Transcript of Jeremy Master's Q&A about linking pay to performance with enterprise compensation management

by Margaret Hein

October 26, 2011

I recently moderated a Web forum with HR 2012 speaker Jeremy Masters on linking pay to performance with enterprise compensation management and SAP ERP HCM. Jeremy covered topics such as custom business logic, handling employee movement between orgs, budget locking issues, new features with enhancement package 5, among other things.

For the full Q&A, you can view the questions and Jeremy's responses in the HR Forum, or read excerpts from the transcript of the Q&A below.

M.S. Hein (moderator): Welcome to today's forum!

In this one-hour forum, we invite you to ask your questions about Compensation Management to SAP ERP HCM expert Jeremy Masters of Worklogix. Jeremy is an HR Expert advisor and author, and featured HR 2012 conference speaker, and will be answering your questions in the forum today.

Thanks, Jeremy, for joining us today!

I see there are some questions already posted in the forum, so Jeremy will be starting in on those right away.

Beth Steifle: Do you have any tips on an easy procedure to re-use a test review/review item in the development and/or QA clients? Once the planning has been approved and activated, it is very cumbersome to reset everything – we have a procedure where we delete the budget structure, delete the new PA0008s that were built using an LSMW, delete the activated IT759s by running a program in debug so that we can tweak it to allow the deletion, and then delete the employee history table. There has to be a better way?

Jeremy Masters: Hi Beth,

Great question! The answer depends on what version of SAP you are on. Starting with EhP5, there are several standard SAP programs that you can use to re-set your data.

For example, in EhP5 (and I think also as early as EhP4), you can use transaction PECM_ADJUST_0759 to delete 0759 records. In EhP5, you now also have access to program RHECM_BUDGET_DELETE which can be used to both clear budget values as well as delete actual budgets.

As far as your IT0008 re-set, you will need to keep your existing LSMW for that. There is nothing to delete the IT0008 even in EhP5.

If you are EhP4 or before, the manual effort you are currently doing to reset the data will (unfortunately) have to continue. Sorry!

JacobAsirvatham: Hi Jeremy,

Can you please explain how linking pay to a performance tool works from a business and budgeting perspective?

Thanks, Jacob Asirvatham

Jeremy Masters: Hi Jacob,

Wow – big question! This one I could take a year to answer. In fact, there are some great books on the subject!

SAP ERP HCM Performance Management

Enterprise Compensation Management with SAP ERP HCM

Hey – what's wrong with a little self-promotion???

Anyway, getting back to your question: it’s a very complex one that deserves its own Q&A. I can tell you though that the latest EHp5 ECM worksheet (the one with the new UI) does directly link the performance form into the worksheet. In fact, one of the columns within the worksheet would display the appraisal rating (e.g., Exceeds, Meets, etc.) and, when clicked, it launches directly into the SAP Performance Management application where the manager can update ratings and supporting comments.

This is just one (important) integration point between ECM and Performance Management in SAP.

From a budgeting perspective, this is a separate process which requires an understanding of how merit budget, bonus pools, LTI pools, etc. are formulated within your company. There are several different ways to handle budgets but a discussion with your compensation group is needed to understand how the budgets/pools are calculated and rolled-up. Oftentimes, Finance is directly involved in determining budgets/pools based on forecasts and accruals.

Hope this at least scratches the surface on answering your question....

Jan Erik Nessmo: Hi Jeremy,

First off thank you for some great lectures at HR2010 in Barcelona last fall.

I have a question we’ve been having some issues with and hope there’s a solution for – and that's how to make budgets for hourly employees?

Thank you and all the best, Stine

Jeremy Masters: Hello Stine,

First – thanks for the comments on Barcelona. It was a fun time.

With respect to your hourly employee question: it depends on how managers will plan for these employees. You first need to know if planning will be done on an annualized or hourly basis. Then, via the new Employee BAdI (there is a new one, HRECM00_BDG_EE) you can perform the calculations using the custom option for bottom up budgeting. This BAdI is only available with Enhancement Pack 5!

Planning and budget for hourly employees should obviously be treated in the same fashion and this BAdI (in combination with your comp review item configuration) will do the trick!

