RGM / AC Bonus Guide. 2 Purpose and Report Contents Serve as an educational resource for HR and...

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


People Strategic Focus

e.g., Team Member Turnover

Sales“Make Plan” Matrix

ProfitFlow-Thru

Balanced Scorecard


Speed of Service

People Turnover

Core TrainingRetention

SalesNet Sales to Plan

ProfitProfit to Plan Flow-Thru

Balanced Scorecard


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%


30%

30%

20%

20%


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


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.


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


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


Set up the spreadsheet to model the matrix


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


Calculate averages


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


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


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


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


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


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


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


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


Flow-Thru Payout as % of RCP Plan 0.29%

Calculation of Make Plan Target as a % of RCP



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


Set up the spreadsheet to model the matrix


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 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%


5b_FlowThru

34



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 %


Assuming Actual Flow-thru of . . . 100.3

Assuming Actual RCP of . . . 107.8%


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


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

36

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


6_CHAMPSPlanning

37

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%

38

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


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

39

TM Turnover Target Pay-out 1,200


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

40

Putting it all together...

2 Flow-Thru

4 Strategic Initiative

1 Sales & RCP Make Plan Matrix



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

41

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

42

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.

43

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


Restaurant 161• Exceeds Sales Plan• Exceeds RCP Plan• Achieves Flow-Thru target• 6 of 16 100% CHAMPSChecks• Achieves TM Turnover 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%

RGM / AC Bonus Guide. 2 Purpose and Report Contents Serve as an educational resource for HR and...

Documents

Transcript of RGM / AC Bonus Guide. 2 Purpose and Report Contents Serve as an educational resource for HR and...