Using a concrete example, this article explains the process of setting up and managing a target agreement between employee and manager.
Within each employee profile, Personio allows you to enter individual targets for the employee with the option to link them to a performance-based bonus. The bonus is calculated automatically.
The following image is a visual reflection of the most important steps in the target agreement process, which is described in more detail below.
Your sales employee, John Doe, receives a quarterly performance-based bonus that is tied to the achievement of certain targets. For Q3 2019, you have agreed on the following targets, with a target bonus of € 5,000:
- Undergo external training to optimize sales
- Acquire 40 new customers
Follow the steps described below in order to set up and subsequently manage the targets.
Basic Settings Prior to the Start of the Target Period
Entering the Performance-Based Bonus
John Doe receives a performance-based bonus of € 5,000. To set this up in Personio, navigate to Salary > Edit > Add bonus in the employee profile. Select option Target bonus percentage and enter the maximum bonus amount of € 5,000. Then select Quarterly as the interval, and enter 01.07.2019 under Change effective from.
Entering the Agreed Target
Now navigate to the Performance area within John Doe’s employee profile, and from the drop-down menu on the right, select Target. Enter Quarterly and Q3 2019 as the interval for the agreed target, and click on Add.
Now, while in editing mode, set up two new KPIs (Key Performance Indicators) for the targets ‘Undergo external training’ and ‘Customer acquisition’. Select Binary for the former and Quantitative for the latter. Apart from the details of the target itself, determine for each target whether it will flow into the bonus calculation of the selected period, and how it is weighted. Save your settings. You will be able to return to this view at any time to document the progress or to make notes.
Documenting the Progress During the Target Agreement Period
At some point in time during the quarter, you would like to discuss with John Doe what progress he has made towards achieving his targets. To reflect this in Personio, create a Feedback meeting. Under the Performance tab in John Doe’s profile, select Feedback meeting from the drop-down menu on the right; choose the desired category (e.g. ‘Development discussion’), and a suitable date. Learn here how to set up individual Feedback categories.
After the Feedback meeting has been created, you can add participants, change and specify the appointment, set the location, and add internal notes that will not be visible to the employee. Change the status from Open to Scheduled to send calendar invitations to each participant. Save your settings. Instructions on how to allow Personio to automatically remind you of Feedback meetings are available here.
After the feedback meeting with John Doe has taken place, return to the above-described view and change the status to Completed. Document the results of the discussion by entering free text within the feedback attributes that you have previously defined. You also have the option to upload a document within the appointment. Close the documentation of the meeting by clicking Submit. You will be able to access the results of the discussion again any time.
Find further information on creating and managing feedback meetings here.
Settings at the End of the Target Agreement Period
By the end of the 3rd quarter of 2019, John Doe has attended an external training to optimize sales, and he has acquired 50 new customers. Enter these results for the respective KPIs: Tick Achieved under the external training target, and enter the achieved acquisition target of 50 new customers.
John Doe has exceeded the customer acquisition target by 25 %. Accordingly, Personio calculates a bonus amount of overall 125 %.
Now navigate to the Salary tab. After a one-time confirmation in the salary overview, the bonus is displayed in the column Bonus. Depending on the settings, it may be shown at the end of the period, after the period, or distributed in equal parts over the period. Find further details here.
It is also possible to enter an amount that is different from the automatically calculated bonus, if needed.
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