Kir Chern: Hi Jeremy,

I have 3 questions:

1. Is there any way to influence how the budget is distributed/allocated or consumed by employees? Currently, the budget is allocated to employees based on IT1 staffing information, but in our context, we need to consider IT27 (cost distribution) instead. For example, a budget of $100K is created for an org unit A responsible for WBS1, and $100K for org unit B responsible for WBS2. Assume that an employee is co-funded by WBS1 50% and WBS2 50%, and the employee is awarded a merit increment of $1000. The budget in this context should be reduced by $500 each from the 2 org units, A and B. Is there any way to change or influence this?

2. Is any provision possible to do compensation planning prior to completion of an appraisal for employees or in parallel with the appraisal (we're using flexible performance management)? For example, part appraiser 1 submits the appraisal and compensation recommendation together to the next level or part appraiser, and so on, for approval.

3. What new improvements can we expect to see for ECM in EHP 6?

Thank you.

Jeremy Masters: Hi Kir,

I remember speaking to you in the past! How are you?

Let me address each question separately:

1. You should be able to take care of your custom business rules for budget/bonus pooling within the new BAdI HRECM00_BDG_EE if you are on EhP5. If you are not yet on EhP5, you will need to revisit the older BAdI HRECM00_BDG0001. In either BAdI, you can perform any of the complex logic with budget calculations and roll-ups. In your case, you may need to reference one or more custom tables.

2. Yes, you can absolutely plan compensation without a finalized appraisal (or fully calibrated rating). You need to adjust some of your configuration – look at your Appraisal Rule configuration within the Eligibility section of ECM as well as tweaking the function module used within the planning worksheet to show the rating (even though it’s not in the Completed/Approved status). Many customers need to do this since they have not yet synced their performance and compensation management timelines.

3. As far as EhP6, I am not aware of any enhancements for ECM but I need to defer to SAP on this one.

SantoshSingh: Jeremy,

We have a custom solution to link pay to performance. We have a custom IT which we have deployed as a WDA application for managers to rate their employees and we then recommend merit and bonus based on these ratings on the MSS compensation planning screen. We would like to go with the standard solution one day. Is it possible with ESS/MSS BP of 1.0? What would you recommend? We have a lot of custom changes in WDJ for MSS–ECM in NWDS and from what I hear upgrading the BP and accommodating these changes would be a pain?

Jeremy Masters: Hi Santosh,

You are not alone – many customers have already come up with creative solutions for paying for performance.

First let me qualify and say each customer’s requirement is unique, so take this advice with a grain of salt.

My best advice for you (not knowing your functionality and business process) is to wait for EhP5 functionality. In EhP5, there is a new UI based on Web Dynpro ABAP technology. You maybe be able to leverage some of your custom business logic (as needed) to the standard application. Using the Enhancement framework within Web Dynpro ABAP, it’s fairly easy (with the right resources) to make changes to the screens and navigation elements (buttons, floor plan manager, labels, etc.).

Hope that helps.

rob preston: Hi Jeremy, thank you for this opportunity. It is my understanding that with EhPk5, there is dynamic reallocation of budget, but that this is only supported at the employee level. Meaning if an employee moves from one manager/org to another, the budget “moves” to the new chief of the organization unit. Can you confirm that if an entire org unit moves from one chief to another, that we would need to write custom code/BAdI since this type of movement is not supported “out of the box” via Ehpk5?

Jeremy Masters: Hi Rob,

You have asked one of the golden questions!!!

Let me clarify this, as many customers are finding this a challenge.

The new employee (bottom-up) budgeting does handle transfers (employee movement) from one org to another. It also handles if you “drag and drop” a position (within PPOSE) from one org to another. These all get considered in the roll-up process during the refresh (FYI: There is a NEW program – and supporting tables – for this).

However, the following major league considerations need to be understood: As with the previous versions of budgeting, once you initialize your budgets for the first time, it is “static” and locked. No org-to-org movement can happen since it’s truly still a snapshot of time for your planning. Also, no new org units can be created (or deleted/delimited) for that matter.

This has been a challenge to say the least for some customers already on EhP5. I had discussions with SAP last week on this very topic and they have made available a consulting note which is posting soon. Note number is 1645410.

Again, great question – I could take the whole hour on this subject.

Laura_Bojanowski: Hi Jeremy,

My question relates to “budget locking” during manager planning. We have been running on ECM now for 3 years for our annual compensation planning and this issue still haunts us every year and we cannot seem to solve it. We use a fixed date of the organizational structure from which planning is based (12/31/prev year) and do our planning in February. We have salary increases that become effective up to June of that year, so we have our budget period set till June.

