decision making; judgment is required to focus appropriate behavior within your BMU
See Next Slide for Matrix Graphic
Guidelines
Pay 100% target at 100% of RCP Plan and Sales Plan
If you must reduce cost, adjust from 300% down to 250% (adjust other matrix cells accordingly)
Pay a percentage of target for nearly achieving plan. To reduce cost, consider holding payment flat for increasing sales but not achieving profit plan
Encourage both growth in sales and growth in profit
To avoid negative behaviors, consider maintaining a flat percentage for not increasing sales but increasing profit.
Encourage sales growth
Consider making the increase between these increments larger to reflect the fact that it is more difficult to achieve these levels of performance. Reduce the matrix payouts below this level.
28
RGM Bonus -Step 4 - Develop the Make Plan Matrix (continued)
0.44% % of RCP Times 98 100 102 105 108 110--- --- --- --- --- ---
99.99 101.99 104.99 107.99 109
96 --- 99.99 40% 50% 50% 50% 50% 50%
100 --- 101.99 50% 100% 125% 135% 145% 150%
102 --- 103.99 60% 100% 135% 150% 175% 200%
104 --- 109.99 60% 100% 145% 175% 200% 225%
110 --- 114.99 60% 100% 155% 200% 250% 275%
115 --- 60% 100% 165% 225% 275% 300%
Net Sales vs. Plan
RC
P v
s P
lan
29
RGM Bonus -Step 5 - Develop the Flow-Thru Chart
Objective
• Focus RGMs on maximizing profitability by focusing on costs that they control
• Flow-Thru reflects bottom-line controls by adjusting for sales plan attainment
• Bonus increases with increase in profitable sales
Design Parameters
• Based on actual RCP results (volume-based)
• Quarterly calculation (i.e. payout based on quarterly results)
• Weight of component can vary between 20% – 30%
Targets and Thresholds
• % RCP pool figure will vary based on component weight and average RCP for the BMU
• 100% factor on the Flow-Thru chart should correspond to at least 100% RCP to Flow-Thru index
• All other percentages on the chart can vary based on BMU discretion
• BMU establishes thresholds
• Establish thresholds that ensure good long-term cost control decisions are made
30
RGM Bonus -Step 5 - Develop the Flow-Thru Chart
BMUs may have a different Flow-Thru calculation than the one outlined in the following example
Consult with your Finance partner on how Flow-Thru works for the BMU
31
Flow-Thru Bonus Target 1,200
Average 2004 RCP Plan 410,420
Flow-Thru Payout as % of RCP Plan 0.29%
Calculation of Make Plan Target as a % of RCP
RGM Bonus -Step 5 - Develop the Flow-Thru Chart
Worksheet Tab in the Bonus Modeling Tool
Calculate Flow-Thru Bonus Target as a % of the average 2004 RCP Plan
Flow-Thru Payout as % of RCP Plan is the percentage of actual RCP that RGMs would receive for achieving Flow-Thru targets. The number will be used as the basis for calculating the payout on the Flow-Thru chart.
Calculate the Flow-Thru Bonus Target as a % of Average 2004 RCP Plan
(1,200 410,420) x 100 = .29%
From Step 1
From Step 3
5a_FlowThru
32
RGM Bonus -Step 5 - Develop the Flow-Thru Chart
Set up the spreadsheet to model the matrix
Worksheet Tab in the Bonus Modeling Tool
5c_FlowThru
3
Identify the appropriate multiplier from the Flow-Thru
chart (next slide) using estimated 2004 Flow-Thru
Calculate payouts by multiplying .29% of RCP by the
chart multiplier
.0029 x 359,700 x 1.5 = 1,565
4
Flow-Thru Bonus Target 1,200
Average 2004 RCP Plan 410,420
Flow-Thru Target as % of RCP Plan 0.29%
Estimated Average Pay-out 1,362
Count Area ID Store ID2003
Flow ThruEstimated 2004
Flow Thru
Estimated 2004 Actual
RCP
Estimated RCP % (from
chart)
Estimated Bonus Payout
1 001 1,000 103.6 103.6 359,700 150.0% 1,5652 001 1,002 102.5 102.5 227,435 125.0% 824
199 025 1,396 104.0 104.0 255,826 200.0% 1,484200 025 1,398 98.0 98.0 305,527 50.0% 443
1
Assume that 2004 Flow-Thru will equal 2003 Flow-Thru for each restaurant
1
Include estimated 2004 RCP data from “Make Plan” Matrix modeling
2
2 34
33
RGM Bonus -Step 5 - Develop Flow-Thru Chart
Set 100% payout at 100% RCP vs. Flow-Thru %;
Set at bonus target for the component ($1,200)
Allow for threshold payment for achieving within 2-3% of the goal. Work with Finance to determine the appropriate
RCP vs. Flow-Thru %.
