Modeling is a very useful tool in SAP Commissions, designed to help your compensation team predict the impact of changes to your plan on future compensation payouts. The Modeling workspace can be found under the Plans menu in SAP Commissions. It’s important to keep in mind that while Modeling allows you to input an assumed change in overall revenue, it is not a forecasting tool!
This begs the question, if it’s not a forecasting tool, exactly what does Modeling do for me?
Let’s see an example. Let’s say that you’re using SAP Commissions to manage a compensation plan in which everyone gets a nice year-end bonus if they meet their annual sales quota. Most years, about half the sales team gets this bonus. So everyone is motivated to sell, those who make the quota get a bonus, and everyone is happy.
Now, let’s say your ERP forecasting tool helps determine that next year’s sales will increase by 8% next year. Great! But wait…with that much growth, everyone will meet their quota, which means everyone will get their bonus. Using this year’s compensation plan, this also means all of your revenue growth will be eaten up by bonuses. Now your sales team is happy, but your finance team is in a bind. What you need is a way to adjust the quotas and the year-end bonuses so your quotas are balanced out.
Another advantage of Modeling is that it allows your team to test run a new plan with historical or test data without affecting your production numbers. And if you like the new plan, it’s easy to promote it to production.
How does Modeling work?
Modeling uses the same engine as the calculation, running through the compensation plans already assigned to your payees. When the model is run, it uses either historical data or test data as the source, accounting for forecasted growth. The resulting data shows the actual increase in compensation payouts, taking into account rate acceleration, bonuses and other incentives, so you will be able to see just how much an increased revenue might affect compensation.
The basic steps to create a Model are:
1. In the Modeling Workspace, create and name your model.
2. Set up the model with Calendar, budget, planning periods, transaction inputs and other details
3. Add the plan to the model
4. Generate the results of the model
5. If needed, promote the model to production
Now on to the details:
Creating the Model
- Select Models from the Plans menu
- Click Create Model
- Enter a unique model name in the Model Name field.
- Enter a description of the model in the Description field. This field is optional.
- Select the Calendar and Processing Unit.
- Select the Budget (optional)
- Budget for Model Period (or)
- Calculate budget as % of transaction value
- Select the source date for the model. The Source Periods contain the historical data you’ll be using for the comparison. They also determine which plans can be used in the Model.
- Select the effective dates of the model if promoted to production.
- Remember, this is only a Model; these periods do not impact your Calculations.
- If you decide to promote the model changes to Production, this will be the default promotion period.
Inputting the Source Period
The Source Period is just what it sounds like: the periods that you’ll use to select your source data. This data is what the Model will use as its input. You can select from a few options here.
First, you can base your source data on historical data or use model transactions, or “dummy” data.
- Use transaction from the source period allows the model to reuse existing source period transactions during the model run. This is the default and is the best option to ensure that all data is incorporated in your model run.
- Use only measurement from the source period allows the model to reuse existing source primary measurements during the model run. If you use this option, the model run recalculates results starting from Secondary Measurements instead of Primary Measurements. This is the most efficient option in most cases.
- Use new model transactions only allows the model to use only transactions uploaded for this model. If you use this option, the model run recalculates results starting from Credits.
You can load sample transaction data if you’d like to include it in your model. A few notes on Transaction Inputs:
- Uploaded transactions exist in model context only and are not available outside the model.
- The model run executes the Classification stage for all uploaded transactions.
- Production transactions are not reclassified during the model run.
To upload model transactions, click on either the first or last option under ‘Source Period Inputs’ to make ‘Upload Transactions’ button active.
- Optional Uplift allows you to make a mass adjustment to allow for market growth. For example, if you assume an 8% growth in sales over the Planning Period, enter 8 in this field as shown in the image above.
Adding a plan
As I mentioned earlier, you’re not limited to just modeling changes in revenue; you can also add a new plan to your model. This lets you see what compensation would look like with either an entirely new plan or an adjustment to an existing plan. One thing to note: while you can run a model using multiple plans, it is not recommended. This is because all results are aggregated, which makes it hard to see the results of each change. A better option is to run a separate model for each compensation plan.
To add a plan to a model:
- Save the Model Definition. More detail will appear in the lower pane.
- Use the following steps to select a plan:
- Click the New icon to the right of the Modeled Plans
- Select a Plan from the dropdown list
- Click Add
- Click Back to close the window.
- This will populate the Modeled Plans window with the Rules, Fixed Values, and other elements in the Plan.
3. Optionally, add any Rules or other elements to the Model:
- Click the type of element; for example, Territories
- The list of elements of this type will appear under the list of Rule Elements
- Select the element to add to the Model
- This will display the element in the Details tab of the Model Summary to the right
For example, the image below shows the addition of a Territory called T_Products to the Model:
4. Edit the rule element
- Click the pencil in the upper right to change to edit mode
- Make any changes to the rule element
- Save changes to the rule element
5. Save the Model definition.
After you’ve created the Model, you can generate results for that model by performing a model run. The model input selection determines the stages that run.
To generate model results:
- Select the model you want to run and click the Run button at the top of the page.
- You will be asked for Selected Plans to be Processed. Your choices are:
- All plans in the source period – Use this option to process all available data.
- Simulated plans only – Use this option to process only the plan you selected while building the model.
- Select the source period range.
- Select whether to process all Transactions (default) or only specific Transactions.
- Select whether to run the calculation or schedule it to run later
If you have run a model in the past, a dialog appears warning you that performing a model run removes any associated results for the model period(s).
- Click Start to run the Model.
Once the model run is complete, the following steps will help you see the results:
- Return to the Models workspace
- Select the Model you just ran
- In the lower pane, select the Modeled Plan
- In the Model Summary, choose to compare the Model by Measurement, Incentive, or Deposit.
- Select the Unit Type
- Click Load Results
Promoting a Model
If you wish to promote the changes made to Production, here are the steps. Keep in mind that once you promote a model, it can’t be undone.
- Click on the model to be promoted.
- In the Results tab for that model, click Promote.
- Select promotion periods, if needed.
- Validate and review promotion validation metrics.
- Promote the model, if validation is successful.