We always have problems with some budgets not being updated with dollars spent (and therefore dollars remaining) in the budget maintenance table and display budgets R3 report. We over the years found there to be a couple reasons for this (position is end-dated before our June budget period date, person is end dated before the June date) but have found no solution to ensure the budgets are always updated during our planning cycle for any planning the managers are doing.

I realize they get budget lock messages in the portal, but it is not intuitive to the line manager what this means and they ignore it (which they can). We also have not found a way to stop the data entry when the budget lock message is given. What this leaves us with at the end of the cycle is managers who have overspent their budgets.

Do you have any advice on this situation? Or have other scenarios where you know of that the budget maintenance table would not be updated?

Thanks in advance.


Jeremy Masters: Hi Lori,

You brought up one of the biggest gremlins of ECM – budget locking!

Unfortunately, this still haunts a lot of customers still running ECM.

For your specific situation, I would check a few things:

1) Explore not having your budget period go until June. Perhaps try to align your budget period with your planning period. Obviously the challenge there is that you need it to include the effective date of your 0759 record(s). You could explore having a different (Feb/March) date on your 0759 but then including logic to have a different effective date on your IT0008 for the June increase during activation.

This is just brainstorming by the way . . . I am not sure I even like that recommendation!

2) Explore any security issues that might be happening. I have seen many customers have issues with budgets not being updated because there wasn't enough authorization (either in the PLOG or P_ORGIN objects). In your case, it seems like you have isolated the issue, but this is really for the benefit of others.

3) Implement some (additional) process checks/audits on the OM side to reduce the issues you are experiencing. You probably have already done this but thought I should say this as well.

Hope the above helps. And we can speak off-line if you have specific follow-ups on it.

M.S. Hein: Jeremy, do you have time to give us a brief rundown of any major changes to compensation management with EhP5?

Jeremy Masters: Sure,

The biggest changes are in the following areas:

1) New budgeting functionality (allows employee-level, or bottom-up, budgeting) in the calculation.

2) New web application and UI (user interface) in Web Dynpro ABAP technology. You can now plan for all plans on one tab, and also plan for all compensation plans for an employee on one screen within the worksheet (called “Single Employee Planning”).

3) New MSS features including Compensation profile (which is linked to the Talent info), Compensation statements (for managers ONLY), and a Compare feature.

4) New refresh program functionality (which handles transfers/employee movements) after a stated freeze period.

There are several others, but these are the major league ones.

KanekaChhim: Jeremy,

Are there limitations to using new functionalities available in EHP5 to link pay with performance if we’ve used custom templates for performance docs? For example, would we still be able to use the functionality you mentioned in a previous answer where we can link the performance doc to the worksheet? Would we still be able to use the calibration tool?

Thanks, Kaneka

Jeremy Masters: Hi Kaneka,

Yes, you can definitely still link your performance document to the worksheet. How you do that (and where) would depend on how much enhancement you have put into your performance management process/template.

As far as the calibration tool, I assume you are talking about the old tool currently available in BSP (business server pages)? If so, then you definitely need to be using the standard SAP performance management module. So if you are using a template from there, you should be able to leverage it. Otherwise, you are out of luck!

Jeremy Masters: Insider Learning Network – thank you for hosting me in this Q&A! It's been a blast!

Here is my contact information if you would like to connect further on ECM or other SAP HCM questions.




Twitter: @jeremymasters

Good-bye for now! Hope to see you at the conference in March!

M.S. Hein (moderator): Thanks to all who posted questions and followed the discussion!

A full summary of all the questions and answers is available here in the HR Forum. I encourage you to review Jeremy’s other tips and Forum posts and join the HR Group for ongoing information and additional resources. HR Expert also includes a number of recent articles on compensation management such as Top 10 Tips for Enterprise Compensation Management.


You can also meet Jeremy in person at this spring’s HR 2012 conference, where he will be presenting “An Introduction to the New Functionality for Enterprise Compensation Management in Enhancement Package 5,” as well introductory and advanced sessions on EMS/ESS and enhancement package 5. Visit the HR 2012 conference page for more details about the conference, scheduled for March 13 - 16, 2012, in Las Vegas.

And thanks again to Jeremy Masters of Worklogix for joining us today!

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