Sample Aggregate Cost Model
The aggregate cost model projects the cost of the new compensation plans at different levels of business performance, and compares that cost to prior year costs. This simple example also includes some useful ratios of the cost of compensation as a percent of revenue, and per headcount. Depending on the critical business drivers other values may be included in the comparison or scenario creation such as:
- Gross margin
- Unit volume
- Detail by division or product line
- Specific large customer scenarios
- etc.
While the summary is relatively simple and usually fits on one page, the modeling and analysis behind it can be quite complex, and includes the results of the incumbent model in which the effects of the new plans on each incentive-eligible individual are modeled and assessed. View a sample incumbent model here.