Set the maximum based on your performance distribution and what
the BMU can afford (see next slide)
Based on the performance distribution, create a logical
progression for payment (see next slide). As a starting point,
you may want to align to Balanced Scorecard targets.
0.29% (.0029) of actual RCP x quarterly multiplier
Quarterly Multiplier
104 200%
103 - 103.9 150%
102 - 102.9 125%
101 - 101.9 110%
98 - 99.9 50%
97.9 0%
RCP versus Flow-Thru % Payout
2,400
1,800
1,500
1,320
1,200
600
0
100 - 100.9 100%
Worksheet Tab in the Bonus Modeling Tool
5b_FlowThru
34
0.29% (.0029) of actual RCP x quarterly multiplier
Quarterly Multiplier
104 200%
103 - 103.9 150%
102 - 102.9 125%
101 - 101.9 110%
100 - 100.9 100%
98 - 99.9 50%
97.9 0%
RCP Versus Flow-thru %
Flow-Thru Bonus Target 1,200
Assuming Actual Flow-thru of . . . 100.3
Assuming Actual RCP of . . . 107.8%
Estimated Average Pay-out 1,373
Count Store ID2003
Flow Thru
Estimated 2004
Flow Thru
Estimated 2004 Actual
RCP
Estimated RCP %
(from chart)
Estimated Bonus Payout
1 1,000 103.6 103.6 359,700 150.0% 1,578
2 1,002 102.5 102.5 227,435 125.0% 831
199 1,396 104.0 104.0 255,826 200.0% 1,496
200 1,398 98.0 98.0 305,527 50.0% 447
Averages 100.3 100.3 100% 1,373
104.690th Percentile
RGM Bonus -Step 5 - Develop the Flow-Thru Chart
Worksheet Tabs
Set the maximum at around the 90th percentile (e.g., only 5-10% of RGMs should achieve this level of payment)
Use the modeling tool to determine the appropriate breakpoints based on
what the BMU can afford
Adjust scales to determine what total spending would
be and if the program would be affordable
3
3
3
5b_FlowThru
5c_FlowThru
35
RGM Bonus -Step 6 - Develop 100% CHAMPSCheck Chart
Objective
• 100% CHAMPS = Satisfied Customers
Design Parameters• Every CHAMPSCheck score of 100% is rewarded
• Every customer provides RGM with opportunity to generate more sales and bonus
• Fixed $ payout assumes similar level of complexity in delivering 100% CHAMPS, regardless of volume
• Period calculation (i.e. payout based on period results)• Weight of component can vary between 20% – 30%
Targets and Thresholds
• Targets should be set to motivate improvement over prior year
• Work closely with your CHAMPS team to ensure that you have a good prediction of 100% CHAMPSCheck in the base year and the year for which you are planning
• BMU establishes threshold for payment
• Payouts vary by BMU to fit strategy
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RGM Bonus -Step 6 - Develop 100% CHAMPSCheck Chart
2003 Actual
2004 Estimated
CHAMPSCheck Bonus Target 1,800
Average Number of CHAMPSCheck per Year 16 16
% of Total CHAMPSCHECKS at 100% 53.8% 62.8%
Average Number of 100% CHAMPSChecks 9 10
Bonus Payout per 100% CHAMPSCheck 180.00
CHAMPSCheck Data - 2003 Actual and Estimated 2004
From Step 1
Enter the 2004 CHAMPSCheck target
Calculate the average number of CHAMPSChecks needed to
achieve the goal
16 * .628 = 10
Calculate the bonus payout per 100% CHAMPSCheck score
