Fundamental to the Executive Pay Systems annual review methodology is the notion of an Incentive Pool allocated across the organisation based on performance. This Allocation of the Pool takes place before the individual bonus decisions are made - that is, before the pools are Distributed to individuals. To be able to allocate correctly, the relative information must be stored and the system needs to be able to deal with the intense complexities (for example, an excellent performing Business Unit may consist of 234 people receiving relatively high salaries whilst a poorly performing Business Unit may consist of 3428 people receiving relatively low salaries). How should the pool be divided between these two groups? How does a Manager deal with the complexities of such a decision? The PBR system has been designed to deal with this and a host of related arithmetic problems by simply inviting the Manager to indicate their position on performance and spread, view the outcome and make the decision. The first part of this process is the "Split" decision. Of the Pool allocted from above, the Manager needs to decide how much of it should be reserved for her Direct Reports and how much should be set aside for the teams reporting to those Direct Reports......

The "Split"

You'll notice that there is a capability to look at the "Scenario". This allows the Manager to see how the Split might be distributed amongst their Direct Reports when the time comes to do so.....

Scenario Testing

Having decided the split, the next decision relates to the impact of performance on the Allocation of the remaining Pool. That is, how much difference should there be between, say, poor performing teams and excellent performing teams. This is the "Spread" decision and the PBR system shows the impact and invites the Manager to take this into account before making the Allocation decision, thus.....

The Spread

The next step is for the Manager to indicate the relative performance of the teams reporting to them. The system shows the results and the Manager makes a decision, inputs the allocation and saves the result. This becomes the Incentive Pool allocated to the next level down.....

The Allocation

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