The definition of targets is a two-step activity:
1. Defining the target types that describe the nature of the target, such as a sales target or customer satisfaction.
2. Defining the target values, such as annual sales of USD 200,000 or 5 points for customer satisfaction.
The target type is the logical definition of abstract targets for a specific number of similar commission contract partners. The target types that you define are added to the standard commission contracts through the standard agreements for target agreements. In ICM, a differentiation is made between the following two target types:
● Elementary target types: these contain the actual values, correction values and target values.
● Complex target types: these consist of elementary target types but do not have any actual values or target values themselves. You determine through the commission case trigger the periodicity of the evaluation and the target administration system for the actual and target values of the assigned elementary target types.
The defined target values are available for each period in a target administration system.
The definition of complex target types comprises the following elements:
● Commission case trigger (period types such as monthly, yearly)
● Business objects (such as an insurance policy)
● Business transactions (such as a new business)
Each complex target type may consist of any number of other predefined elementary target types. For elementary target types, the levels of target achievement (LoT) can be determined directly from the target values, actual values and correction values. Methods to determine actual values, target values and correction values are assigned to complex target types:
○ Construction method to establish a link with the determined levels of target achievement of lower level target types
○ Locks for this target type
○ Levels of target achievement
○ Remuneration determination
1. Determine your targets based on target agreement model.
2. Specify the data for your targets in Customizing for Incentive and Commission Management under Basic and Master Data ® Standard Commission Contract ® Target Agreements ® Target Definition.
Abstract definition of targets
ABC Insurance defines the following abstract targets for its general agencies for the year 2005:
● Determination of production value for new business for “health insurance” line of business
● Determination of production value for additional business for “life insurance” line of business
● Stay below cancellation rate of 5% (represents a non-cancellation rate of 95%)
Since the “life insurance” and “health insurance” lines of business are treated differently from a revenue point of view, the above targets are weighted as follows:
● Level of target achievement “additional business life insurance” (additional life) is weighted with 75%.
● Level of target achievement “new business health insurance” (new business health) is weighted with 25%.
Staying below the cancellation rate is rated as a knockout criterion.
● If the general agency does not succeed in staying below the cancellation rate, no target remuneration is paid out.
● If the general agency is successful in staying below the cancellation rate, the target remuneration is paid out according to the specified weighting.
Concrete target agreements
The determination of target remuneration is explained in the example below for the general agencies of Heidelberg and Cottbus. Correction values have been defined for the “additional business life insurance” line of business since not all the new business will have been entered in the system for fiscal year change 2005/2006 but the values are already known to the sales agent and commission clerk.