1,800 10 = 180
Enter the average number of CHAMPSChecks per year
1
2
3
1 1
2
3
4
4
Worksheet Tab in the Bonus Modeling Tool
6_CHAMPSPlanning
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RGM Bonus -Step 7 - Calculate Strategic Component Chart
Objective
• Align to BMU strategic objectives
• Business Unit can change strategic measure each year although we recommend balancing “year of initiative” with consistency
• Example - BMU could use People Measure (e.g. TM Turnover to drive people capability mindset) to balance Financial Measures
Design Parameters
• Must be measured on Balanced Scorecard Summary or Balanced Scorecard Detail reports
• Calculation timeframe can be period or quarterly (we recommend that you pay quarterly)
• Fixed $ or volume-based
• Should be a recognized strategic focus for BMU and YRI AOP
• Weight of component can vary between 15% – 30%
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1 2
3
2003 2004
TM Turnover Target Pay-out 1,200
Average TM Turnover Target 117% 100%
Improvement 15%
Team Member Turnover - 2003 Target and Estimated 2004
RGM Bonus -Step 7 - Calculate Strategic Component Chart
Example: Team Member Turnover dataThe Strategic Component should be
determined by the BMU. We recommend a People or Customer measure to balance the Financial measures.
3...
Use % of improvement to calculate the estimated 2004 TM Turnover by
restaurant
78 * (1-.123) = 68
Calculate the Average TM Turnover for the prior year
Enter the Target for 2004
Calculate % of improvement
(1.14-1.00)/1.14 * 100 = 12.3
1
2
3
4
4
Worksheet Tab in the Bonus Modeling Tool
7a_StrategicPlanning
Count Area ID Store ID
2003 Team Member Turnover
2004Team Member Turnover
1 001 1,000 78 672 001 1,002 127 108
199 025 1,396 42 36200 025 1,398 120 102
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TM Turnover Target Pay-out 1,200
Estimated Average Pay-out 1,338
Count Area ID Store ID
2003 Team Member Turnover
2004Team Member Turnover
Estimated Cost
1 001 1,000 78 67 2,4002 001 1,002 127 108 1,200
199 025 1,396 42 36 3,000200 025 1,398 120 102 1,200
RGM Bonus -Step 7 - Develop Strategic Component Chart
Adjust scales to determine what total spending would be and if the program would be affordable. As a starting point, you may want to align to Balanced
Scorecard targets.
Payout
0 - 54.9 3,000
55 -
74.9 2,400
75 - 99.9 1,500
100 - 114.9 1,200
115 - 129.9 900
130 + 0
Leverage Multiple
250%
200%
125%
100%
75%
0%
Projected Annualized Turnover
Set the maximum at around the 10th percentile (e.g., only 5-10% of RGMs should achieve this level of payment). Payment can be up to 300% depending on what the BMU can afford.
Calculate the estimated bonus for each RGM using 2004 Team Member Turnover. For example, 69 falls into the 55-74.9 category yielding a bonus of $2,400.
Calculate the overall average payout.
Worksheet Tabs
7_StrategicPlanning
7_StrategicPayouts
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Putting it all together...
