Yearly review, annual raise, and bonus

Today at work, I had my annual performance review. It's a review of my performance as it relates to goals and milestones I established for 2007. The performance is weighted by several categories. 70% of the performance is related to meeting defined goals. 15% of the performance is related to job specific competencies. The last 15% of the performance is related to core competencies as it relates to our company's vision and quality goal. Within each of those categories are more specific sub-categories, but I will not go into those.

For each sub-category, I am given a rating by my manager. It can be one of the following: met expectations, exceeded expectations, needs improvement, or no feedback. Based on a scale of 4.0, I would receive a 3 for every category that met expectations. Therefore 4 means I exceeded expectations and a 2 means I need to improve in the area. Overall, I exceeded expectations in 5 categories, met expectations in 12 categories, and needed improvement in 1 category. Overall, I received a weighted score of 3.22 out of 4.

So what do those numbers mean anyways? Well those numbers directly affect my annual raise and bonus. Each year, the company sets a new baseline percentage that is standard raise if someone met expectations for every category. So, if they set the baseline raise percentage to be 5%, someone who received a weighted score of 3 would receive a 5% raise. A higher weighted score would receive a higher raise than 5%, and a lower weighted score would receive a raise lower than 5%. This year, the baseline was set at 4%, which is lower than previous year. Coupled with my 3.22 weighted score, I had an effective raise of 4.3% to go into effect later this month.

There are three factors in determining the annual bonus. They are individual performance, company performance, and bonus target percentage. Individual performance is taken from the weighted score. Company performance is similar to calculating the goal category for individuals. Bonus target percentage is the percentage of last year's salary that I can receive as a bonus if everything else met expectations. So if my bonus target percentage is 5%, I have the opportunity to make 5% of last year's salary as a bonus.

The bonus target percentage is differs for each position in the company. The breakdown is as followed:
15% - Directors and above
5% - Managers
3% - Supervisors and below

The equation is calculate bonus is complicated to explain, but for simplicity, the equation to calculate the bonus equals (individual performance) x (company performance) x (bonus target percentage).

I fall into the 3% category, so coupled with my weighted score of 3.22 and a company performance of 133%, I am receiving a target bonus equal to 4.2% of my salary last year.

In terms of actual dollars, my salary is now $51.8k, up from $49.6k, and my annual bonus is $2.1k. I'm not that happy with the actual numbers, but until I'm 100% vested in my 401(k), I will stick with my current company. I will try to find a higher paid internal position, but if that does not happen, I will look for career opportunities elsewhere.