Understanding the Types of Targets

Top-Down Target Setting

To facilitate the top-down and bottom-up approach to planning, you must “distribute,” or break down the target at the parent node in the hierarchy to the child nodes. Top-down target distribution can occur in the following methods:

  1. Do Not Distribute – meaning the children do not inherit the target from the parent.
  2. Same Value – i.e., each child has the same targets. There is no concept of totals here – if you add up all the children, you do not get the parent’s total.
  3. Equally – Distribute the target equally among the children nodes.
  4. Ratio Based on a Field – Take a metric/target, and distribute the target based on the % of the total that each child has. This method can be used to distribute expense targets based on how much revenue each child is contributing.

Exclusions: If you choose to distribute a target, some children may be explicitly excluded from distribution because they may not be assigned. For example, the Unassigned bucket is a good example of this. The accounts in the Unassigned bucket by default are not going to be assigned to a node and therefore likely to not have a target. In the Design Module, we can provide a list of exceptions (i.e. a list of nodes) that need to be excluded from the distribution logic above.

To learn more about the specific aspects of Top-Down Target Setting, click here.

Bottom-Up Feedback

Once the targets are distributed to the children, you will see the target displayed as "inherited." To provide feedback to the target setting process, you can edit this inherited target. This edited target is called bottom-up feedback. Therefore, for each target – you could potentially have a “bottom-up” and a “top-down” number.

The Top-down number is typically driven from a financial plan. Quantitative or qualitative feedback from the sales team usually derives the Bottom-up number.

The Bottom-up number could start with picking the top-down number and applying a schedule adjustment, or with using a derived formula (e.g., take the amount and apply an uplift or multiply by an assumption constant.)

To learn more about the specific aspects of Bottom-Up Feedback and Adjustments, click here.

Viewing the Difference

When bottom-up feedback has been provided, you can see the difference between the two numbers in the "Tops Down vs Bottoms Up Page" page.

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Note that at a leaf node in the hierarchy, you won't be able to see both a Top-down and Bottom-up row represented in the "Tops Down vs Bottoms Up Page" page. You should only be seeing a Top-down row.