2 Flow-Thru
4 Strategic Initiative
1 Sales & RCP Make Plan Matrix
0.29% (.0029) of actual RCP x quarterly multiplier
Quarterly Multiplier
104 200%
103 - 103.9 150%
102 - 102.9 125%
101 - 101.9 110%
100 - 100.9 100%
98 - 99.9 50%
97.9 0%
RCP Versus Flow-thru %
3 100% Perfect CHAMPSCheck
$180 payout per 100% CHAMPSCheck Payout
0 --- 54.9 3,000
55 --- 74.9 2,400
75 --- 99.9 1,500
100 --- 114.9 1,200
115 --- 129.9 900
130 --- 0
Projected Annualized Turnover
0.44% % of RCP Times 98 100 102 105 108 110--- --- --- --- --- ---
99.99 101.99 104.99 107.99 109
96 --- 99.99 40% 50% 50% 50% 50% 50%
100 --- 101.99 50% 100% 125% 135% 145% 150%
102 --- 103.99 60% 100% 135% 150% 175% 200%
104 --- 109.99 60% 100% 145% 175% 200% 225%
110 --- 114.99 60% 100% 155% 200% 250% 275%
115 --- 60% 100% 165% 225% 275% 300%
Net Sales vs. Plan
RC
P v
s P
lan
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Validation
To validate the bonus design, the following should be taken into consideration
On an average basis, consider how the plan is paying out for the level of performance that is achieved
Is the overall cost of the bonus affordable for the BMU
Category TargetAverage
Payout "ALL"
Average Payout
"Receivers"
Total Projected
Cost
Sales & RCP Make Plan Matrix $1,800 $2,124 $3,173 $424,717
Flow-Thru $1,200 $1,362 $1,702 $272,353
100% Perfect CHAMPSCheck $1,800 $1,809 $1,809 $361,728
Strategic Initiative $1,200 $1,338 $1,565 $267,600
Overall $6,000 $6,632 $8,249 $1,326,398
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Validation (continued)
When calculating the projected cost of the bonus, the following should be taken into consideration:
This bonus modeling technique is modeled on annual data. To validate the bonus, you may want to model the cost of the bonus for each quarter of data to ensure that you are not under or over funding the plan.
The model assumes that all stores will be open for a full year. Work with Finance to determine the appropriate assumptions to apply to the total cost figure.
The model assumes that no RGMs will forfeit the bonus by terminating employment. Work with Finance to determine the appropriate assumptions to apply to the total cost figure.
The model assumes that restaurants will perform at the same level to plan as they did in the prior year.
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Validation (continued)
To test the bonus, calculate bonus payouts for different performance levels and restaurant volumes
Does the payout level appropriately reflect performance?
Restaurant 200• Almost achieved Sales Plan• Achieved RCP Plan• Almost achieves Flow-Thru target• 10 of 16 100% CHAMPSChecks• Achieves TM Turnover Target
Receives 73% of bonus target
Restaurant 13• Achieved Sales Plan• Achieved RCP Plan• Exceeds Flow-Thru target• 8 of 16 100% CHAMPSChecks• Achieves TM Turnover Target
Receives 118% of bonus target
Restaurant 161• Exceeds Sales Plan• Exceeds RCP Plan• Achieves Flow-Thru target• 6 of 16 100% CHAMPSChecks• Achieves TM Turnover Target
Receives 215% of bonus target
Category Restaurant 200 Restaurant 13 Restaurant 161Sales and RCP Make Plan Matrix
Payout Payout PayoutSales vs. Plan 99% $828 100% $1,870 116% $6,885RCP vs. Plan 103% 103% 112%Estimated Actual RCP 314,693 426,447 627,982Matrix Multiplier 60% 100% 250%Flow-ThruEstimated 2004 Flow-Thru 98.0 $443 105.6 $2,473 104.0 $3,642Flow-Thru Multiplier 50% 200% 200%100% Perfect CHAMPSCheckNumber of 100% CHAMPSChecks 10 $1,880 8 $1,520 6 $1,160Strategic InitiativeEstimated Team Member Turnover 102 $1,200 106 $1,200 104 $1,200Estimated Bonus Payout $4,351 $7,063 $12,887Target Bonus $6,000 $6,000 $6,000% of Total Payout 73% 118% 215%